By Chimwemwe W. Kanyenda:
From the mounting strains on health systems to once bustling cities now left eerily deserted, Covid-19 is the most serious global health crisis for a generation.
And with contagion, uncertainty and lockdown comes economic dislocation and market turmoil.
The fast-moving nature of the Covid-19 emergency means that most businesses are in uncharted territory and the immediate crisis management challenges include dealing with the impact on workforce and business continuity management.
For insurers specifically, the fallout from the Covid-19 outbreak includes a surge in health, life and travel claims, pressure on sales from reduced business activity, and less use of face-to face channels.
The gathering economic slowdown emanating from the pandemic is also increasing credit risk exposures from businesses facing possible default. This raises the possibility of regulators asking for extraordinary solvency tests to ensure insurers can withstand the immediate and knock-on impacts.
Put together, this daunting list of issues represents a stern test of resilience for an industry already weighed down by premium undercutting, enduringly low interest rates and slow organic as well as new business growth.
Covid-19 is an unprecedented situation that is putting tremendous pressure on even the world’s richest and most powerful nations and their healthcare systems.
Yet, Covid-19 could also be a turning point for the insurance industry by enabling insurers to demonstrate their higher purpose and value to society. It’s therefore heartening to see how well the industry has responded.
In China, for example, a leading insurer has set up an emergency fund to help tackle the outbreak.
Further, steps include a fast track claims process and waiving deductibles. In Singapore, a leading insurer has doubled the benefits for frontline healthcare workers who are hospitalised due to Covid-19, in recognition of their selfless contribution to patients.
Locally, a life insurance firm is standing in solidarity with front line health care workers who are providing routine and essential services during the pandemic by putting in place a programme to provide life insurance cover for free to these honourable men and women.
These and other examples show how the insurance industry can be a powerful force for good – doing the right thing solely because it’s the right thing to do.
What’s also clear is that emergencies like Covid-19 are something we all have to get used to in a world marked by growing uncertainty, instability and interconnectedness. Some systemic threats like climate change and cyberattack we know about. Others we don’t.
It’s therefore worth considering the attributes of insurers best positioned to wither the Covid-19 storm and deliver value to customers and society. I believe there are five distinguishing characteristics, with a clear sense of purpose and operational agility, capability and resilience at their heart:
The true purpose of an insurer in times of crisis and stress is to provide peace of mind. It’s therefore important to devise strategies for handling this crisis from a customer and wider stakeholder perspective. From waivers of deductibles to pre-approval of claims or setting up funds for frontline employers, insurers are demonstrating their empathy.
Digital distribution capability
While face-to-face interaction has been limited by social distancing, insurers who’ve built digitally assisted distribution and sales capabilities are still able to engage with customers and service their needs. This crisis may prove to be a catalyst for product simplification and accelerating the development of direct digital channels.
Self-service enabled claims and customer service
As the number of enquiries and claims increase, insurers need a cost-effective yet customer-friendly way to handle these requests. Across the globe, directing customers to self-service channels and the automated processing of straightforward claims are proving effective.
Whether working remotely, managing workforce demand dynamically or bringing new products to markets quickly, a crisis like this is a good test of organisational agility. Insurers that have invested in the development of a connected digital enterprise will most readily be able to adapt, flex and execute.
Informed and proactive capital management
A sharp economic downturn could have serious implications for solvency ratios. Insurers’ ability to handle the impact will depend, to a large extent, on advance systematic scenario planning and capital management capabilities.
What Should Insurers Focus on Post–Covid-19?
Though denial of coverage due to exclusions will frustrate a lot of business/corporate customers, I believe that the pandemic will lead to huge demand for more comprehensive business insurance/business interruption cover. Customers will expect such insurance policies to address the many gaps revealed during the crisis. Insurers must capitalise on the opportunities and up their investments in innovative products and services.
As and when the Covid-19 crisis eases, insurers must prioritise measures to break the deadlock and accelerate their digital transformation efforts in collaboration with the right technology partners. These efforts will give them the platform, technology and skills to face future crises.
Lastly, post– Covid-19, contextual and clear communication should be the norm. Insurers must be more transparent than ever in their coverage and communication and reinforce trust in the idea of true, hassle-free financial protection at the time of need.
A distressed society is looking to its government and businesses for help and guidance in this crisis. How the insurance industry responds in this kind of moment that matters may dictate public perceptions for the next decade.
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