As the adrenaline rush of converting entire companies to WFH for the first time ever starts to wear off, insurer executives are beginning to think about what comes next.
For many insurers, this starts with realizing that a comprehensive digital operating model is critical. If you start from the assumption that paper and people will always be available, it is easy to argue that it isn’t worth the cost to digitize the last 10% of some key processes. But in a world vulnerable to pandemics and shelter-in-place orders, this assumption is no longer valid.
At the same time, insurers are planning for a serious contraction in 2020. The property/casualty market tracks overall economic activity and employment levels. While there will be fewer claims and losses in most lines of business, there will also be serious challenges in new sales, retention, and cancellations. There is also real uncertainty about pandemic-related business interruption and workers’ comp claims. In any case, there will certainly be more claims litigation.
Life and benefits insurers were already facing the challenges of a persistent low-interest rate environment. That’s now compounded by the pressure of high unemployment on the benefits business and concerns about whether the face-to-face sales channel and paramed-based underwriting will ever rebound.
The reduction in top-line premium will put pressure on fixed operating costs, and many companies will find they need to restructure their product offerings, service model, and organizations in late 2020 and early 2021.
As part of this, insurers will need to reevaluate their technology strategies. Some formerly optional projects, like digitally reengineering underwriting and claims or fully digitizing company operations, will become mandatory for survival. Other priorities will fall by the wayside as companies focus on transformation and survival.
It is a time of crisis and change. Insurers who cling to the business structures and systems of The Before Times may not be able to adapt. But those that stay focused on “true north” goals of managing customers’ risk, meeting customers’ experience needs, and optimizing their organizational resilience will be positioned to thrive in the uncertain world ahead.
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