Covid-19 has temporarily brought the world to its knees.
The life-threatening health risks associated with this disease is well known. Beyond that, the associated global lockdowns have led to severe economic implications for most people. To potentially relieve the financial burden that coverage costs have on your pocket, whether it be a car, home, or motorcycle plan, have a look here.
The uncertainty of this pandemic has caused a ripple effect within the insurance industry. It resulted in the need to shift customer priorities and design new operational models based on work-at-home staffing and digital channels.
This increased dependency on technology and other social and industrial changes will shape future loss trends for insurers and businesses alike. Covid-19’s outbreak has resulted in reduced risk in specific areas. While at the same time, the pandemic increased and changed it in others.
So, let’s look at the implications this holds for insurers in the areas of digital channels, tailored offerings, and pricing.
Pricing – A More Prominent Concern
With the effect that Covid-19 has had on household finances:
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Roughly 18 percent of consumers with life cover requested temporary relief on their insurance premium
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Nine percent of people with property and casualty insurance (P&C) asked to postpone their payments
This is on top of premium refunds already offered by most US insurers.
Price sensitivity is also visible in switching behavior and other areas. During 2020, consumers have been more inclined to change their insurance providers than the previous year. Between mid-January and the end of May, the switching rate for those that requested premium relief was:
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19 percent for P&C policies
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15 percent for life cover
The rate for consumers that didn’t apply for relief was far lower. Undoubtedly cost is the leading reason for this increasing trend. Further global analysis also revealed that between March and May, “home insurance cost” and “cheap car insurance” were among the leading keywords related to insurance searches.
Escalated Digital Use
The use of digital channels created for insurance purposes saw a considerable increase in the past year. Consumers tend to research policies online more often. Yet, digital interaction doesn’t come without complications.
About 21 percent of consumers that used the web to find life cover encountered problems. This includes slow or complicated processes and the need for more personalized advice.
Digital Claims Assessment and Handling
The pandemic also intensified the demand for digitalized claims handling. Assessing and inspecting major industrial accidents and natural disasters remotely are now possible through tools such as:
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Image capture technology, such as drones
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Satellite
Traditional assessment processes are mostly done in person, and it involves a lot of paperwork. This isn’t only time-consuming but also expensive. Through digitalization, insurance teams are enabled to deal with the escalation in claims. They can also deliver uninterrupted professional service while working remotely.
Post Covid-19 Claims Trends
The coronavirus has accelerated many trends, including:
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The increasing dependency on technology
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The growing awareness of the susceptibility of intricate global supply chains
Companies will have to make their supply chains more flexible and analyze and de-risk them in the future. This may include inshoring specific critical production areas that were disrupted as a result of the pandemic. This move would likely decrease the frequency of claims as well as the costs of future business interruptions.
Furthermore, the increase in remote working means that businesses may have fewer employees on site. They’ll also potentially have lower property assets in the future. Yet, there will also be corresponding changes in cyber risks and workers’ compensation.
Cybercrime exposure has seen new heights during the ongoing pandemic. Particularly in cases that involved business email compromise and ransomware attacks. Yet, only a small number of these claims are Covid-19 related.
The Appeal of Usage-Based Insurance (UBI)?
Due to Covid-19, more people are working remotely, and less are driving. This trend has made the shortcomings in existing insurance models more prominent. Many insurers offered premium rebates compensating for reduced accident risk and mileage. Yet, these discounts don’t justify the significant reduction in traffic.
With the coronavirus causing the current price sensitivity and a weakened economy, more people may opt to switch to insurance based on miles driven. According to a recent survey:
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21 percent of respondents have already switched to usage-based insurance (UBI)
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56 percent of participants said they’ll most likely choose UBI in the future
To Wrap Up
Covid-19 has had a tremendous impact on consumers’ insurance needs and priorities. Yet, will this be a lasting trend? The answer, of course, is open to debate.
Insurers, on the other hand, need to up their analysis and in-market testing. Furthermore, they need to re-evaluate their existing products and address their shortcomings. Then only will they be able to provide offerings that the consumer values at the right price.
