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Omdia view

In common with many sectors, the immediate impact of the COVID-19 epidemic is forcing the insurance industry to rapidly pivot entire organizational structures in a very short time. Insurers around the globe are having to retool to enable their employees to operate from home while at the same time manage a massive influx of claims across some product lines, such as business continuity and travel. As an industry that has to react quickly (in response to catastrophe events for example), it is used to this, but this time is having to act on a scale not seen before.

Commercial insurance lines have been most immediately hit as millions of companies stop paying premiums as they go out of business or reduce coverage. Similarly, marine, aviation, and transport (MAT) insurance has slowed as less manufactured goods are being shipped and most aircraft fleets remain parked. Personal lines are also likely to be badly affected as economic hardship begins to really bite and forces families to cut back potentially foregoing insurance at renewal time.

However, it is the longer-term effects on the insurance industry that are likely to be the most profound impact of COVID-19, particularly highlighting the need for the sector to accelerate its drive toward far greater digitization. In Omdia’s view, the failure of most of the insurance industry to keep pace and offer a digital customer experience comparable with that of many other sectors exposes them to a renewed threat from new entrants when the world eventually returns to some normality.

While many insurers have invested significant time and money for more than a decade in transforming themselves into digital organizations, the sector has tended to remain stubbornly self-referencing, with insurers continuing to compare themselves to their immediate peers rather than looking at what other industries are delivering in terms of a comprehensive digital customer experience. While not underestimating the challenge of the task, insurers have tended to see delivering a seamless and valued customer experience across multiple channels as a relatively low priority. The primary goal of many digitization initiatives remains operational cost reduction with enhanced customer experience a welcome but secondary outcome.

While significant parts of our lives are already conducted digitally, one thing this epidemic is demonstrating is that there is still much further we can go as companies rapidly reconfigure themselves to continue operating and interacting with their customers. Insurance is no different in this respect and while the ability to buy insurance online has been available for many years, the same cannot be said for many other aspects of the insurance lifecycle, especially the claims process. The insurance industry’s digital shortcomings will become more apparent to their customers as they try to make claims requiring quotations, invoices, assessments, site visits, and other forms of evidence that are simply not feasible in a world mainly in lockdown.

As a consequence, Omdia believes that following the immediate COVID-19 crisis, insurers will be forced to reassess and, in many cases, accelerate the digital transformations of their operations, especially the claims process. This is because, if for no other reason, more policyholders will have become accustomed to managing their lives online and will expect insurance to be no different.

It is clear that some insurers face the perfect storm of reduced revenue, increased claim levels, greater volume of fraud, and reduced investment income. If the current levels of lockdown and reduced trade continue for any extended period, some insurers will go to the wall, particularly those that have not been fast enough in their efforts to digitize the organization.

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