What the next six months look like for insurers

What the next six months look like for insurers | Insurance Business Australia

What the next six months look like for insurers

As insurers and brokers have survived the first stage of the crisis, being the initial lockdowns and restrictions, the next phase of activity to focus on should centre on customer relations and operational resilience.

That’s according to Grant Peters (pictured), Ernst & Young’s Asia-Pacific and Oceania Insurance Leader, who says insurers and brokers succeeded in quickly enacting their business continuity plans and getting their employees to work remotely to survive the onset of COVID-19.

“That was essentially the first few months, just making sure that everything was working properly – and that was no small task,” he conceded. “At that same time, they would have also needed to prioritise customer interactions as there was a major spike in customer inquiries to intermediaries and insurers over that period as well.”

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Moving forward, Peters says the next phase of activities for insurers and brokers should revolve around being “proactive” in customer relations and financial relief as well as reviewing the operational “shortcuts” they took earlier in the year.

“On the customer side, this will include things like being a little bit more proactive in terms of ongoing customer support and considering additional product initiatives based on customer feedback,” he explained.

“On the operational resilience side, insurers will be reviewing some of the shortcuts they may have taken in the first couple of months of the pandemic, just to get things up and running, and solidifying those to make sure that they’re going to be robust going forward.

“As with many other sectors, insurers will also have a strong focus on heightening cyber security and fraud prevention measures to address any additional risks that may have arisen from remote working and other operational process changes.”

Over the next six months, Peters believes a key challenge for insurers and brokers will be navigating through the uncertainty in the broader economy. He says they will need to ensure they’re “keeping an eye on” customers that are more susceptible to some of the economic challenges, particularly small businesses.

Additionally, insurers and brokers will also need to consider what type of support they can provide to their intermediaries – who, at the end of the day, are often small businesses themselves.

“Opportunity wise, during a crisis period like this one, the underlying purpose of insurance really comes to the fore,” Peters adds. “There’s actually a broader opportunity here for the Australian insurance industry to position itself as a trusted financial services pillar, helping to support customers, communities and the broader economy during this difficult period. In economic crises of the past, the insurance industry has come out with a good reinforcement of its overarching purpose, so that will be a key focus.

“Another opportunity for insurers is for them to use the current situation as a catalyst to speed up their process simplification and automation plans to drive increased productivity gains. I think we’ll see that as a strong focus and opportunity for the insurance industry over the next six months.”

However, Peters admits that many insurers and brokers are feeling some immediate financial and operational challenges. He says these will be different for individual organisations, depending upon their own business mix and size.  Additionally, he says there will be some downward pressure on commission volumes and future revenue streams, so brokers will need to think about how they respond.

Read next: Ernst & Young on financial management for insurers during crises

“In the short term, being proactive in their customer interactions and being agile and responsive to customer needs is going to be particularly important, noting that a number of their customers could be suffering financial hardship as a result of the crisis,” he explains. “Ultimately, brokers will also need to look at their own operations and consider ways they can increase their productivity and build a more sustainable business model through things like process simplification and digitalisation.”

But as we move beyond the initial pandemic response into the recovery phase, Peters expects to see a trend around some of the big insurers relooking at their business models. With revenue under pressure in an uncertain economic environment, he believes they will be looking for increased productivity improvements and other opportunities to simplify their business models going forward.

Additionally, the pandemic may make some significant changes to policies with pandemic exclusions. Peters concedes there may be a “big retrospective” on how various types of cover have handled this pandemic period.

“It will be about more than just pandemic exclusions though,” he added. “I think we will probably see some new products coming to market that will be better fit for purpose for pandemic-like situations. We’re already starting to see a bit of that in some of the European markets, like Italy for example. Some new products are being developed with more specific customer relief features built in; for example, premium deferrals in certain pandemic type situations might be built into the contract options.”