COVID-19: Imperatives for the insurance industry and what lies ahead?
Insurance | 11 min READ           
COVID-19 has been an unprecedented global health care crisis with significant economic and social impact, at an unprecedented scale and duration.
The insurance industry is going through a significant phase of uncertainty and turbulence. In these times, how should insurance companies support their businesses, customers, and the workforce? What should they be prepared to see in the insurance value chain in the mid to long term horizon?
Melissa Womack, Head of Marketing at Birlasoft posed a few important questions to seniors leaders of our insurance business and sought their views and commentary on the ongoing crisis and its implications for the insurance industry.
Melissa Womack

Head

Global Marketing

Birlasoft

Shilpa Bhandari

SVP and Global Head

BFSI

Birlasoft

Milind Sathe

Head and Sales Leader

Insurance

Birlasoft

Shyam Somani

Head

Insurance Solutions

Birlasoft

 
Melissa Womack: It's an extremely critical phase for most of the businesses, and insurance is not insulated either. How do you see the pandemic affecting the insurance industry in short to the mid-term horizon?
Shyam Somani: The world, as we know it is going through a significant upheaval. While the insurance industry is bound to absorb some shocks in short to mid-term, the new business applications will either get plateaued or witness a dip.
  • Every business entity needs liability insurance, property insurance, and workers' compensation policies if it employs other people. Most new business plans would have been put on the backburner or shot down for the mid-term horizon. For the insurer, this means they are losing on new policy selling. Likewise, a similar effect would be seen in auto, real estate, which will hit personal lines carrier as there will be fewer buyers for insuring these assets.
    For example, one of our clients here in North America is a leading specialty insurer and we anticipate impact to their book of business with respect to revenue loss and/or increased claims payout because most of the sporting/entertainment events have been canceled or pushed out to later in the year.
  • Travel insurance will be significantly affected by reduced or stalled travel (both leisure/business). There will be a surge in the cancelation of policies, which will further lead to degrowth; many companies have shut down during the pandemic forcing them to either cancel or non-renew the policies.
  • Non-essential coverages may be removed from policies such as physical damage coverages because vehicles are not driven as usual. Limits on essential coverages such as liability coverage may be reduced to comply with compulsory insurance law requirements. This aspect will negatively impact the existing book of business.
  • For claims, there will be a surge in workers' compensation claims as essential workers like medical practitioners, and law enforcement still need to be out there on the forefront to contain the spread and support the community. There is also the possibility of litigation from small businesses that had to suspend operations due to pandemic and are trying to seek claim payment under business interruption coverage.
Melissa Womack: How would this pandemic affect the insurance industry in the long term?
Milind Sathe: This pandemic has opened up strategic and operational gaps that need to be bridged to make the insurance companies more insulated to external forces, especially the ones that emerge out of black swan events like COVID-19 crisis.
The industry will undoubtedly learn from this crisis, and they will need to redefine business models to prepare for such events in the future. There is a risk of insurance companies getting insolvent due to the market volatility affecting liquidity and investments, ultimately affecting their ability to pay claims. Second, they may be asked to pay for business interruption claims on a scale that was not forecasted by actuarial models, thereby leaving no option for them but file for bankruptcy.
Insurers are struggling with responding to policyholder inquiries, service requests, and handle the surge in website/call center traffic. They will have to improve their response time by providing digital self-service capabilities such as Mobile apps, portals, chatbots. It's the right time to prioritize legacy modernization programs and upgrade infrastructure to handle the traffic and opt for cloud migration, so application is available 24x7 to their staff and customers. This tactic would also ensure that no person has to visit the premises in the case of the server crashing down.
Their existing BCP plans were not equipped for such a fast-moving crisis and unknown variables. Typical contingency plans promote operational effectiveness following events like natural disasters, cyber incidents, and power outages, among other emergencies. They don't generally take into account the widespread quarantines, extended school closures, and added travel restrictions that may occur in the case of a health emergency. The insurers should deliberate on introducing products/coverages to cover the claim for such events. E.g., offer minimum coverages for suspended operations to business owners reducing their costs and also retain business for carriers.
"Insurers are struggling with responding to policyholder inquiries, service requests, and handle the surge in website/call center traffic. They will have to improve their response time by providing digital self-service capabilities such as Mobile apps, portals, chatbots. It's the right time to prioritize legacy modernization programs and upgrade infrastructure"
- Milind Sathe
Melissa Womack: How do you think insurance distribution, underwriting, and claims would get affected by this crisis, and how should the insurers respond to it?
Shyam Somani: The gap between agents, brokers, and financial advisors will get widened. One way for the companies to solve for that problem is by driving proactive collaboration and education to roll out new products and coverages. The insurance will have a high propensity to suspend a specific product, and they should have all the means to communicate it effectively to the customer without depending on traditional channels of communication. The commissions should be paid electronically. If that's not the case, do all you can do to facilitate that process. Insurers must provide or enhance mobile apps or agent portals to foster remote work for intermediaries and support them with all they need to service their customers. Besides this, they should switch to e-mode; eliminate everything that's paperbound, as much as possible. E.g., e-delivery of policy, e-billing of policies, and electronic signature supported documentation/processes for new/renewal business, e-payments for claims, etc.especially the ones that emerge out of black swan events like COVID-19 crisis.
Underwriters should be prepared to add or remove coverages, as appropriate, to meet the surge in policy requests. They will be spread way too thin on these requests from customers either to do with understanding policy better, queries regarding amending insurance policy. It's the right time to go back to the desk and revisit risk management and the exposures they are dealing with and evaluate how they can respond to the customer in a comprehensive and timely manner.
Claims managers broadly speaking have three areas that they need to address: (i) As much as possible, automate intake and processing. This move will go them a world of good, especially on the low dollar value claims, which can be settled automatically. (ii) they would witness a surge in fraud claims like staged accidents in the case of auto frauds. (iii) it's time when service quality and customer experience can win your customers for life, or you lose them forever. I'd recommend insurers should maintain a minimum threshold response time to customer inquiries. They should encourage the use of other digital channels to share information regarding business operations (office re-opening), future payment, policy renewals, cancellations, etc. and proactively provide information on future payments.
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Melissa Womack: What do you think are going to be the key triggers and catalysts for the transformation of the insurance industry in this crisis?
Shyam Somani: There are three main triggers that are going to drive the transformation in the insurance industry as we navigate through this crisis-
  • Improving underwriting efficiency and claims management
  • Increasing customer and stakeholder engagement across digital channels
  • Embracing legacy modernization
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"Claims managers broadly speaking have three areas that they need to address:
(i) As much as possible, automate intake and processing. This move will go them a world of good, especially on the low dollar value claims, which can be settled automatically.
(ii) They would witness a surge in fraud claims like staged accidents in the case of auto frauds.
(iii) It's time when service quality and customer experience can win your customers for life, or you lose them forever."
- Shyam Somani
Melissa Womack: Do you think the insurers were prepared for a black swan event like this in terms of activating business continuity plans? How should they respond to it and minimize knee-jerk reactions that could lead to potential losses?
Milind Sathe: The majority of insurers have a BCP plan but not to handle a disaster of such magnitude. Priority should be given to customers and minimize disruptions to their life due to the crisis. Make sure all requests/inquiries (coverage change, claim reporting, etc.) are responded to promptly. Provide clear instructions on different ways insurers can be reached and where information could be found for support on most common issues. Their most valuable asset is their employees, so the safety and wellbeing of those should be given a priority so they can return to work when it is safe to do so as the majority of the country has some shelter in place order. Promote flexible work arrangements so they can support business from remote locations. Provide adequate safety gear if they have to be in the field to ascertain loss for a recent claim and make payments.
Melissa Womack: What's going to be your recommended checklist of things that all insurers must keep in mind as they navigate through this crisis?
Shilpa Bhandari: That's a great question, Melissa. Here are some essential pieces of response that come to mind drawing from my personal experience of over two decades in the IT Services industry as well as the work we at Birlasoft are doing with our clients as their partner and helping navigate through this crisis
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Melissa Womack: This is one question that is on everyone's mind. I'd love to know your thoughts. Has the COVID-19 crisis pushed the insurance industry into modernizing its ecosystem, which otherwise would have taken a long time to consider history?
Shilpa Bhandari: Absolutely, Melissa. This crisis has, by far, been one of the most tragic times that we've witnessed. The entire world is going through a lot – nothing has stayed insulated, be it human life, businesses, assets, anything. This crisis has pushed the whole world to press the reset button and rethink what we've achieved thus far, what has worked well, and what needs to be improved. For the insurance industry, I see three major elements that have significant opportunities for modernization:
Rethink the
business models
E.g., work from home is going to be the new normal. There will be a massive shift in the commuting patterns. Are you prepared to bake that into your auto insurance strategy?
Rethink on
automation
Imagine how you could have served your customers better if there were an automation mechanism in place?
Rethink on
adopting AI
Insurance companies that are already fighting fraudulent claims with AI-based engines are able to do better service to their employees and customers.
Melissa Womack: Final one-what are we doing at Birlasoft to help our customers in this crisis?
Shilpa Bhandari: I have been very proud of the work carried out by our teams, supporting our customers, demonstrating true partnership. We are helping our customers through this crisis in the following ways:
First and foremost, ensuring business continuity and service quality – We have enabled our workforce based in our global delivery centers to work from home and be productive for our clients. In many cases, we already had technologies such as VDI, which made the transition more comfortable. In contrast, in other cases, we had to take special exception approval from our clients' compliance departments, provision additional laptops with client-specific images and security policies and mobilize all this in a short time while in lockdown/ stay in shelter mode. Also, we have launched various online interactions leveraging collaboration technologies such as Microsoft Teams to manage our work for home teams.
Secondly, we have been building innovative digital solutions to help out our clients in these troubled times. To help customers drive safety and productivity at their workplaces, we have developed a thermal screening, tracing, and preventive IoT and analytics-based solution named IntelliOpenTM that helps combat the spread of infection in workplaces. We realized that thermal cameras are not good enough to arrest the spread and their need for a smarter solution that augments their primary line of defense. We are deploying this at our offices, and we’ve got an overwhelming response thus far from our clients.
Further, we have been proactive and flexible with our clients to understand the impact of this crisis on their lines of business and working with them jointly on reprioritizing projects and programs. We see a lot more impact on 'build' where several features/ functionality related spending and plans have been put on hold or postponed. We are sharing our solutions as well as advising our clients to help alleviate the specific challenges that this crisis has created. One such example is accelerating the implementation of RPA and presenting additional used cases where RPA can be implemented. We have seen both cycle time reduction as well as legacy modernization as benefits. In one recent implementation, we saw 100% unassisted automation, as well as a 65% reduction in process cycle time. Another solution which we believe helps explicitly with automating an important and document-intensive process of submission automation in this segment. A global insurer who has used AI-based solution to streamline submissions and accelerate revenue growth saw a 2x increase in quote-to-submission ratio.
"In one recent conversation with a global insurance CIO, she affirmed 'this crisis has strongly confirmed our own stated strategy of leveraging technology more and driving more aggressive automation.'"
- Shilpa Bhandari
Overall, our approach has been to ensure business continuity and service quality in the new normal, be proactive in reprioritizing programs and projects, and advise our clients to leverage RPA, intelligent automation to help alleviate the burden of manual processes.
 
 
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