The insurance industry has never been known for its speed or agility. Rather, it has been characterized as slow, methodical, and cautious of any sudden movement. Of course, that’s a generalization. There are many insurance firms that break the mold and lead the way in terms of transformative innovation, but, generally speaking, most insurers have opted to spend their time on other things … until now.
The global coronavirus pandemic has caused an explosion in firms throwing caution to the wind. COVID-19 has created a situation where the world has shifted in a non-linear way – and it’s shifted much faster than anyone could have anticipated. The global economy has been forced into an induced coma to try and slow down the spread of the virus. As governments call for physical distancing, and in some cases total society lockdown, insurance businesses have been forced to close their offices, ask employees to work remotely, and conduct all of their business through digital and/or virtual channels. The coronavirus has triggered the fastest overnight transformation in the history of the insurance industry.
“Insurance companies have had to react suddenly to dispersing their operations and making their employees remote. Some have done really well with that, and others have found some gaps in the process where they’ve had to scramble a little bit,” said Marie Carr, global growth strategy leader at PwC’s US Financial Services Practice. “One gap we’ve seen is among insurance companies that are using offshore solutions, where those offshore service providers perhaps didn’t have appropriate contingency plans in place. Now, in this crisis, they’ve had to make immediate changes and find ways to bring those solutions back in-house to get them covered because the offshore people couldn’t.”
When it comes to the sudden digital transformation required by the unprecedented COVID-19 situation, many insurance companies were more prepared than critics would give them credit for, according to Carr. Most firms have technical capabilities, like chatbots and SMS notification – they just might not have activated them fully prior to the pandemic. Most are also actively engaged in ‘The Digital Question’ and thinking about how to transform their customer experience and improve their operations with the help of technology. So, rather than a rush to create or build innovation, the virus spurred on more of a rush to activate already well-planned initiatives.
“In the short term – a 90 to 120 day period – I think we’ll see many insurance companies making moves to activate, explore and better utilize digital processing in everything from underwriting to claims and customer service. I have no crystal ball, but I expect companies will really focus on the efficiency plays and finding ways to take advantage of those things in the short-term,” Carr told Insurance Business. “Moving into the medium term, we’ll start to see some differentiation. There will be some companies who are in a pretty good position because they’ve had the right strategic view all along. They’ve been making investments in digital innovation –improving the customer experience and upgrading their systems – and in the medium term, I think they’ll start prioritizing and sequencing those things more to their advantage.
“Insurance has enjoyed being able to change slowly over 200 years. You pretty much know when someone is going to make a change, and you can do it at the same time. What COVID-19 has done is create a situation where the world has shifted much faster than anyone anticipated. Everyone realizes coming out of this – whether we come out of it quickly or in a more gradual manner – some things are not going to revert back to how they were before. The investments that insurers have been making around better understanding customers, generating better data, and improving operational efficiency are only going to accelerate further. As a result, what you’ll see is those firms who’ve fallen behind because they were always counting on being a fast follower are soon going to realize that the pace has picked up. They’re going to be faced with having to make more urgent decisions about how to transform their businesses so they don’t get left behind.”
