With the arrival of the COVID-19 pandemic, insurance companies found themselves in the center of the storm. In a matter of hours and days (not weeks), many carriers had to make their entire operations remote. At the same time, they were fielding calls about changing coverage, answering questions about business interruption policies and continuing to pay claims for life, health and disability insurance.
Insurance companies are designed for this. Risk analysis and crisis planning are at the core of their business. With policyholders—individuals and businesses—suffering as a result of the crisis, regulators and legislators expect insurance companies to live up to their responsibilities. Those that don’t will likely face enormous reputational consequences. Getting it wrong is not an option.
So far, insurance companies have weathered the crisis exceptionally well, largely due to investments they’d already made in networks, applications, laptops and more. The crisis did expose a number of gaps and vulnerabilities, and it reinforced the need for additional technology investments. But, overall, industry leaders can feel secure in the knowledge that the battle is being managed and the near-term path forward, while precarious, is one they know how to navigate.
The big question now facing leading carriers is this: How do we adapt our business strategies to accommodate a new way of working? In our conversations with insurance clients, three topics come up frequently as the industry looks to the future:
As carriers move from their initial response to a longer-term strategy, we recommend they adjust their approach based on shifts in consumer behavior. PwC’s June COVID-19 Consumer Insurance and Retirement Pulse Survey uncovered the potential influence of COVID-19 on service preferences, loyalty to carriers and attitudes toward auto, homeowner, life, dental and vision coverage, as well as retirement.
Insurance companies were nimble in deploying remote technology in response to the crisis. But many have delayed investments in additional technology (for example, customer data analytics and technology to integrate mobile apps, websites and call centers) due, in part, to concerns over employee resistance. It’s now evident that an incremental approach to technology adoption won’t be sufficient to help insurance firms thrive in an industry that’s rapidly moving toward virtual operations.
The current crisis has accelerated the trend toward automation and digitization, both of which were previously fueled by changing demographics, customer expectations and competitive pressures. The current situation has forced many insurers to rely on virtual conferences and meetings, and many now realize that telework works quite well in most circumstances. As a result, we anticipate that remote work may remain the norm at many firms. In fact, virtual interactions may open up new opportunities for servicing, selling and building customer relationships. We anticipate that conversations with customers that are supported by technology will lead to greater efficiency, more informed decisions and better outcomes for both buyers and sellers.
Before the crisis, many insurance companies were already pursuing a digital transformation roadmap. Now they’re trying to accelerate the process, compressing implementation from 10 years to two, in order to move ahead of competitors and deliver sustainable profits.
In the years ahead, we expect leading carriers to leverage technology to reduce costs, improve data analysis, streamline claims and underwriting, bolster customer service and drive efficiency. Companies may transition to digital documents, leverage AI and implement other “bionic” capabilities to help employees make better-informed decisions and focus on higher-value work. US carriers can learn valuable lessons from their Asian counterparts as they look to drive digital innovation.
The pandemic has revealed gaps and vulnerabilities in operations, and that’s likely to speed the evolution of insurer operating models that focus increasingly on digital technology. We anticipate greater adoption of online and omnichannel distribution, more robust analytical capabilities for improving products and underwriting, and growing involvement with InsurTech and new partnerships to refine core customer services. We believe carriers of all stripes should also rethink their customer service models—how they interact with current and prospective customers, including distributors, employers and consumers. These models include processes, channels and even the culture that defines the customer experience.
We know that “return to the office” won’t mean returning to work as it was before. Some jobs will change, and not all employees will feel comfortable with the new, more digital ways of working. Insurers should help their existing workforce adapt, by providing relevant technology training for their teams. This includes employees involved in delivery, as well as those who handle service and operations. Recruiting additional tech-savvy employees may also be key to the success of any digital transformation.
While carriers routinely monitor capital and liquidity, their main focus now is establishing that their balance sheets are strong. Some companies may seek to acquire new businesses to bolster the balance sheet, and many may find that valuations could become quite reasonable in the near term. Others may want to identify non-core assets that could be divested, and some will need to divest properties in order to fund the acquisitions they seek.
Whatever their strategies, company leaders are asking the same questions: What should my business look like in the future? How can we best position ourselves for success in the new ways of working?
Business interruption insurance has gained a high profile as the crisis has evolved. With business interruption at the center of P&C losses, there will be pressure on carriers to cover claims. As of mid-July, eight states have proposed legislation that would require insurance companies to cover business losses caused by COVID-19. If we start to see lawsuits related to business interruption insurance, policies that don’t specifically exclude “virus”-related damages could take center stage.
Many in the insurance industry would prefer the federal government to back an insurance plan that would support businesses that suffered BI losses due to COVID-19. This is what happened after Sept 2001 with terrorism insurance. While the idea of federal pandemic insurance has gained some momentum, we’re not likely to see much progress in the near future, given the substantial effort required.
Insurance companies are starting to think about workforce models that combine a new mix of remote and on-site employees. For many, this will require at least two phases: one that includes some employees returning to the office soon, and a longer-term version that is more comprehensive.
If, when, and how to return to the office
The sweeping scale of a return-to-work program (which may take 18 months or more to complete) offers insurers an opportunity to revisit priorities, plans and strategies. At the heart of any program are three questions that carriers should explore: if, when and how should employees return to the office?
There are many other issues to address, such as critical issues of liability should a returning employee contract COVID-19. But answering the questions of if, when and how employees can return to the office will allow leaders to consider the technology and operational infrastructure needed to support a new workforce model.
The insurance industry is facing enormous challenges as a result of COVID-19. It’s time for carriers to develop new business strategies, prioritize investments, rethink what industry verticals and customer segments to target and develop products, services and pricing strategies for prioritized segments. Doing so can help drive revenue.
We believe the right strategy for carriers, if they believe their roadmaps are directionally correct, is to invest in the future—in the digital capabilities, talent and other strategic resources needed for long-term success. Companies that invest now in their capabilities and strengthen the bond with their customers have the potential to emerge from the crisis ahead of their competitors.
Insurance Consulting Solutions Leader, PwC US
Property and Casualty Advisory Leader, PwC US
Managing Director, Insurance Business, Operations and IT Strategy, PwC US
Life, Retirement and Group Advisory Leader, PwC US
Global Growth Strategy, US Financial Services Practice, PwC US