(Ellen Carney, Principal Analyst, Forrester. Source: Forrester.)

Insurers’ IT organizations were called on to enable their companies to operate in full-remote mode when states issued COVID-19 shelter-in-place mandates. Having dealt with that challenge, they are now in the throes of a longer-term reaction involving helping their companies adapt to new business realities, some of which are sudden, some longer-term. For a view on how insurance technology executives are responding to the challenges created by the pandemic, we asked Ellen Carney, Principal Analyst, Forrester (Cambridge, Mass.), about lessons learned, likely changes to technology investment, which tech trends are likely to accelerate, and which technology vendor categories are likely to prosper in this difficult time.

Insurance Innovation Reporter: What lessons have insurers learned from the COVID-19 crisis about how they should think about business continuity planning and capabilities?

Ellen Carney, Principal Analyst, Forrester: It’s too early to say what are the “lessons” that insurers have learned from the crisis, because it’s still unfolding and likely to be doing so for a while yet. I also don’t think that they’re worried about their own DR and BC strategies, but they should be thinking about how they can help customers with their own. Of course, loss control teams are likely already looking at commercial prospect and customer accounts, but this would be a value-add for small businesses. Way back in 2015 we asked ~300 agency roles about non-insurance services that they’d be willing to sell:  47 percent said that they’d be willing to sell disaster planning services. When you consider just how big the impact has been on small businesses, agency roles already anticipated a need like this five years ago. We already know that a lot of U.S. small business customers are going to be disappointed in their coverage—and their agents.  From 2014 to 2018, small business owners who said they had business interruption coverage went from 19 to 28 percent. But unless that small business is in certain industries, COVID-19 does not meet the “direct physical loss” requirement. Call centers and agents will be tied up explaining coverage limits that should have been made obvious on purchase.

IIR: What impact is the COVID-19 crisis likely to have on insurers’ technology spending?

EC: Even before the threat of the corona virus, insurance tech spend was poised for a slowdown. Five days after the WHO declared a pandemic, we were talking about the odds of a tech market decline across all industries basically increased by 50 percent. And given that many insurance CIOs have already been through Y2K, the dot-com bubble, 9/11, and the financial crisis, they likely have playbooks in place to follow. Expect to see the following tech investment impacts in this order of priority:

1. hardware spend on replacing/upgrading laptops, servers, storage, routers, etc.
2. except for projects that can reduce spend or help insurers work better in this new normal, new projects will be pared, including spending for consultants, staff aug, and SIs.
3. cloud subscriptions get looked at closely and low usage, duplicates, and low-value agreements get nixed.
4. the mix of telecom/mobility/services is definitely changing and expect these kinds of deals to get re-negotiated, too.  Likewise, whatever outsourcing agreements that are left will be in the same boat.

And while not necessarily “tech,” all that stuff that’s been percolating (as in never scaled or commercialized) in digital innovation labs as well as random acts of CX will be looked at under a microscope and cut.

IIR: What insurance technology trends are likely to be accelerated by the crisis, for example, those involving process automation, virtualization or artificial intelligence?

EC: All of these will get more attention, and many insurers have scaled this tech within the business. I would also add in data and analytics. Computer vision (as in photo claiming), chat bots, conversational interfaces, IoT are other technologies that will rise in importance. And while not necessarily about the insurer’s own workforce but rather one that they’ll “insure,” figure that there will be a very interesting workforce composition shift wrought by the corona virus. In industries like construction and local logistics, tireless and immune robots and drones lay bricks, hang drywall, and deliver groceries and take-out meals. They can work in close quarters without the fear of sickness or overuse injury. And since they’re not on the payroll, these indefatigable workers don’t get factored into workers’ comp premiums.

IIR: How are insurers likely to think about remote work capabilities in the future? How prepared or unprepared were insurers to support remote work?

EC: It turns out that in normal times, insurance employees are about as likely as all employees to work from home at least a day a week (14%) and 12 percent told us that they work from home every day. What’s interesting about insurance employees and this has been the case for a while is that they’re quite mobile within the workplace—38 percent told us that they’re constantly on the move while they’re at work, in meetings, collaborating, and so forth. So, this is a big activities-of-work change that insurance employees will have to get used to. While I have not interviewed insurers about their Work From Home [WFH] policies, I suspect that playbook has already been in place especially with their disaster planning.

You can also imagine that successful WFH experiences will prompt at least consideration for insurers to get out or reduce the square footage of their office real estate. Even with shelter-in-place mandates, businesses must meet customer needs and generate revenue. While many employers have been reluctant to offer telecommuting on anything but a one-day-a-week scale, WFH is now the only way many employers—including insurers and agencies—can keep going. This shift in employment practices will stick, thanks to subsequent waves of the virus, and if consequent recession is U- not V-shaped. Some large employers are already questioning whether being in the real estate business makes sense, with per-floor rents in downtown Manhattan easily over $1 Million.

IIR: What vendor categories are likely to benefit from the crisis, for example, companies that outsource the management of billing/payments, infrastructure, process management?

EC: Yes, I agree on the billing/payments, as well as more cloud, cloud, cloud, low-code development capabilities.

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