The insurance industry has been upended on an unprecedented scale as result of COVID-19. Executives have estimated that related losses may be their biggest ever—Lloyd’s of London predicted in May that the industry could face at least $100 billion in total underwriting losses from the pandemic. Additionally, courts have also since ruled many contract exclusions invalid and reinstated claims, especially those made by small businesses.
As global vaccination efforts forge ahead, customers are slowly emerging from a year in lockdown more attuned than ever to their realistic insurance needs. Not surprisingly, demand for the next-generation of insurance, such as on-demand or usage-based products and parametric insurance, is on the upswing. Customers want to pay for only for what they use, or only when an insured item is in use, and have the option of “switching” protection on or off as needed.
Insurers have also taken note of the drastically changing business landscape over the past year. Many have already spent the time reviewing their portfolios to revise or withdraw products or services that are no longer viable. Some have forged ahead with launching new, more niche products, such as coverage for working remotely, private vehicles making deliveries, and shuttered businesses.
Many insurers also began offering support for customers and communities, ranging from premium rebates and free or enhanced coverage for health workers to funding the development of infectious disease treatments.
Looking ahead to a post-pandemic world, it’s clear that customers are embracing data as a mechanism for making better decisions. Insurers need to diversify their portfolios to match products and services to keep pace in already crowded and competitive field. Although the immediate COVID-19 crisis diverted priority and capacity away from product development, insurers can now begin positioning themselves now for improved customer experiences in our new normal.
Here are the essential next steps for the post-pandemic insurer:
Leverage platform ecosystems: In today’s digital environment, insurers must accept that no organization can or should do or own everything. It’s essential they determine their core competencies, such as risk management, then look for partners with other competencies, such as real-time data insights or analytical models, to elevate their business processes and better serve customers.
Insurers should look for accelerated innovation paths and ways that emerging technologies can be integrated with ease via platforms, by working with InsurTechs, for example. Platforms can open doors to a wider range of dynamic data and functional capabilities that might not be available in-house.
Modernize data use: Post COVID-19, insurers must embrace their role as a trusted advisor. This starts with data—making changes to improve the transparency of data sources, how their data is used and the customer benefits of sharing data to enable innovation. Insurers should also begin thinking about their legacy data sources and how to employ more dynamic sets of information.
This modern use of data can add value to insurance products for both insurers and their customers. For example, the evolution of telematics has enabled automotive insurers to not only get deeper insights into a customers’ driving patterns and potentially lower their premiums, bit it has also provided the needed data for insurers to offer alternative usage-based products to this marketplace.
Adapt their portfolios: We discussed earlier how insurers have already begun to reevaluate their suite of products to fit changing customer needs to add more service-oriented products.
Compared to three years ago, insurers offer 25 percent more services, such as roadside assistance, and only 20 percent more traditional products. Services attract customers and carriers alike, with anything “as-a-service” usually synonymous with customer convenience and flexibility. Typically, services are developed faster and associated financial returns realized sooner, compared with traditional coverage products.
Maturing markets, tight capital, increasing risk, and technologically sophisticated customers are just some of the pressures the insurance industry faces today. As a result, insurers have to work faster, more efficiently, and— above all—smarter. Those that do can thrive while others fail.
Insurers need to be more nimble, innovative, and connected with their customers. By leveraging platforms, modernizing their data use and adapting their portfolios, they’ll be well-prepared for the world that awaits us post-COVID.
Source: Insurance Innovation Reporter
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