“The greatest danger in times of turbulence is not turbulence itself, but to act with yesterday’s logic.” – Managing in Turbulent Times by Peter F. Drucker

In the seismic shift sparked by COVID-19, insurers must focus on three key tactics to prepare for the new norm that lies ahead – respond, recover and thrive. Analysts report that monthly income losses from business interruption could reach as much as $203 billion.  Forward-thinking insurers must adapt quickly and try to spot the silver lining of opportunity.

The pandemic pandemonium has significantly affected insurers in general, and property insurers in particular. Legislation has been introduced requiring insurance companies to cover business interruption losses due to the pandemic, forced closure of businesses and mandatory evacuations.

The current outlook is reminiscent of the insurance market post-9/11, when some corporate offices paid more than $1 million for terrorism coverage. Property carriers have reacted swiftly, introducing policy language focused on restrictions on pandemics, virus, microbial, ingress and egress, civil authority and business interruption/extra expense, and increasing deductibles and retentions.

Certain trends may accelerate because of the crisis:

Accelerated digitization Social distancing has already driven further adoption of contactless technologies and digital experiences. More new businesses will likely be digital or cloud-native, further accelerating emerging technologies. Enhanced digital capabilities are needed to support virtualization of the post-COVID workforce for insurers and their clients.

Increased virtualization of workforce Many organizations have already adjusted to working remotely through virtual communication and collaboration channels and are unlikely to revert entirely. COVID-19 has also driven increased adoption of different business models, such as telemedicine and user based insurance. Global outsourcing and partnerships continue to become more widely used due to widespread adoption of virtual working and continued cost pressure.

Business model implications  Increased focus on expenses as digital adoption weighs on in-person labor costs. • Insurers focus resources to improve time to market, seeking to increase market share by outpacing competitors with enhanced products, coverages and pricing • Insurers focus on calibrating back-end processes and technologies to enable claims disbursal and adjudication flexibility.

Greater corporate responsibility Taking steps to “do the right thing” in the COVID-19 context is not only further appreciated but is also becoming table stakes for consumers. Rising activism among consumers and employees could drive an increased focus on corporate purpose.

Emergence of pop-up ecosystems Value chain disruption is likely to lead to creative partnerships, which may cause organizations to further invest in developing the mindset and agility to collaborate across sectors.

Read More about a Next-Gen Policy Administration System for the Future

Future Proofing

While insurance may be a commodity-based market, it still relies on human relationships when it comes to developing long-term and sustainable property and casualty programs.

Insurers must be agile and ready for new approaches to coverage, products and risk profiles across all commercial areas. Let’s examine some of the business areas that have been impacted by the pandemic where commercial insurers must take action.

About four out of 10 people in the EU began working from home as a result of the pandemic, according to an April 2020 Eurofound survey. Some organizations have shut down offices completely and have opted for a work-from-home environment across the board.

In light of this, commercial properties are now vacant or only semi-occupied. How do insurers re-evaluate the risk profiles of newly vacated properties? Are current policies still relevant or do completely new ones need to be written?

Companies must consider new liability coverage for accidents that occur while an employee is working from home, and how to adequately define this coverage. There are numerous grey areas involved in working from home such as what is defined as work time and what is defined as personal time? Insurers must be able to be flexible to account for these distinctions.

Employees working from home on networks not secured by their company’s corporate cyber-security are far more vulnerable to cyber-attacks. This is a risk that also needs to be taken into consideration and covered.

And what if you’re back in the office? Organizations are now compelled by law to provide clean and sanitized working environments and ensure safety measures. Companies that do not comply can face business interruption, legal action and even be required to shut down altogether. Some insurers are already offering COVID-19 cleaning inspection and decontamination services.

Thinking of going fully WFH? Some building owners are repurposing unrented properties to generate new income sources. An owner opting to convert a commercial property for residential use will need to adjust their insurance and risk profiles accordingly.

These changes are emerging as opportunities to develop new types of insurance products, including cyber insurance and business interruption insurance. Regulations are slowly emerging that will also require insurers to adjust their policies to cover COVID-19 related risks from virus to workers. Insurers must be ready and flexible to take action and offer new products with quick time to market to properly serve their customers.

What are the emerging opportunities commercial insurers can participate in?

Sector prioritization and tailoring Adapt quickly to changing risk appetite and reduce exposure in lines of business where future underwriting performance is expected to dip.

Digital differentiation Leverage AI and cognitive technologies to enhance capabilities as more customers and brokers transition to digital channels for sales, service and claims.

Client engagement Offer comprehensive support to brokers and customers through enhanced digital and data capabilities that enable better insights and flexibility in coverage and pricing.

Innovate product offerings Offer nontraditional products such as parametric products and automated and auto-rated products via risk exchanges and usage-based plans; expand portfolio to offer additional protection, such as pandemic-related and cyber coverages.

As customers and brokers demand a transition to digital channels for sales, service and claims, those who embrace the latest technologies will come out ahead. The pace of adoption of digital capabilities will distinguish the winners.