COVID-19 Is a Game Changer – and the Game Starts Now

This is a warning. A call from me to you – from one insurance professional to the other. Do not let COVID-19 slow you down. You need to mobilize now.

What is happening in the market?

We all read the news closely, watch as insurance companies enter this odd new era. There are no beaten paths here – all we can do is to read the signs and understand what they are telling us.

Cancellations are up

More and more car owners are canceling their insurance policies – either because they are not driving anymore or because they lost their regular income and can’t afford it anymore.

New business slowed down dramatically

New car sales slowed down significantly; new home sales are down, too. Customers are not looking for new ways to spend their money. The predominant tendency seems to be cancellations – with the plan to reinsure once things get back to the new normal (whatever that means).

All your predictive models might be irrelevant

We don’t fully understand the impact of COVID-19 on our models – not quite yet, anyway. Models need a thorough review – they might not be valid anymore -, but this is just one of the many unknowns we are facing. We don’t know, e.g., how the changing credit scores affect clients. Or if our existing models can generalize without the usual influx of claims.

Historic behavioral models no longer give us valid results either. Should we exclude this period from future models – or do we need to collect enough new data and rebuild everything to understand new customer behavior? Will we need to do the same when the virus returns in a few months?

Where do we go from here?

Among an abundance of unknowns – there are some truths we can hold on to, though:

Keep your customers close.

Acting in the best interest of your customers has always been key – but with COVID-19, it became an inescapable priority.

This is the time to optimize renewal rates to retain customers. But that’s far from the only approach to up your retention game; reach out proactively to customers. Approaching them with discounts – even retroactive discounts (e.g., for motor insurance clients), became a go-to move. Consider extended grace periods for non-paying clients – and make sure they stick to you once they are back on their feet. You won’t be alone there; many big names, like USAA, Geico, State Farm, and Allstate are already offering such relief measures.

Offers like the above speak a thousand words – and will gain you more than just a few dollars. It will show your customers that you appreciate their business and that they matter to the company.

Costs must go down

On a similar note – if you can cut premiums due to a decrease in claims, do so now. Customers are aware of what’s happening, and they will not accept the superprofit some companies are making due to a lack of claims.

Anyone who has been in the business world long enough has heard a CEO say “we need to do more with less”; this era will bring no changes there. In the past, we had to work harder. Now, we can do it smarter, with a plentitude of available tools. “Automation” should be part of your vocabulary in nearly every meeting where costs are discussed.

Start looking for a new equilibrium—a balance of costs, expenses, and realistically priced premiums. The next action item on the list should be simulations set up to mirror our new world order – and figure out the best way to balance through it.

There is no day like tomorrow

COVID-19 hit the insurance industry hard. Most of us didn’t expect the onslaught – and were caught unprepared. But we must prepare for “the day after.” That day is fast approaching, and you must be ready:

Never-before-seen competitive landscape

Customers will be back buying new houses and cars, and they will be searching for new insurance – but these customers will be quite a bit different from the pre-COVID-19 buyers.  Their behavior and personal financial situations will have changed.

In some cases – dramatically. Additionally, they are after an economic shock, and they won’t take their money for granted. They will compare prices – and keep comparing them even after they bought in with a company.

These customers will be ready to shop around and buy online or through an app, and they will want nothing but the best available deal. Finally, digital will truly rule the land – during the crisis, even those who were wary of online shopping got used to the idea. And thankfully so, since in this new digital space, speed-to-market and agility will be critical drivers of success.

Furthermore, you remember those startups with their fancy, utopistic digital solutions? The ones without any branches, agents, or decades of ratemaking history? They just became standard competition. They came of age during COVID-19 – and they won’t make your lives easier.

Only insurance carriers that will be ready can win this competition. Those who will not invest in an end-to-end automated system will fail in the new, post-pandemic world. Be agile – and you can defeat your competition. Stay behind – and become an outdated option.

Personalization will become king

Modern consumers demand personalized solutions. These customers, “spoiled” by the amenities of the digital age, are aware that their needs are unique to them and expect to be approached with the right product bundle.  Your customers expect a proactive provider, who approaches them with the right offer – on the first try. If you don’t reach out, they will go out themselves – shopping for a new solution.

Predict their moves, detect their needs. This way, they will know they can rely on you and trust you with their insurance needs.

What do you need to consider now?

The post-COVID 19 shopping list is long and might look overwhelming – but the items on it should be familiar from before the crisis. The pandemic only underlined the need for a fast transformation that benefits both carriers and clients.

How do I achieve Speed to Market and Agility?

Speed-to-market and agility should be on the top of everyone’s list. The competitive environment will not allow nine months to implement your next rate revision, speed-to-market will emerge as a competitive differentiator.

Tell me how fast you are – and I will tell you how much time you have left. It’s a cruel motto, but one that we are not allowed to forget. Don’t use regulatory approval processes as an excuse for being slow. Take the bull by the horn – improve your systems, processes, and make them work faster.

The keyword is extreme agility. We must leave behind setups based on multiple systems, points of failures, and the lack of an agreed data set for analytical purposes – all constant sources of error. Future needs will be different, and automation will be the key to business continuity. Companies need to adopt solutions that will allow them to adapt quickly in the future.

Resist change, and you won’t survive long.

Automate, automate, automate

Did we mention automation? If we did, it’s because it’s the next crucial step on the journey to a more sustainable, digital system. Automation cuts costs (for our clients’ sake, too). It also makes us more efficient; it reduces errors, routinely tests and retests business scenarios, automatically monitors every market and product, trains models on new data, and self-learns from what happens.

Automation has another great benefit: business continuity. It is time for leading companies to adopt solutions that keep them a step ahead, in terms of speed-to-market (you can’t mention it enough), business continuity, monitoring, data governance, cost reduction, and reduction in errors.

Simulate, Analyze, Monitor

The era of pricing your products based on your competitors’ rates has just ended.

Welcome to the land of tomorrow, where the discussion will be around business KPIs – instead of just how to maximize profits and revenues. Your business analysts will invest more time in business opportunities and less on correcting errors and re-running models with different datasets. They will rely on a system that will be quick to adapt to new realities. A system they have access to and can be navigated and changed with ease to fit the ever-changing needs of the organization.

This will enable you to show strong executive leadership, and make fact-based decisions, in real-time. Without capabilities like the above, you will keep flying blind – while everyone else will have night vision.

Continuously improve your modeling

Machine learning is great. Use it in the right instances, wherever it makes sense. Don’t be afraid to try new techniques – as we don’t yet understand the effects of the new post-COVID-19 on our risk and elasticity models. Collect data, test, and learn. Start looking at customer lifetime value. Now more than ever, we need to understand the long-term behavior of our customers across all our lines of business.

Adopt strict governance and compliance

Our industry is highly regulated – and we can expect more regulation coming our way. When thinking about transformation, think about turning your system into an agile end-to-end solution – that will enable you to adapt to any new situation with agility and has governance and compliance at its core.

Up to the cloud, we go  

We are just a tad more appreciative of cloud-based solutions than we were before, aren’t we?

During these past weeks, cloud-based systems were readily available and more resilient than on-prem applications. Think about all the file-sharing you’ve done while working from home – or the countless chats, meetings, discussions, and family events you attended via Zoom.

Embrace the cloud and let your SaaS provider make sure that you can run your business seamlessly. (No worries; it works!)

And finally, think about what will happen when the pandemic returns next year, and we will have to face yet another round of the same crisis. What will be our excuse for not being ready and not having the right systems and processes in place?

Act fast, and you will be able to stand by your clients’ side, weather the storm, and flourish in the new market – built on the ashes of this cataclysmic era.