By Davnit Singh, Lead Consultant at ThoughtWorks
A survey carried out as early as 2013 found ‘global pandemics’ to be one of the most important extreme risks for the insurance industry to worry about in the long term. And, we are seeing this scenario play out in the midst of the COVID-19 crisis.
For the purpose of this article, we explore the insurance business areas that are currently under great pressure, and the pragmatic efforts needed to equip them to better handle an unpredictable future.
Opportunities to ramp up
2019 was a record year with over $6 billion in investment, for insurance-tech start-ups and scale-ups. However, it’s only the current global crisis that has forced insurers to leave no stone unturned when re-evaluating their businesses’ structure, operations and customer service.
Let’s look at a few insurance business areas that can benefit from a ramp up –
1. Reshape insurance business strategy
India’s insurance regulator IRDA has already moved to revise insurers’ product portfolio. They have advised insurance companies to design products that cover treatment costs for COVID-19 patients. We’d also recommend that companies reassess their existing product portfolio and evaluate the launch of more comprehensive insurance products in the future.
Here is an example of one of India’s first corona specific products – the digital payments company PhonePe has launched an insurance policy, Corona Care in collaboration with Bajaj Allianz General Insurance for people who have been infected and hospitalized for COVID-19 treatment.
2. Reimagine risk models
One of the biggest reasons why insurance companies have not built models suited for a pandemic like situation is the lack of enough historical precedents to build credible loss curves for a COVID-19 like situation. Sophisticated stochastic models are based in epidemiological science and are built from the ground up using a wide range of inputs – a disease’s transmissibility, lethality, point of origin and status of a vaccine in production. However, there is no widely accepted risk model that all parties may comfortably use as a pricing guide.
Our suggestion is to design a robust strategy that does not ramp up only during emergencies or crises. The extensive framework should continuously evolve to consider all possible permutations and combinations of risks and redressals.
3. Build digital capabilities
The genie of Digital Insurance is out of the bottle and will be hard to put back in. Our recommendation is to invest in digital platforms that will enable remote and seamless collaboration of diverse stakeholders.
For instance, the COVID-19 crisis gives rise to unique situations where a nominee might not even be aware of the insured’s ongoing treatment because of strict lockdowns. In such scenarios, insurance companies will need to extend the benefit of doubt (circumstance) to the nominee, without requiring additional action like intimation, form submission etc. This can be easily facilitated by proactive, regular and consistent communication through digital channels.
The scope of digitization should be broadened to internal processes as well like, virtual inspections, DIY claims reporting for first notice of loss (FNOL) and AI-based damage assessments. In fact, we advise that insurers and regulators accelerate their involvement in emerging tech like blockchain which has the potential to eliminate intermediaries, duplications, erroneous records, lengthy claim processing, claim denials, excessive checkups and more.
4. Evolve decision intelligence
Developing decision intelligence and management is a valuable addition in particular to the underwriting, claims and policy/customer administration processes.
Our suggestion to insurers is, pick a straightforward point to start this data management journey. It could be anything from targeting macro decisions to day-to-day operations. Identify a motivated line-of-business sponsor so that the project does not lose steam. Additionally, the project should engage operational and technical folks to examine institutionalizing new approaches. Finally, determine metrics to be tracked to ensure that the project functions within expected tolerances and all learnings are recorded for the continued data management journey.
5. Enable flexible operating models and a remote workforce
Once the COVID-19 outbreak is controlled, business continuity plans will come under review. This will raise questions about employees having easy access to remote working set ups and if the insurers’ employee onboarding processes accounted for this way of working.
Upskilling and cross-skilling agents, adjusters and other field operatives to be adept with digital collaboration tools will help manage increase in operation volume during a crisis-like situation. Our suggestion for insurers is to enable setting up remote digital workspaces for their workforce, which should focus on culture, technology, communication, training and decision making.
We foresee that as remote working becomes the norm, equipping insurers with the mindset and technical ability to supervise their remote teams and employees will become pertinent. A small step in this direction are the recommendations that insurance regulators have started issuing to employees working from home.
6. Addressing cyber risk factors proactively –
It is common knowledge that the insurance industry is in early stages of a comprehensive digital transformational journey. COVID-19 has created a sense of urgency about building these aspirational digital capabilities. Add to this, the findings of the Aon Benfield report that states, a majority of the people working in the insurance industry are likely to see at least one pandemic during their careers.
Such crises will require ongoing IT projects to be re-evaluated as per deliverables that are immediate versus long term. This will also call for a heavy scrutiny of data and process security.Our immediate guidance would be for insurance companies to build better system resilience by proactively identifying security abnormalities and instituting daily, virtual situational threat intelligence briefings.
Post–COVID-19, the insurance industry should have laid the foundations to innovate and build organisational resilience. The sector should reimagine business processes to consider all stakeholders – customers, employees, distribution channel partners, vendors. This is pertinent because at the end of the day, the industry’s core mission is to help manage risk and buffer against shocks like COVID-19. This approach will ensure the sector’s focus shifts to contextual and clear communication to customers. Insurers can be more transparent in their benefits-definition, risk coverage and the communication of the same.
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