In a recent conversation about the current state of the insurance industry, one insurer summarized the challenge being faced as follows – “Insurers hold the key to open up the economy, but will they dare to use this power?”
It’s true, many of us are looking forward to traveling to foreign beaches this summer or going back to gyms and crowded nightclubs. Not to mention that governments and companies are pushing for the immediate lessening of lockdown restrictions and the reopening of our economies. But who will be liable if, and when, a second wave of infection strikes? Will governments step in and carry the burden of the financial downsides affecting businesses? Or will everyone turn to insurers for help?
The first wave of this pandemic sent society at large into an initial panic. It forced us to practice extreme health and safety measures and adopt new habits for living in a low touch world. And while some countries and businesses are beginning to open back up, scientists are warning that we are not in the clear just yet.
A potential next wave of the crisis, compiled with rising economic pressures and societal tensions, will result in both first and second-order consequences for the insurance industry. And while some of these ripple effects will feel dire, change always is accompanied by opportunity.
In our latest report on the Low Touch Economy, we take a look at twelve insurance-industry shifts that are being accelerated by the pandemic. Below are three more shifts we’d like to share:
From the family to the individual.
Lockdown rules enforced during this crisis are driving many companies to adopt a digital approach to their operations. When it comes to insurance, this means that a direct line of communication between the individual, not just the head of family, is possible. So instead of having one decision-maker acting as the middleman or broker of a contract, there is now an opportunity to talk to the individual on a one-on-one level based on their interests and needs.
Digital-first banking startups and Telcos are already able to convince individual family members to sign up for the alternative, niche services they offer. We expect that a similar wave of insurance products would create a similar disruption to the traditional sales model.
From planning for the future to creating security today.
The economic crisis will make money scarcity an issue for many consumers and businesses. People will be more anxious about the potential risk that they may face, but their available budget to spend on insurance will shrink.
Wealthy nations can learn from the micro-insurance products that are being developed in rural economies across the world, using the core principles of these business models as a source of inspiration for new insurance solutions.
Cover new risks of digital-first habits
And with all the world becoming more digital, it’s all the more important to start preparing for the rise of new technological risks. We’ve already seen the need for a work from home taskforce to have additional IT coverage and cybersecurity matters, and we expect this to become even more of a priority as the crisis stretches on.
Older generations and vulnerable populations, who may be less familiar to digital tools, are at a higher risk of falling prey to hackers, scams, and phishing schemes. While many businesses already cover potential data breaches, there’s an opportunity for private citizens to become more risk savvy themselves, driving a need for personal data security and risk management insurance plans.