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Countless articles about the implications of COVID-19 on the insurance industry are circulating in the digital universe. Many aspects of the industry will be affected, but the ultimate impact depends on the length and magnitude of the virus crisis, something that is difficult to predict. However, one thing that is clear and will become more firmly entrenched as the reality of what is happening sinks in, and the weeks go by: digital capabilities are paramount for this day and age. The work from home movement (#WFM), voluntary or mandatory quarantining, retail store closures, and limits on public gatherings all serve to significantly increase our dependence on digital capabilities. More and more of the population are shifting their commerce online, using home delivery, and expanding their usage of social media and digital tools for communication. The more that people and businesses get used to operating remotely via digital tools, the more it will be expected—even after the virus is contained. The genie is out of the bottle, and it will be hard to put it back.
What does this mean for insurance? Could COVID-19, in fact, create the tipping point for digital transformation? For starters, it will bring into stark relief the level of digital capabilities each insurer has. The demand for self-service digital interaction capabilities will increase significantly, both from a sales and service perspective. In addition, it is critical to assess insurers’ internal operations and the implications for employees. Another area of concern for insurers and customers is the potential for increased cyber-risk. Finally, it is essential to look at existing transformation plans and IT projects and assess how these might change in the short and long term. Let’s take a closer look at each of these areas:
- Digital interaction capabilities:Self-service portals for agents and policyholders, websites that are easy to navigate and built using responsive design approaches, mobile apps for policy service and claims, and world-class call center technologies will become more critical than ever. Volumes are likely to increase as fewer face-to-face interactions occur by necessity. Capabilities such as virtual inspections, DIY claims reporting for FNOL, and AI-based damage assessment will be much appreciated by all involved.
- Internal operations and employees:The digital delivery of policy dec sets, statements, and correspondence is important for customers but also has a significant impact on employees. Documents that require production and mailing require employees to be physically present onsite to manage operations. In addition, the processing of inbound documents is a high-volume, people-intensive activity. The more that insurers can provide digital input options and/or automate and digitize inbound documents and correspondence, the better, for both customers and employees. Increased digital payment options can reduce the flood of checks that require physical handling. An environment in which more employees are working remotely makes the shift to more digital interactions vital. Also, modern technology enablement options for agents, adjusters, and others that are in the field will enable them to do their jobs in a world where customers expect to interact and conduct business online.
- Cyber-risk:The massive shift to WFH and increased reliance on digital interactions will increase the exposure level for cyber-risk. Both the insurance company’s internal data and the data of the personal or commercial lines customer will be more at risk. This will require greater adherence to security protocols and the stringent use of security technologies. From an insurance product standpoint, insurers will need to reevaluate an already rapidly growing product line to assess coverages and limits.
- Transformation plans and projects: The P&C insurance industry is in the midst of a wide-ranging digital transformation. Much has been done over the past decade to digitize more documents and content and provide more ways for prospects, producers, policyholders, claimants, and others to interact digitally with the insurer. However, most in the industry would agree that insurance is still in the earlier stages of comprehensive digital transformation across the enterprise. COVID-19 will not only create an immediate sense of urgency to provide digital capabilities during the crisis, but it will also reinforce the value of being digital.
When the spread of the virus is under control and the world begins to move back to a more normal state, insurers would be wise to rethink their plans for digital transformation. Many already sense that the pace of transformation is not fast enough. At SMA, we predict that COVID-19 will trigger a tipping point that results in more aggressive digital transformation plans across the industry.