The COVID-19 crisis has severely disrupted every industry. Alongside the tragic human toll there have been considerable economic impacts. Strengths and weaknesses have been put under a spotlight and we have all been challenged to rethink the ways in which we do business and consider more carefully the areas in which we fall short.
What will be the lasting effects upon the insurance industry and how can insurers respond? My personal view is that the crisis will be an unexpected catalyst for change, one that accelerates trends that pre-existed the crisis.
The first of these is an acceleration of digital capabilities and improvements to the customer experience. The lockdowns have forced the majority of people to be physically separated from their friends, family and workplace, and required them to adapt to a digital or remote way of doing things. People are stuck at home; they are increasingly price sensitive and they are shopping online.
The infrastructure for online servicing was already in place, yet the crisis will dramatically speed up its adoption. There may be lasting changes in buying behaviors that will have major implications. The surge in online life sales reported by online agencies in march may be a portent of things to come. Looking outside of the industry, even famously change-resistant car dealerships are discovering they can sell cars online and are learning to interact with customers outside of the showroom. What are the implications for the face to face, broker orientated model if this is indeed the new normal?
What about the changing expectations of consumers? The industry is becoming accustomed to the rapid rise of millennials but a side effect of COVID-19 is that every generation is now the digital generation. Out of sheer necessity older consumers have improvised and learned new habits. The future policyholder will want to be touchless and digital and will likely be living differently for an extended period of time. The crisis may lead to greater policyholder expectations. Previously, consumers have expressed an interest in more frequent contact with their insurance provider and the crisis may accelerate the need for digital engagement processes.
The scope of insurance may expand. Prior to the crisis, insurance appeared to be moving from a traditional paradigm (where the policyholder sends a premium check in and gets one back when something bad happens) to one that creates additional value in the marketplace by being able to mitigate a range of risks and solve problems before they develop. The crisis may have the effect of spurring-on the types of innovation needed to offer an expanded model of insurance. Business interruption controversies have unfairly cast insurers in the role of villains and caused a perception among consumers that insurers operate by exclusion. Now is the time to innovate by inclusion. This can be achieved by broadening the policy offering and providing greater value. Improving the customer experience beyond the policy itself will be key for generating new business and retaining policyholders.
The COVID-19 crisis has created major challenges for all of us but there will be opportunities to experiment, better compete and prosper. Insurers appear perfectly positioned to step into the domain of innovation and keep the focus on the customer.