Catch up on our Insurance Services article series, including our recent blog on how to build resilience in light of the COVID-19 crisis.
As we get accustomed to life under Alert Level 1, our collective effort shifts from a short-term target of stopping community transmission of COVID-19 to long-term goals of protecting public health and encouraging economic recovery. The Government is providing support in many ways, including through wage subsidies to impacted employers, an economic stimulus package that promotes “shovel-ready” infrastructure projects and a campaign to support local businesses.
How can the insurance industry help to lessen the impact of the pandemic? We have already seen a number of insurers refund premiums in recognition of the reduction in claims during the lockdown and the financial hardship that policyholders are facing. We expect to see insurers paying increased claims relating to mental health and income protection as a result of job losses and increased anxiety levels. But what more can be done?
The industry should take the opportunity to support those in need and to emphasise the importance of how insurance can help in a crisis. General education on the usefulness and appropriateness of insurance will assist households in their financial planning and help improve the public perception of insurers.
We may see a reduction in employer-provided insurance as businesses look to cut expenses. This could exacerbate the issue of underinsurance in New Zealand as people lose access to the protection that they have previously relied on. Although Group Insurance schemes typically allow employees the option of continuing coverage, affordability comes into question if their future job status is uncertain.
Insurers should explore how they can support both customers and businesses to ensure that people remain covered. During lockdown, people were quick to adapt to working remotely with an increased reliance on technology. This could serve as a guide for how policyholders will interact with insurers in the future and provide a focus for innovation in products to be structured for a digital platform. As insurers adapt to a new way of connecting with customers, there may be a transition to simpler, scaled down products being offered digitally compared with those that currently dominate the market. It could be argued that this is in the interest of the customer, as simpler products are likely to be cheaper and may be sufficient to meet the needs of customers today who are struggling and facing the prospect of losing their insurance cover altogether.
(Chart taken from Deloitte Insights Confronting the Crisis article, with figures from the Deloitte Center for Financial Services survey).
Building on the learnings from the lockdown, the distance between customer and insurer can be bridged with real-time connections and regular contact through technology, making the insurer more accessible to the customer. Through these connections, insurers can refine and develop their products and services in response to their customer’s needs, creating a more tailored approach for their customer base. This can be enhanced even further by integrating digital technology with the value of financial advice through a financial adviser and taking a holistic omni-channel approach to meeting customer needs.
No doubt the insurance landscape is changing, but this is an opportunity to change for the better. In order to achieve this, the industry must focus, above all else, on the needs of the customer.
In our next spotlight on challenges facing the insurance industry we will examine the impact COVID-19 is having on the actuarial assumptions of life insurers. Check in next week.
Read more from our Insurance Services article series:
- How insurers can build resilience in light of the COVID-19 crisis
- COVID-19: The impact on insurance innovation
- COVID-19: The future of mental health and the insurance sector
The content of this article is accurate as at 19 June 2020, the time of publication. If you wish to understand the potential implications of current events for your business or organisation, please get in touch. Alternatively, our COVID-19 webpages provide information about our services and provide contacts for relevant experts who can help you navigate this quickly evolving situation.