COVID-19 has had an indelible impact on all our lives, and while we’re not yet in the clear, increasing vaccination rates across much of the developed world augurs an economic upswing, signaling a potentially robust recovery from the pandemic.
The radical downturn of 2020, and the ensuing uncertainty of 2021, have not left the insurance sector unscathed either. Previously sleepy specialty lines like business interruption insurance suddenly came under the microscope, but the sector as a whole made forward progress, particularly when it came to the digitization and improving efficiencies both within organizations and between insurers and their end clients.
Looking forward, DRC expects continued disruption as the economy reopens, with both positive and negative ramifications across the insurance industry.
Continued Rapid Digitization
With the pandemic shifting white-collar workforces to their home offices, and teams working remotely, Covid has accelerated the rapid digitization of the insurance sector in a lasting fashion.
Important functions, including billing, digital claims management, signatures and contracts, customer service systems, and other operations, were among the previously manual processes that have benefited from rapid automation. Insurers who were quick to make a digital switch will continue to see themselves better positioned to take advantage of new market opportunities and adapt to future disruptions.
Consumers have now come to expect client-facing processes to be streamlined and self-service functionality in keeping with broader Covid-encouraged digitization efforts across touchpoints in other sectors.
Speedy New Product Development
Many insurers initially faltered after being hit by an unexpected bevy of business interruption claims but have responded by taking steps to dive into new specialty lines such as pandemic-related products.
Global supply chains disrupted by an overreliance on a limited number of warehouses have been restructured. This will bring new factories and infrastructure online, including changes to shipping patterns, all of which will require new insurance products.
Rapid product development bolstered by agile systems has given many insurers a boost allowing them to pivot and incorporate a level of versatility unheard of before the pandemic. This digitization and automation will help insurers continue to bring new products to market rapidly.
Cancellation Insurance On the Rise
Anyone who has tried to book a flight or even buy concert tickets over the course of the last year has probably experienced the “not-so-fine-print” terms and conditions that assure the purchaser there will be a refund or at least postponement of delivery of the promised service in the case of Covid-related complications.
This type of assurance is now being deployed at scale, with a significant impact for the insurance sector. From conferences that draw tens of thousands of attendees to concerts to big arena sports, contingency insurance will continue to be a stand-out specialty line moving forward.
Cyber Threat Protection Amplifies
As the world has gotten more digitally sophisticated over the past year, so too have cyber thieves. Organizations reaping the benefits of rapid digitization now face the added challenge of keeping new systems secure at both an enterprise and customer level. Hard-won reputations can be brought low in the blink of an eye by a failure to protect against cybercrime.
Innovative risk-management products launched by insurers have helped develop a strong new market, especially in the development of partnerships between traditional carriers and specialized insurtechs.
Shifts Favoring Property Insurance
The pandemic exacerbated pre-existing property insurance shifts that were already developing principally due to natural catastrophes and climate change. This led to a firm property market going into the pandemic, which we can expect to continue for the foreseeable future.
Many of these changes will be regionalized, with economies already on their way to recovery, such as the US and China, continuing to see an increasingly strong property market.
The pandemic has given governments, private businesses and individual contributors a once-in-a-lifetime opportunity to innovate and find new solutions for areas where insurance can make a positive impact.
Inevitably this will lead to greater disruption and growth in new markets and products inconceivable only a few years ago. We expect the insurance sector to innovate and grow as the broader economy reopens, especially around the emergence and adoption of new, innovative insurance products.