To ensure business continuity and to reduce operational risks in the future, the insurance industry needs to reimagine the way it operates. Insurers should consider investing in cloud services, automation, and remote collaboration technologies to enhance customer experiences and reduce human dependencies.
The world is going through an unprecedented crisis that's disrupting businesses, wreaking havoc on our livelihoods, and, consequently, on global economies. According to the IMF, there would be a 0.1% decline in global GDP growth. Businesses across industries are already felting the pre-effects of this decline.
For the insurance industry, the impact is reflecting not only on revenue but also on the workforce. In 2018, insurers employed a staggering 2.7 million people in the US alone. Since it relies heavily on human capital, COVID-19 puts the entire industry in a very tough spot. Let's delve deeper to understand why.
Assessing the impact on revenue for 2020
The world equity markets lost $40 billion during the 2003 SARS epidemic. The COVID-19 pandemic will cause a more significant impact on not just equities and interest rates but also premiums, especially for health, business, and travel insurance portfolios.
While several health insurers have exclusion policies in place for flu-type outbreaks and pandemics, there will still be a considerable spike in claims. Also, with higher mortality rates, the number of death benefit claims will be on the rise.
With quarantine and social distancing, businesses facing interruptions will claim coverage for their losses, whereas employees at high risk, such as first responders (paramedics, police, firemen), will seek workers' compensation.
Meanwhile, canceled flights and trips will lead to a surge in travel insurance claims. Organizations that deal with events (sports, concerts, productions) will expect insurance to cover their financial losses.
How is the impact being felt? Firstly, sustaining spikes in demand will put a more significant strain on the already reduced workforce. Secondly, since airlines, hospitality, and events firms will bear substantial economic brunt, future demand from these portfolios might decline considerably. Even the sectors that aren't majorly impacted, such as auto insurance, will have to review their coverage policies, premiums and brace themselves for a looming global recession. Now let's see how COVID-19 will affect the insurance industry workforce.
Visit our Insurance page