Has COVID-19 brought new changes to the insurance industry? – Yes. Covid-19 definitely turned the world upside down when it first outburst in 2020. All the businesses and general sectors had a significant challenge continuing their lives in the new normal. Like all working industries, the insurance industry was no exception. However, insurers responded quickly to the crisis. In mid-year of 2021, the insurance industry is cautiously managing the claims management process following the phases of the COVID lockdown that began in the year 2020. As the sector leveraged technology to bring in hassle-free services, it also increased transparency and efficiency. While the economy recovers and responds to this pandemic, insurers in the overall insurance industry may face several challenges and see many new opportunities in the medium to long term.
Before discussing the prospects, let us discuss some significant impacts or after-effects that Covid-19 brought to the Insurance Industry.
Some Major Impacts of Covid-19 for Insurance Industry
Going back to the pandemic’s early days in the US, a report published by Deloitte Center for Financial Services noted that lockdowns led to a year-over-year drop of 40.2% in miles driven in April and a 25.5% drop in May 2020 for Auto Insurance. Though some auto insurers gave the money back to insureds, they ultimately came out on top during this period.
At first sight, the impact on personal auto insurance in the United States appears minimal. According to the research by Mc Kinsey, this segment’s growth and performance have mostly been unaffected by recessions over the last 20 years. But the pandemic, on the other hand, caused a few structural market changes increasing in auto insurance.
Pandemic and catastrophe-related losses hit North America hard, accounting for 40.0 percent of the worldwide property and casualty (P & C) market. According to the Deloitte Center for Financial Services, P & C insurers’ yearly operational return-on-equity fell from 8.3 percent to 2.8 percent in the first half of 2020. The $6.8 billion in damages experienced due to the COVID-19 pandemic, including workforce reductions that resulted in lower workers’ compensation insurance sales, demonstrates this loss (with the recovery of P & C insurance expected to be slow until employment rebounds to pre-pandemic levels).
Some Examples You Might Want To See
On the other hand, Wimbledon, the oldest tennis tournament globally, got canceled in 2020, and the pandemic insurance coverage for this event was more than £114 million. Adding to that, the postponement of the Olympic Games in Tokyo became a more extreme example of an insurance payment owing to event interruption, with Jefferies analysts estimating the insured cost of the event at $2 billion.
Now besides, the unpredictability of the COVID-19 pandemic has impacted a wide range of industries with insurance coverage. Among the areas affected are business interruption (for example, disruption to supply chains and inability to operate normally), trade credit insurance (cover for businesses if customers who owe money for products or services delay or do not pay at all), travel, cyber liability (due to increased working from home), and event cancellation).
We could also observe some significant adverse impacts of Covid-19 in Trucking Insurance, Commercial Insurance, and many other Insurance Providers, Insurance Agencies, and Brokers. Despite this negativity brought by Covid-19, it has also brought some new prospects for the overall Insurance Industry.
Now, let us discuss some new opportunities brought by Covid-19 for Insurance Industry and understand everything you need to know if you are involved in Insurance Provider companies or Insurance Agencies.
Top Trends You Will See In Insurance Industry By 2022
COVID-19 has transformed the insurance industry by bringing emerging roles of technology and advancement. In a work-from-home environment, technology has become even more crucial in all parts of the work areas. Low lending rates, a renewed focus on liquidity, and a heightened awareness of the possibility of black swan occurrences have increased the pressure on businesses to rethink their operational models and maintain their independence. Now, underinsurance is a problem that is not restricted to developing countries or just for specific risks.
1. Change in Interaction with the Stakeholders
Furthermore, as more information becomes available in the aftermath of a pandemic, it will compel the insurers to reconsider how they interact with customers, distributors, investors, and other critical stakeholders. New expectations for the industry’s leadership in promoting transformational change from the viewpoints of the environment, social justice, and governance will continue to grow across geographies.
2. Acceleration of Digital Transformation in Insurance
Insurance companies were quick to employ remote technologies in reaction to the crisis from the mid-2020. While most of the insurer IT spending is still dedicated to maintaining legacy systems, budgets are beginning to shift away from core applications and business analytics and artificial intelligence to enable more flexible products and a better customer experience.
However, many companies have put off investing in new technology (such as consumer data analytics and technology to link mobile apps, websites, and call centers) due to fears about employee opposition. Here, a gradual approach to technology adoption won’t be enough to enable insurance companies to succeed in a world where virtual operations are increasingly becoming the new norm. Therefore, it is the right time for all the Insurance Agencies and Companies to research more on bringing new technology for the digital transformation.
3. Adaption to Remote Working
In many aspects, remote working has shown to be more efficient than the current norm. This disaster has served as a wake-up call to rethink the operating model and construct a more efficient and resilient infrastructure. Among other developments, the future may bring more remote-work call centers, lower commercial real estate expenses, and more geographically distributed footprints in the Insurance Industry. Given the knowledge that future COVID-19 outbreaks or other pandemics could have a comparable and sudden impact, adopting a remote working or hybrid working model is necessary.
4. Potential Increase in Personal Auto Insurance
Consumer attitudes toward shared resources may shift as a result of the pandemic. To minimize infection from heavily used means of transportation, people may rely less on public transit and ride-sharing. On the contrary, the prospects of driverless vehicles could become more attractive as an alternative to public transportation if it ensures a robust hygiene protocol towards adequate sanitation. Additionally, personal vehicles for commercial purposes may arise with increased deliveries, whether by small enterprises or via digital delivery applications. In fact, Ride-share drivers are already increasingly involved in food delivery and other services in the USA at present.
Therefore, it’s time to take new dimensions to take the Insurance Industry to the next level in 2022 and beyond.
The Emerging Landscape for Cyber Liability Insurance
Government limitations in reaction to the coronavirus pandemic have pushed employees to work from home or even stay at home.’ As a result, technology has grown important in our professional and personal lives. Despite the increased demand for technology, many companies still do not provide a “cyber-safe” remote-working environment. Whereas the business meetings that used to be held in person are now mostly held online. This approach spotlights the emerging Insurance Coverage in Cyber Security.
This further indicates that Cyber insurance is becoming more critical in the commercial world. Recent developments in remote work across industries, organizations’ increased reliance across a wide range of operations, and the emergence of new technologies will highlight the need for cyber insurance for any company in the upcoming days.
Cyber Liability Insurance Is Growing Gradually
There appears to be widespread agreement on the rate of increase in cyber insurance premiums in the future. Research by Standard & Poor’s Corp noted that Cyber insurance premiums, which now total approximately $5 billion yearly, will significantly grow from 20 percent to 30 percent each year on average in the upcoming days starting from 2022.
Key Takeaways from this Blog
- Covid-19 has brought tremendous significant new changes in the Insurance Industry especially for Insurers.
- The insurance industry faced many challenges during and after the first and second phases of Covid-19, including reducing employees, significant losses in P & C Insurance, Commercial Insurance, and increased cyber-attacks.
- Despite some significant negative impacts in the Insurance Industry, the insurance agencies have been coping with Covid-19 by quickly adapting to the new norm of working, accelerating digital transformation, and interacting more with stakeholders.
- We can forecast significant growth in Personal Auto Insurance and Cyber Liability Insurance in the upcoming days. There are good opportunities to grow in Insurance Industry in 2022 if you follow the trends.