provide continuity of cover. We would observe, given the scale of change, insurers did a great job. There was very little customer detriment during 2020 across the general, health and life insurance sectors, which is remarkable given the transition required in the three weeks following the work from home edict issued by the Government and testament to the huge effort undertaken by the industry.
Many insurers have accelerated their transformation programs - both to improve the digital customer experience and also to automate and take cost out of their businesses. This was highlighted in the recent PwC Global CEO survey which showed that CEOs wanted to increase investment in digital transformation, but were also planning operational efficiencies in response to uncertain economic growth.
The industry quickly adapted, and during 2020, many insurers made significant improvements and accelerated changes to their online platforms. Indeed, Lloyd’s of London was able to launch their online underwriting platform - much more rapidly than potentially it would have occurred without the pandemic. This acceleration of change was similar to many other industries significantly accelerating their technology and digital customer experience.
The needs of customers (and their behaviours leading to claims) have changed. There will no doubt be a surge in driving when lockdown finishes; UK holiday bookings will significantly increase in late-2021 if Government restrictions lift; working from home part of the week will likely become more normal for jobs where this is possible; and customers will continue using technology more for everyday activities.
The pandemic has also shone a light on the ability for a minority of policies to have an immediate and significant impact both operationally and on profitability. For example, the FCA test case ruling on Business Interruption claims resulted in a receipt of huge volumes of claims overnight, whilst others found themselves on the hook for claims relating to specific sectors as a result of over concentration or loose policy wording. As a result, many insurers have sought to tighten existing policy wording and have taken steps to improve their claims handling systems.
How will this impact insurers? Those that do not continue to transform themselves may find themselves left behind, with a reduced customer base open to nimble competitors and potentially new entrants, who are lower cost and focussed on a better customer experience. Increased potential fraud (which always increases in a recession); cyber risks (with more people working from home); and operational risks will also be an ongoing challenge.
As it so often does in times of uncertainty, the insurance industry has remained robust. It has continued to meet the needs of policyholders and Notwithstanding the challenges, many insurers return a dividend for investors.The pandemic has have seen their customer and employee also accelerated much needed change in some engagement scores improve in the last year, as areas and brought flexible working to sectors of insurers have gone the extra mile to pay claims the industry where it was never thought possible. despite the existence of exclusions and have fully Whilst there will continue to be significant embraced flexible working. challenges ahead, it is clear that the insurance Outlook for 2021 and beyond sector is in a good place, but must use this as a The post COVID world will be very interesting. platform to further evolve and remain relevant in a changing and increasingly digitised world. 1. https://www.pwc.co.uk/ceo-survey.html
by Mohammed Khan, General Insurance Leader, & Luke Kendall, Snr Manager PwC UK
