The COVID-19 pandemic changed everything. We are facing a “new normal” and we must adapt quickly and we must do it right, because it is more than clear that nothing will ever be the same again. The insurance industry is certainly no exception. What are some of the challenges in this new post-COVID-19 context?
We have never felt so vulnerable as after the onset of COVID-19. Deaths, hospitalizations, high medical costs and unemployment are just some of the difficulties the pandemic introduced into people’s lives. This fragility has enhanced the value of insurers and their promise to make uncertainty more bearable. People have become more aware than ever of what they can lose without the support of an insurance company.
Another important aspect is the current worldwide economic crisis and the high inflation that is having a dangerous impact on people’s quality of life. In many cases this will prevent them from continuing to comply their economic obligations, such as, for example, the payment of policies. The restriction of expenses will also make it less likely for a significant part of the population to contract this type of products.
What should we expect in this new scenario?
The drop in demand, cancellations, renegotiations and defaults, among others, are situations that the insurance industry is already beginning to experience and that will force them to seek alternative ways to optimize resources and be more efficient.
The answer, for many of them, will lie in the digitization of the different points of their value chain. This will not only allow to bridge the digital divide in the industry but it will also leave them in a better position to meet the new expectations of post-COVID-19 consumers.
How should the insurance industry address this issues?
- Recovery of leadership: The industry must take advantage of society’s awareness of the importance of insurance to increase its penetration as a percentage of GDP. For example, in countries such as Brazil, Colombia and Mexico, current penetration is less than 3% of GDP, well below the 8.9% in the OECD.
- Innovation in the product portfolio: In addition to seeking ways to make products more accessible to those who are currently experiencing complex economic times, they should address the “new normal” of their clients. Interesting examples are those policies that cover expenses derived from pet care if their owners were affected by COVID-19 or those that consider dynamic pricing in car insurance given the decrease in its use.
- Digital Transformation: Confinement has forced companies to focus on working from home in order to maintain their operations. This has imposed special demands on insurers, which have had to generate new operating models to navigate this increasingly uncertain world and enable them to safeguard business continuity and the security and privacy of their policyholders’ information.
But undoubtedly the most important change that has forced the reconfiguration of virtually all service industries is the need for people to have 100% online solutions at all their consumer touch points.
For sure this has placed great demands on insurers in terms of their relationship with their customers at all stages of the value chain. In our next post, we will further develop this vital point for competitiveness in the industry.