The Pandemic One Year Later

It’s been a year to the day since my first blog on the pandemic: February 10, 2020. At the time, I was accused of being too negative. Here are some of my predictions and what actually happened:

Freedom of movement and the ability for people to get to work will be inhibited. Many people now work remotely. Cities suffered economically from the loss of commuters. However, there have only been partial shutdowns overall. The impact of COVID variants could lead to large shutdowns this spring, similar to what happened in London in early 2021.

Large numbers of people with key subject matter expertise may get sick. Large numbers of people got sick. However, severe illness and death occurred more frequently in the 65+ age group (who, for the most part, are retired) and younger people with underlying conditions. The impact on insurance operations has been limited.

Key major IT programs of work could be delayed if key people are impacted. This did not occur. Projects kept moving forward, leveraging new tools like Jira and MS Teams to improve virtual collaborations. In fact, almost everything was NOT impacted by the switch to virtual.

Increased death claims could overwhelm the technology and processes in place at life insurers. The technology and processes held up fine for the most part—however, portions of the processes needed to be digitized if they depended on paper or in-person interactions. The bigger issues for life insurers are that there are more death claims from excess deaths from COVID-19 and other diseases that are not being treated. Excess deaths and persistent low-interest rates due to economic collapse in the spring of 2020 and its aftermath are making life insurance much less profitable. Firms like AIG and Prudential intend to exit the life insurance space permanently.

Companies could be legally liable for not protecting employees. This is still not fully sorted out in the courts, but we see workers’ comp claims picking up some of the costs of the illnesses from COVID-19. There is a notable offset because many people are not going into the office, decreasing some claims. Exclusion clauses for pandemics in business interruption policies have held up in courts. There are also long-term effects of COVID-19 that no one knew of a year ago.

COVID could wane in the summer and reappear when the cold weather returns in the fall. It did just that and more. Cold weather and staying inside causes COVID-19 to spread faster. The Thanksgiving and Christmas holidays contributed to a massive surge in US cases in late 2020 and early 2021. What’s unknown at the moment is whether new COVID variants will cause another surge in the spring, despite the warming weather.

What’s Next?

There is some good news moving forward. Several vaccines have been approved, and about 10% of the US has received the first shot. Between the number of people who had the virus and the number of people who will receive the vaccine in the next few months, about 70% of the US population should have some or full immunity by the end of August 2021.

However, we may not reach herd immunity because of people who refuse the vaccine or children who will not have a vaccine available for them until September at the earliest. Booster shots may also be necessary for the new variants.

So, what does this mean? Current estimates show the US death toll reaching 500,000 people by the end of February and between 650,000-750,000 people by October. These figures would make the pandemic the largest mass death event in the US—greater than the Civil War, the Spanish Flu, or WWII.

However, the pandemic will likely recede in the second half of the year and be “over” by early 2022. COVID will still be around, and some form of annual vaccination may be necessary, but COVID will be a manageable (though possibly endemic) illness.

  • The digital transformation of the insurance industry will be largely complete, and Agile processes will be dominant. Based on what Novarica has seen and heard from the industry, insurers have accelerated investments to enhance portals and create a richer set of APIs.
  • In life/annuity/retirement, M&A activity will continue to create organizations that focus on one area and have a large scale. Numerous acquisitions or announcements in the last year are reshaping this segment of insurance. Examples include AIG’s October announcement that it will split from the life business, MetLife’s sale of its auto and home business to Zurich, MetLife’s acquisition of Versant Health (vision), Lincoln’s acquisition of Liberty Life, and Great American’s sale of its annuity business to Mass Mutual.
  • In P/C, new products will emerge to leverage IoT, massive amounts of data, and digital interaction models. P/C insurer pilot activity focuses on data and analytics. Per Novarica’s 2021 Emerging Technology in Insurance report, more than 20% of insurers plan pilots for AI capabilities in image recognition, machine learning, and unstructured text analysis. Big data technologies are even more popular. Over one in four insurers plan pilots for external data sources and enterprise data sets.
  • AI adoption will continue to accelerate in 2021 and into 2022. Per Novarica’s 2021 Emerging Technology in Insurance report, over 20% of insurers plan pilots for AI capabilities in image recognition, machine learning, and unstructured text analysis.
  • People will return to their offices, but things will look different. Offices will be for a portion of the week that requires in-person interaction. Virtual work won’t be five days a week for most, but it will be the norm for some portion of every week for most people. Insurer real estate footprints will be substantially reduced, as will the need to obtain talent from locations close to the office. And, finally, we should expect a form of inoculation passport for foreign and domestic travel.

The good news: The worst of the pandemic will end by the beginning of 2022. The bad news: We can never go back to the normal of 2019.

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