Covid-19 crisis to give rise to need based products in insurance industry by Navdeep Arora Source- https://bfsi.economictimes.indiatimes.com/blog/covid-19-crisis-to-give-rise-toneed-based-products-in-insurance-industry/4295
We are witnessing a refreshing and much-needed Consumerisation of Insurance where insurance products will be bought (versus being sold) on “use as needed” basis at key “moments of truth” and serviced remotely and seamlessly in the growing digital, virtual and remote e-commerce ecosystemin the post-Covid economy. The Covid 19 pandemic is exposing some of the structural opportunities in how insurance has been productised, priced, sold, and serviced to meet our personal and commercial protection needs, and galvanising the changes that have been long overdue. The risks associated with the pandemic are challenging the fundamental pillars of the insurance industry, and giving rise to new and unique need-based products that are here to stay. Insurance has traditionally implied managing risks across large homogenous populations through products that have predominantly been sold through intermediaries and provided protection against a static set of risks regardless of individual exposure and needs over time. Claims have been settled through case by case assessment of damages and associated indemnity. In addition to resulting in adverse selection for some products (low risk consumers subsidising higher risk consumers within a population), these products have failed to address individual risk exposures and coverage needs when most needed by us. We pay for home insurance for a fixed policy period regardless of whether we occupy the property during that time or not. We pay for car insurance based on risk factors such as the routes we drive on and average mileage regardless of whether we drive the car during the policy period or not. Many small businesses have gone out of business for lack of business interruption coverage in their standard SME policies during the pandemic. Similarly, traditional life and health insurance products are not only complex and difficult to understand by average consumers, they have failed to meet short-term emergency needs arising from hospitalisation, loss of employment, quarantine expenses, disability, and loss of a loved one, risks that are pervasive during pandemics such as Covid 19. GIG jobs that enable us to work on demand on part-time basis will continue to grow in the post-Covid economy and require on-demand insurance coverage. So, what does this mean for new need-based insurance products that are on the horizon? First, we will see more pre-underwritten, fixed price and fixed benefit simple insurance products such as hospital cash, unemployment, and short-term disability benefits that are sold and serviced