The arrival of a new year inevitably brings with it a great deal of introspection and evaluation in a bid to reckon with everything that has occurred over the last 12 months. Tumultuous, unprecedented and the furthest thing from normal – 2020 was many things, to many people.
It would not be possible to discuss its key takeaways without first focusing on the accelerated use of digital technologies and communication channels throughout the UK. Businesses from every industry responded to the move to a digital-first environment commented Dave Ovenden (pictured above), global pricing and underwriting leader at Willis Towers Watson.
Lending her perspective, BT’s director of insurance, wealth management and financial services, Alexandra Foster (pictured below) stated that increased innovation and the use of technology was the biggest change the insurance industry saw in 2020.
“As the pandemic has changed the needs of customers and made home working a necessity, the insurance industry has adapted by accelerating the adoption of cloud and undergoing digitalisation to enable efficient remote working and claims processing,” she said. “While the ‘cloudification of insurance’ has been a work in progress for several years, in 2020 the industry made great strides and this newfound agility in implementing technological changes has been key for businesses in continuing operations.”
Even just looking to his own experiences during lockdown, Ovenden highlighted that businesses responded very well and were able to capably engage with their customers despite the changing environment. Others, however, failed significantly and this impacted their customer retention metrics.
Foster noted that, despite the advantages that digital technologies have brought so many businesses, not least when it comes to maintaining and strengthening customer relationships during the crisis, the rapid adoption of new technology also came with new cybersecurity threats. Since the beginning of the pandemic, she said, phishing alone increased by 600% as cyber-criminals looked to capitalise on the fear and uncertainty generated by COVID-19, and the rapid transformation the insurance industry underwent.
“Now more than ever,” she said, “it is important to educate customers and businesses on cybersecurity frameworks and solutions, including zero trust architecture, endpoint protection technology and multi-authentication models. Protecting customer data is important for maintaining trust, and as the hybrid home-working model looks here to stay, upgrading and aligning cybersecurity measures to ensure they effectively tackle new threat vectors will be necessary to ensure that technological innovation continues to lead to progress.”
Read more: Cyber – the insurer’s double-edged sword
However, the challenges amassed by the COVID-19 pandemic meant that, despite the inroads insurance companies made in digitisation, it wasn’t all good news for the industry, Ovenden said. Something that really didn’t go well for the sector last year was the business interruption cover disputes and the industry’s inability to explain the nuances of those - as well as the way that social media accentuated this.
“The fact is that there was a great deal of work that went into this piece, in terms of the sheer amount of energy and effort put into working out what was being covered and what wasn’t, particularly in the case of manuscript wordings and those who weren’t on top of their products at a very granular level,” he said. “There was a huge amount of effort that went into that work but, as an industry, we just couldn’t seem to get our message across.”
This was further complicated by both an overload of information and misinformation from key sources, Ovenden said, and the situation eventually culminated in the FCA essentially taking the insurance industry to court, which was not a positive indictment of anyone involved. What much of these problems boiled down to was a fundamental misunderstanding of the role of insurance. Insurance is built on the concept of ‘the many pay for the few’ not of ‘the many pay for the many’, the latter of which represents an aggregation model which is simply not sustainable.
As to where the insurance industry stands now 2021 is here, he noted that the situation is more nuanced than simply being a net positive or negative. It varies from sector to sector, he said, because of the asymmetry of information available. For those whose experience of the sector has been relatively unaffected by the crisis, such as those in the motor and home space, their opinion of the insurance industry has likely been relatively unimpacted. However, where large corporate buyers or small business owners feel they have been caught out, they are likely to have a poorer opinion going forward.
The real question for the insurance sector now, Ovenden said, is what is going to happen going forward with regards to factors such as the industry’s reputational standing, its pricing models, its data analytics and its working practices?