Digital Experience Insurance

Overcoming the Impact of COVID19 on the Insurance Industry

COVID-19 has called for unprecedented changes and rapid adaptation across industries. For the insurance industry, specifically, the current pandemic has posed a threat on two fronts: 1) payables, which ensure continuity in both premium receivables and the investment income necessary to sustain business operations; and 2) payouts, which demonstrate the insurers’ ability to fulfill their commitments to their policyholders.

The life & health segments have been especially impacted by COVID-19 as mortality risks and/or resurgence has led to high demand for hospitalization, and in some cases, death benefits. As for casualty insurance, lockdown restrictions and the volatility of the pandemic are predicted to contribute to a significant spike in claims. Given these circumstances, it was no surprise that premium inflows recorded negative growth rates in recent months. COVID-19—and the extensive lockdown policies required to combat it—has effectively halted the human-intensive distribution channels that make up the lifeblood of insurance sales.

How can carriers overcome the impact of COVID-19 on their insurance business? This blog post outlines a 3-phase approach that helps insurers effectively respond to the COVID-19 crisis, and also sustain and even grow their business during the pandemic. This approach was shared by IDC in our webinar: Enabling Partner, Sales, and Customers.

How can insurers respond to change during the pandemic?

COVID-19 has significantly impacted the economy of scale, perceived affordability of goods and services, and policyholders’ living conditions and propensity to spend. To adapt to these changes, insurers need to reprioritize their spending patterns, reassess their investments, and recalibrate the way their business is done by adopting new alternative sales channels.

Two important questions insurers must ask themselves during this pandemic are:

  • How much do human interactions and in-person engagement influence our customers’ insurance-buying decisions?
  • Have we built a brand presence strong enough to compete in the digital economy and attract new customers?

Change is inevitable; and each of the market participants, be it customers, agents, financial institutions, or other constituents, needs to consider how their actions will shape the future of the industry, and plan their course of action accordingly to grow and stay relevant through this crisis.

A 3-phase approach to overcome the impact of COVID-19 on the insurance business

Infographic depicting a 3 phase approach to responding to the COVID-19 pandemic in insurance

Given the pandemic’s scale of volatility and the high possibility of more risky outcomes, it is recommended for insurers to adopt a 3-phase approach—Defending, Enabling, and Adaptive – to take them through the next two years.

At each phase, insurers need to engage with a different set of stakeholders and implement best practices as they modify their course of action.

Phase 1: Defending

In the first phase, the priority is “defending” the current business from the initial shock and securing critical assets. Toward this end, insurers should first enable and aid their employees to work from home. This is facilitated by distributing laptops, facilitating training programs, and developing remote working capabilities. Subsequently, insurers should secure business data assets by monitoring and controlling end-point devices.

At the forefront of this process is communicating adequately with existing policyholders, employees, agents, and partners. Insurers must communicate, be it about changes to work policies, new training programs, awareness campaigns, or new findings from assessments or reassessments of customers’ and agents’ impulses. Of course, insurers must also prioritize interacting with existing policyholders across digital touchpoints to actively cater to their immediate needs and ensure the availability of services such as claims, premium payments, etc.

During Phase 1, some important questions insurers should address are:

  1. Should we condone the delay in renewals without penalty (i.e. without considering it a break in the policy), and provide a deferred payment option for premiums?
  2. How should we engage with customers to discourage them from canceling critical policy coverage?
  3. How can we facilitate the adoption of digital tools and platforms across the organization?
  4. How can we ensure there’s minimal impact on employee productivity?
  5. How can we boost the morale of the backend support staff?

Phase 2: Enabling

In the second phase, the focus is “enabling” business through the adoption of new digital roadmaps and strategic investments in key technologies. Phase 2 requires insurers to engage with alliances and partners (e.g. distribution channel partners) to achieve higher penetration into new market segments.

To operate efficiently as a partner in the digital ecosystems, insurers must embrace APIs and microservices architecture to enable digital success and facilitate interoperability between multiple systems. Digital innovation combined with agile practices will improve operational efficiencies, which helps insurers build resiliency. Particularly, the automation of claims processes, customization of customer interactions, fraud prevention, and rules-based underwriting advisory is necessary to compete and grow in these uncertain times.

As Phase 2 nears completion, insurance companies must prioritize building the long-term strategy before moving onto Phase 3. This requires planning and resetting transformation roadmaps and including more stakeholders in the network. Given the unpredictability of COVID-19, this plan should be reviewed and assessed on an interim basis.

Phase 3: Adaptive

In the third phase, insurers should adopt an “adaptive” actionable framework capable of identifying high impact areas, assessing and managing risk, and addressing business-critical priorities. In this phase, insurers should engage with other stakeholders such as third-party vendors and marketplaces to identify new business models and alternative revenue streams. “Digital” is at the heart of this entire 3-phase process, and the goal of this “adaptive” phase is to achieve a successful digital transformation that sustains insurance business growth during- and post-pandemic.

How can this be achieved? The key is to build a risk-conscious organization culture for effective risk management, an agile mindset for breaking down organizational silos, more automation in governance and compliance frameworks for improved operational efficiencies, better threat intelligence for proactive response strategies, and a truly hybrid IT architecture built for scalability.

By implementing this 3-phase crisis response approach described above, carriers can efficiently and effectively handle the impact of COVID-19 on the insurance business.


For insurance leaders leading the COVID-19 response efforts at their organizations, check out these 5 best practices for a COVID-19 response strategy.