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How did COVID affect the insurance industry: What should we expect in the next decade from insurance policies?

by mindmingles
insurance industry

The Covid-19 pandemic affected individuals and businesses alike. People likely had their income reduced, in one way or another, whilst government subsidies and economic bailouts did little to help ameliorate their financial struggles. Businesses faced closures and losses in sales due to lockdowns and/or disrupted supply chains. Many people have suffered from pandemic-related stress, and this reflected on the insurance industry as a whole. In the text below, we have listed some of the ways in which this global crisis has impacted the insurance market, and the changes we are likely to see in the future as a result of these unprecedented times.

Digitalization and Automation of Insurance

Being that many people have been unable to go to work or send their kids to school due to restrictive safety measures, businesses had to get creative with their work-from-home policies. The insurance agencies which did not have a digitalization plan in place suffered higher losses in sales and were forced to find a way to effectively conduct their business online. Many industries have been forced to undergo a digitization process due to the pandemic, and insurance is no exception.

Insurance agents all over the world have been utilizing communication and marketing automation software to facilitate quick, clear and hands-free online communication with policyholders. Delivering policy documents, issuing billing reminders, and sending renewal letters are just some of the many daily tasks which insurance agencies had to quickly move online. And, with the uptick in the amount of digital communication that insurance brokers are now doing on a daily basis with their policyholders, these manual workflows are now automated and require little to no-input from the insurance agents themselves. Automated emails tailored to the specific needs of each policyholder are triggered by data from within each broker’s management system.

To further reduce the workload that insurance agents are now having to cope with, they have given policyholders access to their documents online via an insurance app and web-based self service kiosk. This reduced the insurance agencies’ call volumes, and the costs of hiring more people to perform humdrum, day-to-day administrative tasks.

These automated communication platforms don’t only help insurance professionals save time by streamlining manual tasks, they also help with increasing sales. Relevant, and more importantly highly personalized, upsell and cross-sell emails are automatically sent out to each policyholder without any input from the insurance agent – resulting in higher open rates and, ultimately, more sales. For insurance agencies, this automation process results in higher profits, and smaller chances for human error. For policyholders the convenience of being able to access their policy documents, file claims, and make payments in-app 24/7 has set a new standard in user expectations in the insurance industry.

Changes in Auto Insurance Pricing Plans

In a RAC survey, as many as 49% of drivers have reported a huge drop in mileage, and 75% of them blamed it on the pandemic. Being forced to turn their homes into offices and kindergartens/schools for their children, a lot of people simply stopped driving their cars. With fewer vehicles on the road, the risk of accidents dropped significantly, but the insurance premiums remained the same. As a result, many drivers have requested refunds from insurance companies for their auto insurance policies. Refunds are a band-aid solution at best, but they paved the way for fairer, more crisis-resilient pricing, such as the pay-per-mile model. The pay-per-mile auto insurance plans are aimed at people who drive under 7,000 miles per year. Instead of paying a fixed annual price, drivers will now have the option of paying for their car insurance based on the actual mileage they accrue per year.

Changing Commercial Policy Wording to Include Communicable Diseases

Businesses all over the world have discovered at the worst possible time that their business interruption insurance policies did not cover pandemic-related disruptions. They were protected against theft, fires, and even riots, but not from having their business temporarily closed down due to a government mandated lockdown. Many businesses in the service industry were forced to temporarily shut down due to the danger of further spreading a highly-communicable disease, and they expected their insurance policies to help bear the financial burden. According to a recent OECD report, as many as 80% of commercial insurace policies in the U.S. have been found not to clearly exclude communicable diseases. The report predicts that, in the future, commercial policies are going to have to be more transparent about outwardly including or excluding coverage for business disruption due to pandemics. This way, businesses are going to be able to make more informed decisions on which insurance company they want to choose in order to be properly prepared for all eventualities.

Conclusion

During the pandemic, the insurance industry has been forced to speed up its digitization process. It has also introduced changes that will benefit policyholders long after the pandemic is over. In the end, Covid-19 has forced the insurance market to be more transparent, prompt, and convenient when communicating with policyholders in the future.

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