It’s clear that the COVID-19 pandemic accelerated many societal and business trends that were well underway before it struck in early 2020. That’s certainly true of the insurance industry in general and the claims function in particular. That’s most obviously true relative to the need for more digital capabilities and more extensive process automation, as well as the need to compete for scarce talent.
The good news is that most claims operations were able to establish remote operations, transition their people and teams to virtual working and maintain operational resilience. Looking ahead, though, the priorities are shifting and intensifying, particularly those related to cost and quality. With market pressure to right-size expenses combined with the premium and claims frequency impacts, many claims leaders justifiably wonder, “Now what? How do we prepare our people and operations not just to survive the ongoing crisis but also to thrive in the new COVID-19 reality?”
They are seeking the best way to navigate the ongoing uncertainty of risks of widespread remote working and simultaneously improve cost and quality in the next 12-24 months. In assessing their priorities, claims leaders are asking themselves which actions are truly urgent now and which can wait a quarter or two? These are the right questions to ask, especially given how important it is for claims functions to maintain discipline on the cost of losses, as well as on operational expenses.
To help find answers in the immediate aftermath of the crisis, the EY insurance team conducted 10 interactive online workshops with senior claims executives from some of the largest insurance companies in the US. These sessions were designed to help leaders:
- Define the many complex risks and opportunities they face
- Assess and prioritize those risks and opportunities
- Define proactive steps and action plans to move forward
This article will present the insights and perspective gained from those sessions, in which more than 100 insurance industry professionals participated. Specifically, it will describe the six most common and significant themes regarding the impact of COVID-19, as identified by EY analysis of the session outputs. As a whole, they represent the most meaningful risks and opportunities for claims operations:
- Managing employee engagement, performance and retention in remote working environments
- Accelerating digital capabilities
- Monitoring and maintaining quality through increased volumes and remote working
- Effectively and proactively managing vendor performance and risk
- Preparing for legal, regulatory and legislative action
- Rapid upskilling and reallocation of resources
Individually, these six areas represent a framework for action. Collectively, they represent huge financial stakes for insurers. Carriers that form the right near-term response strategies and long-term action plans will be able to protect their margins and manage their costs more effectively.
Those that delay action or lose focus on these factors may risk lower customer satisfaction, operational disruption and reduced claims quality at a time of extreme economic uncertainty. Getting the right answers and taking the right actions at the right pace in these areas will be essential.
Where claims leaders are focusing energy and effort
The claims risk workshops covered all lines of business, and participants identified 137 risks, ranging from technology and people to operational capacity and productivity to risks specific to certain lines of business. Taken as a whole, the risks identified reflect the massive amount of uncertainty across the industry even after six months of the pandemic.
However, it’s important to note that the impact across industry subsectors will vary considerably. Personal and automotive lines are dealing with reduced claims volumes, for example, while commercial lines are seeing a large spike in contentious business-interruption claims.
The sessions were built around a risk taxonomy framework that EY leaders use to accelerate and enrich strategic planning dialogues with senior insurance executives. The six focus areas that emerged from the discussions demonstrate how claims leaders are prioritizing their efforts and investments in the months to come. They also reflect plans to sustain performance into 2021.