Best's Review


A New Dawn

COVID-19 is realigning risks for insurers and bolstering consumer appetite for digital approaches.
  • Kenneth Saldanha
  • September 2020
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The COVID-19 crisis has sent shock waves to how we live and work, and all eyes are on the insurance industry to help reboot a punctured economy and be there for customers during a difficult time.

Insurers experienced an immediate and material impact as economies shut down and people stayed at home.

However, the COVID-19 crisis isn't a point-in-time event but one that has permanently realigned protocols in the market and customer behavior, and insurers must adapt.

The changing landscape is also shining a spotlight on the need for digital transformation and increasing customer appetite for digital services.

The insurance industry entered 2020 with relatively smooth market conditions. There was growth in most markets, and global premiums were at an all-time high at more than $5 trillion.

But that picture of positive calm was dramatically redrawn by COVID-19, which rocked the economy and, according to forecasts by the World Bank, could contract this year's global gross domestic product by 5.2%.

Insurers now face simultaneous hits on their profitability (both top and bottom line) and expansion of liabilities.

Along with the reduction in premiums, there are demands for rebates on policies that are not being used, or used less, during the COVID crisis.

While claims costs have diminished greatly, zero interest rates have wrought further damage on income. The adequacy of loss reserves at an industry, let alone carrier, level will be severely tested if insurers are called to cover COVID risks.

Measures to guard against the spread of the virus have tested traditional channels for prospecting, sales and renewals for agency and adviser channels. Local agents cannot serve their customers in person. Given the approximate 85% retention rate of property/casualty premiums, there's now an opportunity for attackers to capture revenue and serve a much broader pool of customers who are exploring digital models.

Life carriers have also been challenged to change operating protocols. For example, health professionals cannot offer the typical in-home visits for health and fluids checks considered critical for life insurance underwriting.

Digital disruption was well underway before the crisis, but the demand for online services from insurers has exploded during the pandemic, and it's unlikely to be a blip.

COVID-19 is accelerating digital adoption more broadly. Most consumers plan to stick with the digital habits that they've acquired during the pandemic, according to Accenture's COVID-19 Consumer Pulse research conducted in April.

Consumers interested in buying or increasing their use of technology has increased dramatically. More than half of respondents to the research study said they're likely to increase their usage of voice-enabled digital assistants, online recommendation apps, self-service apps, intelligent home devices and wearables.

As customer behavior changes, so must the behavior of insurers. They need to defend market share and be ready to satisfy consumers' desire to interact through digital channels and deliver remote sales and service. They'll need to move quickly, harnessing data and analytics with behavioral insights that enable them to predict and serve their broader needs.

One example of meeting those broader needs is in the convergence toward wellness: connecting a person's insurance, health and wealth management.

Rather than trying to sell individual products, insurers are designing solutions and services to make their customers' lives simpler, which is even more pertinent during challenging times such as a global health pandemic.

Best’s Review contributor Kenneth Saldanha is Accenture’s global insurance lead. He can be reached at

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