The Insurance Industry in the Current Crisis: Respond, Recover & Reimagine

Insurance is an industry based on risk and trust. The insurer takes on a calculated risk on behalf of the insured. In turn, the insured needs to trust that when they have a claim, the insurer will be there to support them.

Insurers are excellent at assessing potential risks. But most did not have “global pandemic and 12 weeks of shutdown” in their forecasts. In most cases, pandemics are not covered in existing policy frameworks. Extraordinary events forced business closures imposed by authorities and infectious diseases, and triggered strong legal arguments such as business interruption insurance is intended to cover property losses but not disease outbreaks. 

Managing this situation is very difficult and it’s hard to blame insurers — not many of us saw the current crisis coming.

Now, insurance companies must deal with the challenges that face every industry right now, with the added responsibility of serving customers at the peak of their most desperate need.

Toni Tomic is the Global Head of the Insurance Industry Unit at SAP. In our recent interview on LinkedIn Live, we talked about how insurers are coping with the crisis, and how they can best prepare for whatever comes next.

(Photo credit to the MOST talented, Heather Willems and Two Line Studios for the brilliant artwork.) 

You can watch the entire video on the SAP Industries Page. Here are some highlights from the conversation:

Equipping Employees Was the First Challenge.

“A company is built from its people,” Tomic says. As the crisis began to develop, it was essential for insurers to make sure their employees were safe, well, and able to work remotely. “First, it was taking care of employees, the safety of the employees, and then having the infrastructure in place to work for the long-term success of the company,” he says.

It was no small feat to equip thousands of employees to work from home. “You have to have the right infrastructure in place to move employees online, with security in place, with the right hardware,” Tomic says. “You also have to be encrypted from one end to the other."

Tomic recalls one insurer needed to procure, authorize and encrypt 5,000 notebooks in a single week — and all during a supply chain crisis when tech could be in short supply.

Despite the challenges, most insurers were able to get up and running in just a few weeks. Tomic observes that many insurers were already moving toward a more digital workforce but at the speed of corporate decision-making. The COVID-19 crisis required everyone to drastically accelerate their plans.

Caring for Customers Is the Top Priority

Bringing an entire workforce online is enough of a challenge. To compound the difficulty, insurance companies are experiencing unprecedented levels of customer demand. “You have requests coming from customers in a frequency you’ve never had before,” Tomic says. “Small businesses asking if they’re covered, life and health insurance questions… they need advice and help in real-time. So we were busy from both ends.”

Tomic’s mission is to help companies meet the demands of both employees and customers. The increased demand for insurance and related and useful additional services is an opportunity to build deeper relationships with customers. “When you need insurance to cover your claim, that’s when customers need insurance the most,” he says. “If insurers can provide a good experience at that point, they have a customer for life.”

Part of better serving customers is helping them through the financial side of the crisis, too. Tomic observes that the top 15 car insurance companies are paying back $5-10 billion to customers who aren’t driving as much. “It’s reacting when some of our customers are having financial issues, giving money back and building up trust and support when it’s needed,” he says.

Helping the Community Builds Relationships

Insurance companies are also pitching in to serve entire communities, not just their customers. Tomic cited several examples of the kind of philanthropy he’s seeing across the industry:

Liberty Mutual created a fund offering low-threshold, immediate grants to 450 communities to support impoverished, homeless, and elderly populations. Similarly, the Met Life Foundation is donating $25 million to a global COVID-19 response fund. “By focusing on these immediate needs and offering direct financial support, we can help both customers and the community,” says Tomic.

In addition to financial support, insurers are helping the community mitigate the risk of contracting COVID-19. “One of the largest life insurers in the APJ community, through their app you can track where there have been COVID-19 cases and exposures so you can avoid exposure,” says Tomic. “And this was available for customers and non-customers.”

Secure Financial Performance

The valuations of insurance companies have taken hard hits similar to other industries. Interest rates are still at an all-time low, assets and funds have taken bigger hits. “Managing profitability and spend is fundament for everything the insurance companies are doing,” says Tomic.

More than ever a healthy financial performance is crucial. Driving effective profitability management across lines of business, sales channels, branch, investment portfolios, etc. down to the lowest level and monitoring spend management is mission-critical.  

Only with solid financial fundament, insurers are able to care about customers, their employees, and help their communities and prepare for the post-COVID-19 world.

Preparing for a Post-COVID-19 World (And the Next Crisis)

Hardly any businesses were truly prepared for a global pandemic. Moving forward, we have to both establish a new normal and have a clearer vision of what might be coming down the pike.

“It’s about providing the right service at the right time when it is needed,” Tomic says. “We will likely see a huge jump in health and life insurance post-crisis. Insurance companies are on the road to not only providing traditional life insurance but also providing additional information. Health is going to be the most important point for people. The need for insurance in medicinal services is rising drastically.”

The way insurance companies deliver these services is changing, too. Even today in the western economies “Right now, 88-90% of the premiums generated are coming through a human agent,” Tomic says. “But there is a new generation that is used to shopping and living online.” Insurance companies need to be skilled at serving both the in-person and digital customers.

For Tomic, there are three components of the next step forward for the insurance industry:

●     Respond to the needs of customers, agents, and the community

●     Recover by using technology to enhance scalability and flexibility

●     Reimagine the future of the industry

On that third point, Tomic says the most successful companies will take a more holistic approach to serve customers: “We should look into services beyond insurance, end-to-end health management, mobility services instead of motor insurance policies,” he says. “Insurance companies that go this route will be well-equipped for the future.”

The pandemic crisis has compelled all of us — every type of business in virtually every industry — to think on our feet. It’s got us all making the changes we should have made months or years ago. As Tomic observes, digital transformation is the key to weathering this crisis and developing a more resilient business model for what comes next.

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For the legal minded: Yes, in case I was not explicitly 100% clear, I am the host of the LinkedIn Live series, SAP Industries Live. Yes, SAP is a client of my company, Thulium. Yes, this is a business relationship.