8 minute read 28 Apr 2020
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COVID-19: How insurers can support customers and distribution partners

Authors

Ed Majkowski

EY Americas Insurance Sector and Consulting Leader

Transformational insurance leader.

Simon Woods

EY EMEIA Financial Services Insurance Strategy Leader, EY Global Financial Services IBOR Lead

Senior advisor to board-level executives in financial services. Business leader. Industry thought leader. Passionate about having the courage to challenge conventions and foster innovation.

8 minute read 28 Apr 2020

To spark recovery, insurers must work to meet customer needs, strengthen distribution channels and enhance future products.

In the wake of the social and economic disruptions from COVID-19, insurers have responded quickly to ensure operational resilience, maintain solvency, and engage with governments and regulators. Meeting the needs of customers, distribution partners and other stakeholders has been the top priority.

The coming weeks and months will be a telling period for insurers of all types. They have an opportunity to underscore their critical social purpose of underpinning economies and protecting individuals, businesses and communities.

The most forward-looking insurers will also accelerate – rather than pause – their critical transformation programs. Beyond the immediate-term decisions they make in response to the pandemic, it is the success of those strategic initiatives that will secure the future of individual insurers and the industry as a whole.

Where insurers are relative to COVID-19 – and what’s ahead

Insurers’ business continuity plans have largely worked, though concerns remain about call center capacity, the near-term viability of offshored operations in certain countries, and the implications of remote working at scale.

The financial impact has been significant in terms of steep drops in share prices of public carriers and brokers, and reduced new business volumes, while claims in certain areas (especially business interruption, travel and event cancellations) are expected to spike. Conversely, the likelihood of rising retention rates and longer-term premium rate increases provides some cause for optimism.

The impacts will be felt differently by different types of insurers and within different parts of the business. This article focuses on the customer, product and distribution impacts for non-life insurers, which will be significant and requires a proactive response.

We believe non-life and specialty insurers need to focus, first and foremost, on meeting customer and stakeholder needs in the immediate aftermath of the pandemic. However, they can’t afford to lose sight of long-term commercial opportunities and their role in facilitating a wider economic recovery.

Managing customer queries and engaging stakeholders

Insurers are dealing with unparalleled volumes of queries from customers and stakeholders. Intermediaries – primarily brokers and agents – are playing the crucial role of the customer interface, particularly in commercial and specialty lines.

Insurers will have to communicate consistently and frequently via multiple channels (e.g., call centers and agent portals) and through intermediaries. Everyone is looking for information about business interruption coverages and claims processes, and many carriers have responded by offering premium holidays.

It is difficult to overestimate the value of communication in a crisis such as this one. The industry’s response will shape policyholder trust and behavior for years to come. The question insurance leaders must ask: “Will policyholders turn to us confidently for protections against unexpected future events and emerging risks?” The answer largely depends on what insurers do in the coming months.

Over the longer term, all stakeholders will be looking for consistency on coverage and exposures. What insurers learn now can shape the development of future products that have more flexibility and well-defined coverages and exclusions. A clear and data-driven approach will help the industry strike the appropriate – but delicate – balance of solvency, customer protection, regulatory and legal requirements and potential government support that the circumstances demand.

Insurance distribution – pivoting to opportunity

Insurance is unique as an industry in that its greatest threats are often inextricably linked with its greatest opportunities. The coronavirus pandemic certainly fits that pattern. Retention rates are expected to be high over the coming months, as clients stick with what they know – relationships with familiar insurers, agents and brokers. Market demand for new protections against future pandemics will rise. Still, the first priorities must be supporting customers and sustaining distribution channels.

As new business will be limited for brokers, the focus should be strengthening relationships within existing books of business. Doing the right thing by customers now will be good for business next and beyond. Doing well by the distribution channel is equally important in the short term. Certain carriers have accelerated premium payments, and many are trying to equip their distributors with digital selling tools and processes, and teach them how to use them.

If the economic impacts are prolonged, insurers may need to take additional action to support intermediaries – especially in areas where client-centric goals overlap. That may include supporting independent agents in their applications for government funds, collaborating on “virtual renewals” and working on joint technology solutions.

Insurers will have to consider extending renewal dates and refining policy structures. The focus will eventually shift to product development and growth, so now is the time to devise plans for the “new normal.” The top priorities may include new customer engagement models, refined value propositions and policies that feature pandemic protections. Such policies may become the rule rather than the exception. An expansion of usage-based policies is also likely.

New captive solutions and ancillary offerings for self-insurers (e.g., loss prevention and risk advisory services) are likely to emerge. Affinity groups that currently lack policy options tailored to their unique needs (e.g., peer-to-peer businesses and industry groups) could present promising opportunities.

New products are already being launched to mitigate the impact of COVID-19 in some of the hardest-hit geographies, including Italy. The insurers that think farthest in advance about future needs and move most nimbly to meet them will likely drive the most benefit for customers and stakeholders, as well as their own bottom lines. For insurers, it’s a moment to inspire lifelong loyalty.

Facilitating the economic recovery

For an industry that has too often been an afterthought, the coronavirus pandemic presents an opportunity to reinforce its relevance and critical social purpose. However, the purpose of insurance will be called into question if the industry is not perceived to be doing its part to support a long-term, global economic recovery.

Insurance has an essential role in that recovery. Insurers stand to gain from proactively engaging government authorities and other businesses to present creative solutions that will help businesses and communities get past the pandemic. Demonstrating leadership and compassion can reframe perceptions about the overall role of insurance in the economy, as well as strengthen individual brands that are comfortable getting out in front.

Insurers should consider how existing policies and coverages can be used in conjunction with government bodies to provide support to businesses and cover protection gaps. Engagement and partnership with government entities are also necessary to ensure insurers have access to additional capacity and cash flow, if required.

Regulators and other government agencies are already exploring options to use the insurance industry as a vehicle to support businesses and distribute financial aid. Insurers should view this as an opportunity. The prospect of legal action in the US (e.g., mandated payouts for business interruption insurance in spite of exclusions) highlights the potential risk if insurers take a wait-and-see approach. Taking proactive steps – ideally, in conjunction with government – is the better course of action.

A time for coordination and collaboration

In thinking across the immediate, mid-range and longer terms, our view is that insurers must not lose sight of longer-term imperatives – even as they focus on meeting immediate-term customer needs, maintaining solvency, ensuring operational resilience and helping with economic recovery. The following actions are essential for insurers looking to move forward on all of those fronts, as well as build on the progress they’ve made on transformation and optimization initiatives.

  • Now: next few months

    • Provide clear and consistent messaging to customers and other stakeholders – and refresh these messages regularly to ensure they remain current
    • Implement a smart triage system to intelligently prioritize and efficiently process incoming queries across channels
    • Develop proactive outbound engagement plans for customers, agents and brokers, third-party suppliers and partners
    • Establish dedicated teams to develop statements of purpose relative to COVID-19, model a range of economic scenarios and map the various commercial considerations and growth opportunities 
    • Actively plan and proactively engage with government bodies on pragmatic approaches to facilitate economic recovery 
    • Consider accelerating commission payments to ease liquidity concerns among distribution partners
    • Plan to collaborate with intermediaries on “virtual renewals”

  • Next: 6 to 12 months

    • Plan to reboot and enhance new business activities, especially in retail line
    • Accelerate the shift toward digital sales channels, as well as cost optimization efforts in traditional channel
    • Amp up product development efforts, targeting newly identified customer needs and groups
    • Develop and communicate distinct and updated customer value propositions relative to the “new normal”
    • Seek opportunities to create joint technology solutions with intermediaries to lower costs and increase resilience
  • Beyond: 1 to 3 years

    • Seize opportunities to “futurize” operations, with increased customer centricity and stronger digital capabilities
    • Consider adopting new commercial relationships and partnerships that best respond to future customer needs
    • Engage with capital providers to drive development of new products and business models
    • Adapt and refine operating models to support new products arising from the crisis (e.g., those designed for stronger protections)

A time of uncertainty invites bold action

Insurers are confronting the reality that COVID-19 is a long-term disruption to all stakeholders – customers, employees, investors, partners and suppliers. The scope, duration and severity of the crisis is, as yet, unknown. As the circumstances change and new issues inevitably emerge, the industry must be ready to think creatively and act nimbly.

Insurers must take advantage of the tools and resources they have to confront the crisis now, even as they identify the capabilities they need to develop next to seize the emerging opportunities. That’s how they can come out of the crisis with a stronger business model and market position in the quarters and years beyond.

Summary

While insurers need to focus on meeting customer and stakeholder needs in the aftermath of the pandemic, they can’t afford to lose sight of long-term commercial opportunities and their role in facilitating a wider economic recovery. 

About this article

Authors

Ed Majkowski

EY Americas Insurance Sector and Consulting Leader

Transformational insurance leader.

Simon Woods

EY EMEIA Financial Services Insurance Strategy Leader, EY Global Financial Services IBOR Lead

Senior advisor to board-level executives in financial services. Business leader. Industry thought leader. Passionate about having the courage to challenge conventions and foster innovation.