COVID-19 has significantly impacted lives of all of us. The pandemic has taken lives of many, disrupted economies across the world, and affected supply chains and all business sectors. In the past, the insurance industry has experienced many natural catastrophes or viral outbreaks. However, the global scale of the COVID-19 pandemic is especially challenging for the insurance sector.
With increasing customer expectations and engagement, there is a growing opportunity for all insurers to focus on digital transformation. InsurTech leaders need to question their current drawn-out projects and design intelligent processes and agile products in order to stay competitive. This also involves setting a compelling vision and delivering an engaging product experience that is customer-centric and solves real-time customer pain points.
The insurance industry has already acknowledged the importance of undertaking digital transformation. A substantial increase in the budget allocation towards ‘the digital’ proves this. While in 2017 companies invested 3,38% of their revenue into IT, this number has increased by nearly 33% in 2018.
The need for new products
The current situation, offers a unique opportunity for insurance companies to rethink the way they do business, innovate and adjust. There is a growing need for new insurance products to meet customers’ reshaped needs.
However, the ability to react quickly is critical, because the value of the product is often lost before it’s launched either because the opportunity has changed, or competitors reacted faster.
While there has been many talks and indications of some insurers creating products that would be payable in a case of a pandemic, there also might be an increasing appetite for a customised, or usage-based insurance. The simplest example would be a motor insurance through IoT devices. A customer is charged on the actual kilometres they drive, rather than paying fixed premiums over time. By using wearable devices, individual needs can be reflected in premium pricing. Pulse by Prudential is a real time example proving that these are not only futuristic ideas. This digital health platform manages health through AI and real-time health related data, helping people prevent the onset of diseases.
The need for digitisation and personalisation
Secondly, there is a debate that the pandemic might be accelerating digital transformation and personalisation of the insurance sector. Highly standardised and not personalised products are the main source of criticism. Customers often state that priorities when selecting an insurance provider is an online end-to-end experience and speed and flexibility when processing claims.
Even though, the consumers are looking for more digital experiences the importance of agents will not disappear. However, the selling process should. Insurers recognise that to succeed in today’s market, they need to bring more value with personalised offerings and individual communication. Indeed, many insurers are starting to provide a digital-first advice to their potential clients as a result of the pandemic.
Moreover, there is a much greater demand for flexible and new types of insurance. Insurers need to rethink their strategy to meet this demand. This means a greater investment in digital that will allow them to communicate better, launch new products faster and streamline their claims handling operations. As the customer behaviour and expectations are rapidly changing, they are less likely to tolerate any frictions and slowdowns during their insurance processes.
COVID-19 has prompted consumers to review their insurance priorities. However, the insurance sector rethinking their market strategy, how to quickly meet the demand for new products and how to bring additional value to the customers. In the future, we might look astonishingly back on how the pandemic changed so much that seemed to be impossible before.