How to build a pandemic-proof insurance company

How to build a pandemic-proof insurance company | Insurance Business

How to build a pandemic-proof insurance company

One of the most notable disruptions for the insurance industry amid the coronavirus pandemic has been the rapid transition to a remote workforce, forcing employees to rely on their own IT systems to support their clients and process claims.

This change has raised concerns about security. Should firewalls be considered, and should employees be able to access the files they need from home? Martin Sarjeant (pictured), SVP product management of insurance at Fidelity National Information Services (FIS), says firms must prioritise business-critical systems during this time and then look to build a pandemic-proof insurance company for the future.

“A challenge that all firms faced initially as they navigated through this crisis was employee access to critical systems and applications while working remotely,” said Sarjeant.

“… it’s been a particular challenge to access the systems that process and pay-out claims… when [remote workers] can get access, they are generally going through VPNs, which weren’t sized for the kind of load now being placed on them. So, prioritising business-critical systems, such as policy administration, financial, claims and risk management systems and payment systems has been key.”

Sarjeant says with the insurance sector prioritising both employees and policyholders, there are three distinct phases to navigate to ensure it can be “business as usual” in the future.

Phase one, he says, is prioritise and stabilise, which he claims most insurers have already completed. Phase two is plan and review and Phase three, perhaps, is the most vital – build for the future.

“Most insurers in Australia are transitioning out of phase two and into phase three, whereby they are reviewing how they have and will continue to respond to policyholders while also planning for the future,” Sarjeant explained. “Furthermore, they will be reviewing operational resiliency and identifying where improvements can be made.  On top of this, the multi-dimensional impact of COVID-19 must be understood and taken into account in capital required to be held.”

The crisis has also acted as a driver for employers to move more applications and systems to the cloud – a system that stores data and systems online without any direct management by the user.

Sarjeant says a cloud-based operating model offers many advantages for insurers, with greater flexibility and agility. He also says transitioning to a cloud-based critical business model is “easy”.

“Many insurers already use the cloud for mission critical systems, and it provides many benefits vs typical on-premise installed software. What we’ve seen during this pandemic is another value in cloud-based applications and that is the ease and speed at which employees can access them,” he continued.

“For those with cloud-based solutions, from day one, the user experience was identical to that in the office. It was an easy transition, and everything worked seamlessly, in most cases. We already see insurers strengthening and, in some cases, changing their cloud strategy and investing more in achieving that and, ultimately, we see insurers moving all critical systems into the cloud, so that if another challenge were to arise whereby teams were to be dispersed, they would be more readily able to respond.

However, the COVID-19 outbreak is also forcing insurers to reconsider the valuation of their policies and investments.

“Insurers are well capitalised and solvency levels are strong… However, the falls in global stock markets and falls in bond yield both have an impact on solvency levels within what insurers have modelled for,” Sarjeant explained.

“Some of the more significant considerations are where does the economy go from here? Again, insurers will continue to model further scenarios, update their assumptions based on market conditions and ensure they hold appropriate funds.”

As insurers determine the effect of the crisis on the industry, he says they must specifically address the growth and profitability prospects of their portfolios, as well as the products they will sell in the future.

“Insurers will need to look at the products they sell and adapt,” Sarjeant said. “This global pandemic highlights certain areas where businesses were not covered, and, while pandemic cover existed, few businesses purchased it due to perceived costliness and the unlikeliness of the scenario to occur. However now it seems clear there will be more demand in the future for both pandemic and parametric insurance.”

Globally, Sarjeant says he has already seen insurers move into healthcare advisory services with the addition of virtual and telehealth services, with the emergence of wearables also encouraging healthier lifestyles.

Additionally, household insurance has experienced a rise in IoT technologies and a raft of integrations with “flood detectors, smoke alarms and other security systems,” according to Sarjeant, emphasising how insurers are “embracing” technology.

“It’s clear that the pandemic will have a lasting impact on all of us and change our behaviours and values going forward and that the insurance industry still has a vital role to play in this pandemic and for the future,” he said.