With the looming threat of an economic recession, players in the insurance industry must learn to anticipate and cope with risks. Also, insurance companies must continue to assess and transform their business’ strategies to adapt to the “new normal.”
To face up to this new reality, we compiled a list of what to expect for your business insurance.
A Massive-Scale Shift to Telework
Going back to March 2020, most people believed things would go back to normal in a few weeks. However, things did not go as planned. Now that 2020 is almost over, insurers across various organizations have shifted to remote work. If one thinks about it, the pandemic has accelerated the digitization of operations.
Besides the current pandemic, states have had to deal with other disasters such as the wildfires in California. As a result, insurers are experiencing an increase in customers enquiring whether they are eligible for business interruptions claims. This deluge of inquiries also involves the withdrawal of customers facing financial burdens.
This overload might get worse. Therefore, a wise move would be for business insurance companies to adopt ‘volume shifting’- a scenario involving the transfer of more internal employees into the insurance claims department from departments that seem to be less stomped.
Just like all major economic sectors, the insurance industry will likely face a shrinking workforce. An increase in infections will lower productivity. The ILO Monitor third edition referrencing COVID 19 and the world of work estimates a 12.4 % reduction in working hours in America. Based on such drops in productity, some insurers are quickly coming up with contingency plans.
For instance, in Germany, several carriers are in discussions with third parties about handling claim queries. In the US, brokers have attempted to negotiate the terms of their coverage with insurers. This action has prompted insurers to seek the help of actuarial consultants to assist in the modification of their pricing models.
As for the high-cost and complex claims, which require physical evidence, there’s a high chance of adopting drone technology to replace site visits. An important thing to note is that not all internal procedures can be easily digitized. For instance, federal law in some states in the US prohibits electronic notaries. Therefore, it would be interesting to see if this law changes soon.
Increased Cybersecurity Measures
There has been an increase in cyber breaches over the past couple of years. In 2019, for instance, more than 164 million records containing sensitive information got out—this information is based on a Statista report. Also, 540 data breaches occurred in the first half of 2020.
With insurance company employees’ shifting to telework, we will likely observe an increase in data breaches by malicious actors looking to exploit the system vulnerabilities. Companies should therefore train their staff on best information security protocols. Also, cyber teams must continuously monitor their systems. We should expect tightening around underwriting procedures as well as the reinforcement of incidence response strategies.
Due to the pandemic, so many unknowns surround the insurance sector. Staying on top of trends is important to ensure business longevity. Based on what we have mentioned above, it’s quite clear how big of a role technology plays in improving resilience. Therefore, it would be best that all actors in business insurance unlock the opportunities that come with digital transformations.