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Impact of Coronavirus on the Insurance Companies!

Last updated: 27 Apr, 2020 By | 6 Minutes Read

The entire world has been affected by coronavirus. COVID-19 has not only made the health suffer of individuals worldwide but the economy as well, and every industry has been at its receiving end. If we talk about the insurance industry, it too has been impacted negatively by coronavirus in terms of operations and customer service. It is forcing insurers to redefine their business models to deal with the coronavirus challenge successfully.

Let us throw some light on the same by knowing the opinions of insurance industry experts.

1. Smartphones are Proving to be of Great Help

John Kohout

John Kohout, Financial Representative and IAR with the U.S.A. Financial and I work for Hudson Wealth Management.

It has been a very unique time with the pandemic going on, and I think this is a great topic for the times. The topic really describes the past 2-4 weeks for me. Insurance is an industry with a lot of security; people will always need it. That being the case, I’m fortunate enough to be someone who can still work, I know many folks who never even considered it are looking to unemployment.

We are able to have phones set up in a way that allows us to still show up on a caller ID that we are calling from our office, and whether I’m calling to market or maintain client relationships, that is very important. In the past, we almost exclusively did business face-to-face, so this has changed our prospecting and client interactions in a very large way. We still are able to set up times to work with folks, but most are phone appointments, which do not offer the same benefits that face-to-face meetings do.

It’s harder to build rapport, harder to connect, and you always have to overcome the hurdle that someone is afraid that you’re scamming them. You can do everything in the world to assure someone that you’re a real person and try to prove that, but for some folks that is never enough. With so many of our basic processes having to change so radically, we’re just controlling what we can control and trying to reach out to folks to the best of our ability.

There certainly are hurdles, but people still need help with their insurance (and finances). On a brighter note, because people are being required to stay home unless their employment is essential or they leave to do a task that “sustains life”(I reside in Michigan, there is currently an executive order in place), there are a lot of people right near their phones. Contacts are up with our cold-calling, and this once-in-a-lifetime event gives everyone some common ground to build rapport with potential clients during those cold calls. Inclusion is a very powerful tool.

2. Team Site and Zoom Came to Our Rescue

todd burkhalter

Todd Burkhalter, Chief Executive Officer at Drive Planning

As a licensed Insurance Agent and Financial Planner, we have seen a sharp drop off of meetings. At Drive Planning, we were well ahead of the curve in using online tools for meetings both internal as well as client meetings.

Internally we built a Team Site to allow our own people to communicate more efficiently and effectively than through email or text chains. This also allows us to share corporate info & training quickly.
Externally we utilize Zoom primarily as a method for client meetings as well as old fashion phone calls.

Having lived through the downturn of 2008; people/clients became slower to make decisions. However, insurance products thrive during volatile times; therefore we will see an increase in the times ahead just as we did coming out of the 2008 Financial Crisis.

I personally used this quarantined/slower time to write a book about avoiding these scary financial periods in the future.

3. Insurance Processes are changing w.r.t Coronavirus 

Zhaneta Gechev

Zhaneta Gechev, Agency Owner at One Stop Life Insurance

My name is ZhanetaGechev, and I am the founder of One Stop Life Insurance. It is strictly a life insurance brokerage helping families across the nation secure the coverage they need.

It goes without saying that the COVID-19 has impacted every industry, including the insurance world.

I was pleasantly surprised to see that the typically slow adjusting industry, such as life insurance, is changing rapidly to stay current to the new normal.

Here are some of the most common things I’ve noticed as an impact the virus has on the insurance industry:

  • Many states have issued a no-cancellation policy for a period of approximately 60 days or more. This means that an insurance carrier cannot cancel your policy due to nonpayment. Now, it is important to point outthat you need to reach out to the company and that the payments would still be due in the future. They will not be forgiven, just deferred.
  • Life insurance companies are considering no-medical exam policies and are loosening up their guidelines for acceleration. In other words, they would strive to issue more policies without the need for a medical exam. This is a big shift in the industry.
  • In addition, companies are paying close attention to foreign travel and will postpone any application if the client has traveled to a country of a high concern.
  • Some companies are tightening their guides on approving life insurance for seniors. They want to ensure that they do not have any respiratory or other underlying conditions that could make them at a higher risk should they contract the virus.
  • In addition, some companies have already updated their policies verbiage and have excluded COVID -19 as a covered death in their policies.
  • In the auto insurance site, I’ve kept in touch with various agents and brokers. They are noticing less activity, as more and more drivers are staying put at home. It is very likely auto insurance carriers notice anincrease in revenue due to fewer losses.

4. It Comes with Both Negatives and Positives

Randy VanderVaate Randy VanderVaate, Life Insurance Brokerage and Agency Owner

Positive Impact
1. COVID-19 pandemic makes people aware of the importance of life insurance. They don’t need so much convincing when they contact us. Therefore, the sales process becomes easier.

Negative Impact
1. Some companies put COVID-19 and severe acute respiratory syndrome exclusion on newly issue policies. People with these conditions are limited in the type of life insurance they can buy.

2. The insurance companies are still studying the risks and long-term effects of COVID-19. Since this pandemic is causing a higher mortality rate, they are being cautious and putting applications on hold to make sure people are clear of COVID-19 before they are approved.

Read: Experts Revealing the Insurance Accounting Issues and Solutions

5. Making Customers Feel Valued is Challenging Virtually

Brent Thurman

Brent Thurman, Insurance Agency Owner

As a personal lines agency owner, the policy count and revenue doesn’t change much due to things like COVID-19 since everyone still needs home and auto insurance. It’s one great thing about our industry.  However, since our lobbies are closed and many employees of the agency are working from home, customers are forced to use quicker, more efficient ways of doing business for things that they might normally stop by the office for.

Many of our employees who have felt like they have a heavy workload are now finding themselves finished with all of their tasks before the day is over.  My goal is to maintain those strong relationships with each customer and make each feel valued, but I wonder if this will be the catalyst needed for those late adopters of doing business by text, phone, or email to feel comfortable with these service options.

6. Relaxations are being Offered in Medical Examinations

RaymerRaymer Malone, Helping People Make Smart Decisions about Insurance and Annuities

While there are some clients who are postponing purchasing disability and life insurance until there is a little more certainty in the economy, there are still many people interested in purchasing a policy today.

In this environment, anyone doing fully underwritten insurance will find it difficult to get a client medically examined.  The good news is that several disability and life insurance companies have relaxed the necessary requirements to get a fully underwritten policy.

For instance, the principal used to require a paramed exam and labs on anyone over the age of 50 applying for more than 6k in monthly disability benefits.  Last month, they increased that threshold to 10k, essentially allowing people 50 and younger making up to 200k annually to get a full-benefit disability policy without an exam.

Other disability carriers have followed suit.  We have seen similar programs available on the life insurance side as well.  In some cases, this will be temporary.  However, it’s good to see our industry adapt quickly given the circumstances, and hopefully, some companies will decide to permanently allow these expedited programs for larger cases.

7. Life Insurance Policy Applications have Become More Strict

Jonny Fritz Jonny Fritz, CEO at noexam.com

Life insurance companies don’t have adequate data to underwrite consumers during a pandemic. As a result, we are beginning to see life insurers adjust their underwriting guidelines. Two major life insurance companies have temporarily suspended applications for consumers over the age of 71.

Others have announced they will not accept applications from individuals who are considered high risk or that have certain pre-existing conditions. A statement of good health is now required with the submission of nearly every life insurance application.

8. Coronavirus has Led to Multiple Insurance Process Changes

anthony martin

Anthony Martin, CEO Choice Mutual | Official Member at Forbes Finance Council

Speaking strictly about life insurance companies, coronavirus has resulted in a variety of changes:

  • Suspension on sales of certain products due to the unknown mortality risk of the virus.
  • Forcing applicants who have recently traveled to affected areas to wait before they can apply. They usually make applicants wait 60 days after returning before they will consider the application.
  • Ban on applicants who intend to travel to affected areas. The applicant must complete their trip and then wait (as mentioned above) an average of 60 days.• A ban on applicants who have the virus.
  • For applicants who have been exposed to the virus, some companies are making them wait 60-90 days before they can apply.
  • While uncommon, we have seen an example of an exclusion rider being added to a policy that stipulates the policy would not payout if death was due to the virus.
  • This change has not yet hit, but it will. The downturn in the investment market and the interest rates being where they are will result in higher premiums down the line. The increased claims due to the virus will also contribute, but the investment market tanking will be more of a contributing factor.
  • More life insurance companies are embracing non-medical exam policies, and more will certainly follow.

9. Changes in Medical Underwriting are Predominant

Heidi MertlichHeidi Mertlich, licensed life insurance agent, owner of multiple websites, including NoPhysicalTermLife.com

Please consider the following 2 important ways COVID-19 is impacting life insurance companies:

Many life insurance carriers are placing temporary underwriting restrictions, specifically age and face amount limits, due to the risk that COVID-19 presents to the American population.

Medical underwriting is currently delayed for most life insurance carriers, as paramedical examiners are unavailable to conduct exams due to health concerns and stay-at-home orders.

10. Refining Insurance Policies to Deal with Financial Challenges

Alexandra Eidenberg

Alexandra Eidenberg, Co-Founder and President of The Insurance People

Health insurance is our specialty. We work with numerous small businesses and individuals. Right now, folks are focused on staying insured to make sure they have access to healthcare in the event they get COVID-19. We are hard at work coordinating creative strategies to help businesses move their folks from group to individual with a subsidy, from a subsidy to larger subsidy, and sometimes even subsidy benefits to Medicaid. The vast majority of our clients are struggling to afford their premiums, so pivoting to different and more affordable product lines is the name of the game.

Already the financial crisis is putting a lot of strain on folks mentally, and we are assisting our clients with these challenges by supporting them, their families and their staff’s to confidently change insurance and save money. We are taking a hands-on approach to assisting our clients with telemedicine appointments and are working with folks in need to get into hospitals for their COVID 19 symptoms.

11. Travel Insurance has been Hit Severely by COVID-19

Chiranth Nataraj

Chiranth Nataraj, President and CEO at International Services

The overall travel insurance industry is already experiencing a huge decrease in demand (over 90%), especially in the international travel insurance segment. Many foreign airlines have suspended all travel in-and-out of their respective countries and the US Dept. of State prohibits US Entry to foreigners from many countries. So, for all practical purposes, we have NO new customers seeking visitor medical insurance.

Stranded travelers in the US seeking fresh insurance protection (or seeking an extension of an existing travel insurance plan) are the only few new customers utilizing our services.

12. Life Insurance is Affected More than Other Insurance Coverage

Palmer “Whit” Ferguson III, Managing Director and Partner

For the Auto Insurance

You are seeing fewer drivers on the road, which leads to fewer claims; thus carriers are issuing 15% credits for April and May to clients.

The Life Insurance Industry

The drop in the 10-year treasury was impacting carriers prior to the pandemic, and now with the dislocation in the market we will see a lot of changes in:

  1. Pricing increases and product discontinuation
  2. Underwriting: traditional means of having an examiner come to your home or office for blood and urine, is no longer viable. Companies are allowing people to electronically upload their Dr records into a portal for a review. Something that should have been available a long time ago, but apparently took an event like this to pull them into a new way of doing things.
  3. Reinsurance and death benefit decreases

Conclusion

This concludes the fact that coronavirus has impacted the insurance industry like never before, and looking at the present scenario, the impact is going to get bigger and bigger with the passing of every day. Insurers need to realize that in the absence of physical operations, they need to leverage technology to provide uninterrupted customer services. However, investing in technology for the remote working of employees can be an expensive affair. So, what is the solution?

The solution lies in joining hands with a top outsourcing insurance accounting agency like Cogneesol that can offer you with quality insurance back-office services. It has been providing cost-effective services to insurers worldwide for the last 12 years and has one of the best infrastructure and an expert insurance team in place. So, get in touch with it and start your 14-day free trial to ensure your customers do not suffer amidst the COVID-19 outbreak due to a lack of resources.

Recommended:

5 Things You Need to Know About Insurance Accounting!

Role of Outsource Accounting for Insurance Businesses!

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