COVID-19 urges insurers to focus on both the financial and operational resilience of their companies as they try to address the economic challenges created by the virus.
It is no surprise that insurance prices rise when the industry assesses the size of the risk and losses associated with the pandemic. U.S. c general insurance prices rose by almost 1
This is a normal “market hardening” response as the unit price of risk exceeds P&C lines. It is also a cyclical response to some extent, as prices tend to come under pressure when loss trends are fairly stable or low, and the market hardens as risks and losses increase. It is a way for the industry to return to profitability, and we will certainly see higher prices as the market continues to harden due to the scale and risks associated with COVID-19 and catastrophic events.
But carriers must also look beyond economic resilience and focus on their operational resilience because the effects of COVID-19 are really testing it. In a few weeks, the pandemic forced insurance companies to provide and reconfigure their workforce to operate remotely, requiring their operations and technology infrastructure to operate in fundamentally different ways.
Long-term operational resilience
With such dramatic changes in such a short time, insurers must first examine their operational resilience in terms of risk, safety and cost and then adjust it to match the new reality.
Because the market has changed so much this year, insurers will need to reconfigure their existing business book to deal with these changes. The small commercial insurance market, for example, is fundamentally different than it was as recently as February.
Imagine a restaurant owner who today trusts much more in delivery services. Does the owner really understand the associated changes in risk exposure? Does the restaurant need new and / or different coverage?
In addition to market shifts in existing coverage, COVID-19's extensive effects encourage customers to consider products that were once considered rare or esoteric.
Cancellation rules for events, for example, get much more interest. Customers noticed when Wimbledon received a large payout after canceling its famous tennis tournament. This is an area with great potential for new revenue.
Similarly, parametric insurance, which pays damages in response to the occurrence of a specific event instead of covering actual damages, also receives new attention. There was actually a parametric policy to provide coverage for business interruptions in the event of a pandemic, but no one bought it . No surprise, there is now a much greater interest in this and similar products.
Migrate to the cloud – now
Each of these factors can together increase operational resilience. But long-term resilience will not happen without a faster migration to the cloud. It is now absolutely necessary and the basis to facilitate digital workforce operations, improve data security, accelerate new and improved products and experiences in the market and implement structural cost reductions.
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