The insurance industry —which, in the U.S. alone, accounts for $1.2 trillion—works as the "shock absorber" of the economy, so the industry has a vital role to play in the COVID-19 economic disruption that is hitting the world. The Insurance Information Institute, in its first-quarter “Global macro outlook,” reported that COVID-19’s impact on global growth and the insurance industry is likely deeper and broader than the current consensus and could last well into the third quarter and beyond.
Against such an outlook, here’s a view on the overarching trends in the sector in a post-COVID-19 scenario:
Rise in Claim Backlogs/ Rejections
The impact of rising claims can be seen in all the stages of the claims process: registration, adjudication and payment. These may lead to backlogs/rejections. There may also be delays in claim payment due to staff unavailability/limited knowledge, leading to customer dissatisfaction/litigation.
Focus: Insurance firms must now focus on implementing intelligent automation and digitalization for efficient claim processing/adjudication, underwriting, etc. to provide better service levels to customers.
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This is where increased adaption of enhanced analytics tools like OCR (optical character recognition), CV (computer vision), NLP (natural language processing) and synthetic data preparation can help insurers scale.
Changes in Underwriting/Sales
The industry will see broad underwriting changes as a result of the pandemic. There will be increased/modified underwriting scrutiny, and insurers have to change their underwriting strategy as a result. A potential shift from traditional channels to digital channels from product recommendations to underwriting is expected.
Focus: Some insurance products may do better with direct sales via digital sales channels. Helping the traditional channels with broker/agent enablement with account/customer intelligence with digital tools and better customer insights will be needed. Customer service will have to look at capacity planning, emerging topics and sentiments and try a digital offload wherever required.
Change to a Remote Working Process
This would mean increased digitalization of processes and workflows. Companies have to figure out strategies to maintain productivity and trust while coping with remote working for the long haul. Robust information security and audit processes will have to be built as a result.
Focus: Insurers have to review existing policies inclusions/exclusions and review coverages to adapt to the changes.
Changes in Policy/Product
During and after the crisis, insurers will have to initiate policy/product changes—including what to cover and how to price it. They may address coverage gaps and introduce pandemic/epidemic pricing on their products.
Focus: Insurers have to focus on repricing, rate calibration and reserving. They will also have to calculate exposure estimation loss prediction (using structured internal data and proxy external signals) by sub-industry, lines of business and regions. They would also need the technology, platform and assistance to usher in digital transformation to enable these products.
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With renewed focus, insurers can adapt to the changes and continue to cushion the various sectors of the economy from risks and shocks.