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May 4, 2020

The COVID-19 pandemic has achieved the distinction of being an unparalleled public health scourge in living memory. The massive casualties, overwhelmed medical infrastructure, potential second-order deaths, and the crippling impact on the socio-economic life cry for a detailed discussion on the transformative changes necessary for the insurance and retirement industry.

Evaluating the impact

The industry response to immediate challenges presented by the pandemic is earnest and rapidly evolving along with the crisis. Insurers are also working on the strategies to address the impact of COVID-19 on life and health insurance post pandemic.

Customers are unable to visit insurance and intermediary offices, thus affecting industry operations and sales due to prohibited mobility of intermediaries, absence of insurer staff and third-party suppliers. Some of the key issues faced include:

Loss of New Business Opportunities: Difficulty in offering services like in-person advice, at-home medical examination, and obtaining previous medical and insurance history have led to dropped applications. Additionally, hike in insurance premiums and reduction of annuity rates is no more a matter of mere conjecture, thanks to plummeting investment returns and declining underwriting profits. Guaranteed issue products face likely suspension.

Contract Servicing: Insurance and retirement benefit providers are experiencing a spurt in inquiries and transaction processing for financial and non-financial events, including policy outgo related to withdrawals, switching funds, annuity payouts, policy loans, and claims. Tele-consultation is gaining traction and may become the new normal post COVID-19 crisis.

Delay or Default: in premium payments, pension contributions and policy loan repayments are likely. The impact of COVID-19 on pension and annuities cuts across their lifecycle. Pension accumulations face uncertainty due to absence from work, lay-offs, and partial employment. Retirees with unit-linked pensions are likely to collect lower pension corpus due to tepid performance of underpinning investments in financial markets, in turn affecting the size of the annuity.

Claims: Life and health insurers are likely to experience a surge in claims due to COVID-19 related mortality and sickness. Insurers may reject claims invoking the “force majeure” or force of nature clause, resulting in a possible spike in litigation. Mobility issues will hinder eligible on-site claim investigations and result in delayed turn-around-time, and encumber customer satisfaction.

Desperate times call for empathy, accelerated innovation

Insurers are rapidly assessing their organization models in light of remote working needs, thus mandating further focus on digital assets, including enhanced information security and remote working infrastructure.

Crisp, targeted communication to relay back-up plans, reassure customers, coordinate war room operations, address vulnerabilities and support value chain partners will be key to running an efficient operation. Additionally, product innovation leading to optimization for online sales, design of dedicated sachet products, on-demand rider coverages would address the increased demand for pandemic-specific coverage and heightened insurance awareness.

Going forward, manual, paper-intensive business rules, processes and workflows, which require human intervention and on-premise interaction will need to be simplified to cater to virtual working and straight through processing. Reimagining underwriting through fluid-free and straight through processes, avoiding document requirements through supplemental questionnaires, undertakings, lien, clauses and checklists, will facilitate quick remote underwriting. InsurTech firms are also helping insurers fine-tune predictive models and providing data insights for underwriting accuracy.

Insurers are extending days of grace on due premiums as a goodwill measure, which in return will help persistency. Proactive offer of cash value loans reflects insurer’s empathy. Similarly, a delay in pension contribution for furloughed members is granted in some geographies. Regulators are chipping in by offering advice to nervous insurance and retirement customers. “Scam smart”, an online utility offered by FCA UK, is an example of alerting gullible customers from the lure of scam investments offered as pension or annuity alternative.

In line with the need to address a virtual working model, insurers are also strengthening digital self-service to address the spurt in inquiries and transaction processing, thus reducing reliance on operations staff and contact centre. Artificial intelligence based interactive tools (bots, assistants), robotic process automation (RPA), video chats, and mobile apps are also gaining traction.

Risk classification and fraud detection in new business and claims, addressed through machine learning has also found further uptake. Along with machine learning, straight-through processing is being pushed by optical character recognition (OCR) and natural language processing (NLP) for automated document ingestion in new business and claims.

Health insurers are demonstrating empathy by either waiving costs on COVID-19 treatment (CIGNA) or waiving cost sharing for in-patient admissions (Aetna). Furthermore, digital screening tools like symptom checker by CIGNA help early infection detection. Free virtual doctor access (Aetna), mental health app (Kaiser Permanente) and vital aid cost absorption (Medibank) are some of the other examples.

Coming out of the Pandemic Wiser

Insurance products are intangible and the trust on the concept, product and provider, hinges on the industry response to the customer, more so, when humanity is facing an existential crisis. The industry is at a strategic inflection point and the Business 4.0TM levers and principles propelling growth and transformation are more valid than ever before. Business agility, innovation, customer engagement, employee motivation and swift technology adoption will dictate survival against the further waves of the pandemic and help build resilience for the post COVID-19 transformation and growth.

Sudhindra Nagendra is an industry advisor on insurance and a thought leader with the TCS BFSI Industry advisory group (IAG). He has over 28 years of experience in insurance, including north of a decade spent with the Insurance industry, and eighteen years in IT. Sudhindra has consulting experience with CXOs of insurers across continents, and is responsible for growth and transformation advisory. He is a Fellow of the Insurance Institute of India and is certified in insurance and annuities from LOMA, USA.


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