Insurers are rightly prioritizing the needs of existing customers and the impacts on live policies. Those efforts include lifting exclusions for certain policies (e.g., unoccupied properties), easing restrictions and offering flexibility relative to policy changes, cancellations and fees. They’re also relaxing conditions for breach of policy terms [e.g., MOT (Ministry of Transport) requirements].
For retail insurers, the focus on customers has a direct link to market and competitive positioning. However, the reputational risks are potentially severe for insurers that can’t or don’t demonstrate visible support for customers who are struggling. If the public doesn’t see retail insurers making such efforts, this could result in long-term brand damage.
Business interruption (BI) and pandemic exclusions have generated many headlines (mostly negative for the industry) about how they affect small- and medium-sized businesses. Regulators are getting involved too, with the Financial Conduct Authority asking for insurer involvement in the high court test case relating to BI policy wordings. They have announced a set of temporary measures to assist insurance customers who are suffering financial difficulties because of the COVID-19 situation. Small commercial lines will be a top priority for insurers, though they must aim to achieve (and document) fair outcomes for all their customers, no matter how long the crisis persists.
Looking ahead, insurers will also face an uphill battle related to policy renewals, many more of which are likely to be handled online. Small businesses damaged by the COVID-19 situation may choose not to insure and will likely question the need for ancillary policies. Personal lines are likely to see an increase in churn as well, with customers looking to reduce household expenses. New pricing and payment plans are already in place for policyholders whose incomes have been affected. Some insurers are also deferring many renewal and policy end dates. Others may follow the lead of some US insurers by extending premium holidays or offering premium discounts as a further incentive to renew.
The economic impact will spark demand for new types of policies and services, as businesses seek to become more agile, digital and resilient. The transition to online and digital channels will only accelerate. For instance, more brokers will offer online quoting and purchasing capabilities. Questions related to COVID-19 symptoms will be added to the underwriting process for certain policy types. Insurers must anticipate this digital shift and align their own digital capabilities to meet these needs.
A rise in startups and micro-startups is to be expected, as furloughed and unemployed workers try to start over. These new businesses will be looking for new policy options tailored to their specific needs. Thus, it is expected that more insurers will launch subscription-style products, offering a modular array of features and more flexibility to add and delete coverages as risks change and businesses evolve, which will also support the needs of the growing gig economy sector. Demand for business interruption and cyber security policies is likely to rise, thanks partly to the dramatic increase in remote working and lessons learned from previous exclusions.
Looking at their risks, insurers must develop a joint approach with their intermediary partners to develop new products and upgrade their value propositions. They must continue to invest in more robust online and digital capabilities, aligned with intermediaries needs, starting with smarter, faster and easier claims procedures that eliminate unnecessary contact.