Don’t let COVID-19 mask the real insurance disrupters

Investing in digital transformation during the COVID-19 downturn is critical to strengthen your market position in the future.

There’s no denying that the onset of COVID-19 has brought about widespread and significant changes to the way we do business, and many insurers are now facing difficulties in managing normal day-to-day operations.

Many incumbent insurers have realised they weren’t prepared to handle a crisis of such scale and gone into damage control mode, focusing on short-term solutions that provide few business benefits, rather than making the requisite changes to underlying operational systems and processes that would make these improvements sustainable.

Since COVID-19 hit we’ve witnessed a rapid shift across the board towards remote working, and insurers relying on outdated legacy infrastructure, manual paper-based processes and in-person consultations have found themselves in the unfortunate position of trying to figure out how to manage a remote workforce on the fly.

Some have responded by reducing IT and project-related spend in an effort to combat added financial stress and are offering quick-fix responses to customer concerns as they attempt to manage daily operations while dealing with a massive influx of customer enquiries.

But given the insurance industry typically aims to attract long-term customers, it’s now more important than ever for insurers to develop (or improve existing) digital offerings to meet increasing demand for digital self-service capabilities—particularly from millennials, who expect online services as standard.

Now is the time for action.

Yes, we’re currently in the midst of a pandemic, but that doesn’t mean underlying concerns and imperatives from previous years have gone away. Insurers still need to respond to compliance issues uncovered by the Royal Commission and are still facing claims cost overruns.

At the same time, 100% digital insurtechs who’ve the capability to continue working at full capacity during the pandemic are still entering the market, placing themselves in an advantageous position to progress and achieve success during the downturn.

In comparison, incumbent insurers are limited by their continued reliance on legacy systems and software. They’re facing knowledge loss as employees are made redundant or benched and as key staff members shift focus to manage crisis communications.

Despite the immediate challenges that COVID-19 has brought about, the impact of these more consequential issues still needs addressing.

Insurers who are focused solely on responding to issues arising from the coronavirus pandemic are at risk of giving tech-forward insurtechs a 12-month (or more) runway advantage through reduced digital investment and their dependency on legacy software and infrastructure.

All of which means key decision-makers are now under increased pressure to establish a vision for how to proceed, while also considering what needs to happen immediately to keep business afloat.

Invest in post-pandemic success.

Investment during a downturn, while it seems like it goes against the grain, can be an opportunity to become stronger if it’s focused on the areas of a business that are reliant on manual, ineffective or slow processes, or where it makes the business more responsive to customer demands. History shows that smart investments in digital innovation can be linked to increased strength and resilience and long-term benefits.

According to a Harvard Business Review study that explored the Great Recession of 2007, “Companies that master the delicate balance between cutting costs to survive today and investing to grow tomorrow do well after a recession. Within this group, a subset that deploys a specific combination of defensive and offensive moves has the highest probability—37%—of breaking away from the pack. These companies reduce costs selectively by focusing more on operational efficiency than their rivals do, even as they invest relatively comprehensively in the future by spending on marketing, R&D, and new assets. Their multipronged strategy appears to be the best antidote to a recession.”

Australia’s oldest insurance start-up, MLC, reported that their transition to the cloud and introduction of online self-service functionality has given them a clear edge over the competition. Chief Innovation & Transformation Officer Sarv Girn states, “The benefits of digital transformation shouldn’t be underestimated—it’s become paramount for companies to continuously monitor their operations in order to provide the best possible service to their customers.”

Which just goes to show that it’s more crucial now than ever for senior leaders to focus on the real challenge of 2020; to internally build awareness about the benefits and competitive advantages that come through digital innovation, and to move quickly to adapt processes and improve technology assets as customer needs evolve. Investing in key services and systems now will put businesses in a better position to take advantage of the inevitable economic upturn.

Digital is the new standard. Make it yours.

COVID-19 has significantly impacted the way we do business and is likely to do so even once the world returns to ‘normal’. It’s anticipated working from home will become more routine post-coronavirus, so transitioning to digital operations should be considered a crucial element in insurer business strategies.

This becomes clear when looking at established Insurtechs who are still going full steam ahead despite the downturn. With a 100% digital offering, daily operations carry on essentially uninterrupted, giving them the opportunity to focus on long-term solutions and actively seek out new business while many insurers play catch-up due to outdated systems and software.

It’s critical for insurers to consider investing in key capabilities that have previously been holding them back. And while taking on additional costs at this time might seem risky, the long-term benefits of keeping your foot on the accelerator could very well be what lands you a competitive edge once the world settles down.

There’s no doubt we’re living in a time of uncertainty, but as we’ve learnt from previous crises there’s always opportunity to be had when businesses face challenges head on. By bravely progressing with digital transformation and a customer-first mindset, savvy insurers will be well-positioned to confidently lead their organisations into the future post-COVID.