Developing the right response strategies
The huge effort to understand and quantify COVID-19 exposures pays off most immediately in the form of effective response strategies, which are best developed in advance of regulatory reviews and litigation. Insurers can define frameworks based on risk and materiality to establish a baseline and set priorities in terms of types of policies, customer segments or geographic markets they need to address first. For instance, in markets where policy wording is clearly defined, insurers may wish to standardize communication with agents and customers to manage expectations around which types of losses will be covered. Insurers in unregulated jurisdictions may wish to adopt special claims handling processes for cases with known ambiguities or inconsistencies in policy wording.
Especially in the case of unregulated product wording, the legal determination of coverage intent will be at the heart of the matter. Still, insurers in these jurisdictions will benefit from proactively thinking about how they will deal with adverse decisions on coverage that affect broad sections of their portfolio. A strong methodology for assessing these cases should address:
- Materiality and proportionality
- Tolerance for error
- Risk of fraud
- Level of social and regulatory scrutiny
- Financial contingency planning
Once insurers have clarity on the portfolio impact for both covered and uncovered exposures, they can implement claims processing approaches with appropriate levels of automation. For example, for explicitly covered simple claims, the entire process, from first notice of loss to payment, can be automated. For more complex covered claims that require extensive documentation and analysis, cases can be triaged and directed to specialized claims adjusters. Claims not covered or related to ambiguous policy wording can be referred to a specialized forensic unit.
The strongest response strategies will also feature proactive regulator engagement, as well as effective customer communications and robust documentation. When it comes to communications plans, technology solutions can accelerate and enhance the necessary customer outreach. Similarly, claims case management tools can provide workflow, document management, reporting and audit trails — all of which help enable the successful execution of response strategies, and any subsequent regulatory review or response to litigation outcomes.
Response strategies should also contemplate proactive risk management support for customers. This may include loss mitigation services, disaster recovery plans, business continuity plans, contingent operations activation, educational services and implementation of post-COVID-19 risk assessment procedures.
Analyzing customer value in a post-COVID world
Even as the industry moves through the immediate and near-term imperatives, it is important to keep in mind the longer-term implications and opportunities. For instance, the COVID-19 crisis has confirmed the need for clearer and more consistent policy wording. It has also revealed opportunities for innovative product coverages and risk management solutions.
Senior leaders may also acknowledge the inevitable turmoil of litigation, especially in unregulated jurisdictions. Given the toll on the industry’s reputation as a whole, as well as on individual brands, insurers would be well-served to find new ways to communicate, educate and strengthen trust with both customers and intermediaries. Those efforts should include not only the clarification of policy contracts, but also the development of high-value services that can help customers prepare for this new form of global disaster.
Over time, as exposure aggregation modeling tools for pandemic risks become more sophisticated, the industry will be able to more accurately quantify the financial impact on the portfolio for covered losses. This, in turn, will improve underwriting, pricing, claims servicing and loss control across the portfolio; individual customers stand to benefit greatly as these capabilities mature and the industry can bring greater predictability to exposure management, in addition to clarifying product intent.
The bottom line: clarity on exposures will benefit the business
Preparing for COVID-19 claims is an important step as insurers seek to respond to customers and recover from this crisis. The first step is to think through and even formally model a range of potential outcomes, each of which will have distinct financial impacts. Assessing and sizing exposures can inform insurers’ planning efforts, generating actionable insights that can be turned into effective and efficient response strategies. For instance, triaging and accelerating claims processing can define the most efficient path with the complexity of both covered and disputed claims.
This work can also establish a foundation to strengthen sales and service processes across the business, from the standardization of policy contract language in unregulated jurisdictions to development of new products and solutions for pandemic risk preparation. Ultimately, the P&C insurance industry will demonstrate its resiliency in the face of COVID-19. In rising to the challenge of long-term viability, insurers will also find new ways to innovate and provide enduring customer value.