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COVID-19 Pandemic Affecting Insurance Operations & Finances
Since the COVID-19 pandemic, the world has grappled with numerous challenges, with many of them still unresolved. This includes significant disruptions in insurance operations, economies, and public healthcare systems worldwide.
The crisis can be seen hitting the insurance sector more because millions of insured people are seeking testing and treatment coverage, while due to lockdown in many locations and social distancing practice, people avoid coming out and buying insurable products such as vehicles, appliances, etc. leading to less demand, less revenue.
Meanwhile, for many reasons, the insurance industry (similar to other sectors) is going through staff shortage, making it challenging to process claims on time. For this, many insurers are choosing to get external help/support or outsourcing insurance claims processing.
No doubt, there are several such challenges that the insurance industry is currently facing, let’s read what industry experts say about the effects of COVID-19 on the insurance industry operationally and economically.
The Impact of COVID-19 on Operations & Financial Performance of Insurance Businesses
1. Empathy & understanding
Kelly Fogarty, Head of Operations at Branch
These uncertain times call for businesses to adapt to the challenges their employees and clients currently face. Clients are used to the “point, click and deliver world”, so insurance companies need to be able to respond to the problems posed by COVID-19 in ways that clients are accustomed to.
Regulators are expecting companies to work closely with clients to help them navigate unprecedented unemployment and the difficulty that lies in choosing between paying bills or feeding their family. The operations teams must be flexible with billing and deliver frequent, clear, and meaningful communication that addresses clients’ needs.
They also need to guide employees and clients alike through the challenges they are facing. Insurance companies that can successfully convey empathy and understanding, while adapting daily operations to best serve their clients, will come out on top.”
2. Offer great customer service and keep them informed
Ross Quade, Owner of Prime Mutual
Our agency, Prime Mutual, has seen an uptick in business among 50 to 85-year-olds, specifically looking at what life insurance options are available for seniors.
The COVID-19 pandemic has disrupted everyone’s life, and we are regretful that this is the impetus for so many people to become acutely aware of this aspect of their finances.
We are grateful to be able to help all those who are now looking for affordable insurance options, especially at a time when so many are worried about their next paycheck.
Operationally, we are working through the weekends and clocking over 70 hours a week to keep everything moving. While we have back-office support, the amount of time spent on underwriting is taking longer, especially with insurance company employees working from home.
Some tips we have found helpful include the following:
- Notifying your inquirers that all quote requests are processed the day they are received and that due to the number of inquiries related to COVID-19, it may take an additional day or two to respond.
- While some agencies might not be as accommodating, we have updated our website’s home and contact page to let consumers know we are working around the clock. We are taking calls after business hours and have reflected those changes on our website.
- Rather than email, schedule a call or video conference. We have been using a calendar to let our customers schedule a time of their choosing rather than wait on hold or go to voicemail.
- For consumers shopping and comparing insurance locally, trust matters. If you can’t meet with your client face to face, we are having success with Zoom and Google Hangouts to conduct video calls.
3. New guidelines can help
Jordan, Life Insurance Broker at California Life Coverage
Covid-19 has affected the insurance industry in many ways, but the most profound way was in regard to underwriting and restrictions.
Now that we are in a pandemic crisis, insurance carriers have to be very restrictive on who they approve for life insurance since it can hurt their bottom line if a large number of insureds were to pass away due to the pandemic.
On top of these issues, companies are also losing a lot of business, and many of the salespeople who work for insurance companies aren’t able to write new applications because of the new restrictions and of the applications that are allowed, the underwriting can be tough.
It is like a domino effect. A lot of departments are being furloughed due to the lack of work, and this can be seen in every industry, but the life insurance industry, especially since health is a huge factor in getting approved as opposed to health insurance or dental insurance that doesn’t have the same restrictions.
My tips to resolve this would be to have looser guidelines to the Covid-19 crisis, like if someone had it and resolved it without residual symptoms to not bar their chances of getting life insurance for up to a year or more after.
Or to create specialized temporary life insurance requirements that might be a little bit more expensive for the client, but if they have the symptoms or are in a risky area will not be barred from qualifying for some coverage.
4. Digitization is the solution
Randy Vander Vaate, President and Owner of Funeral Funds
One of the common insurance operational issues Insurance businesses face during this COVID-19 pandemic is the disruption to agents selling insurance face-to-face.
These captive agents who are part of an insurance companies’ sales and distribution networks generally rely on face-to-face meetings with clients to sell new business. They are now finding themselves out of work during this pandemic.
The insurance industry is facing sales losses as this pandemic continues since agents are grounded and cannot continue selling life insurance their normal ways.
One way to resolve this is through the use of technology on insurance websites and underwriting. The digitization of the sales channels makes it possible to eliminate the need for face-to-face meetings and will enable the agents to do more business through the internet.
Digitization will also open new channels for direct sales and marketing. It will also shorten the underwriting period and speed up the insurance application process.
5. Go virtual
David Duford, Owner of Duford Insurance Group
The unfortunate “good news” with the pandemic is interest in insurance products has measurably increased. Most insurance is purchased in accordance with life events like marriage, buying a new home, new vehicle, etcetera.
COVID-19 falls into this category. People who never thought about purchasing life insurance or second-guessed whether or not they were adequately insured are now giving serious consideration towards purchasing.
This is why demand has increased. However, due to stay-in-home orders and fear of face-to-face meetings, agents have had to alter their sales strategy to virtual sales using the telephone and conference call software.
While most agents are accustomed to selling face-to-face with their insurance prospects, the pandemic has encouraged prospects, otherwise used to meeting agents face-to-face, to accept virtual meetings instead.
How COVID-19 affects supply of providers?
COVID-19 will cause long-term economic peril for many industries nationally for the foreseeable future. Otherwise, talented people will lose their jobs due to furloughs and layoffs.
This provides an opportunity for insurance agencies to recruit and enlarge their agencies with new hires that can leverage the increased demand for insurance. Economic downturns are usually good opportunities for many insurance agencies to build their sales force, introducing skilled salespeople to their industry.
Personally, I came into the insurance sales business in 2011 during the Great Recession out of pure desperation. No one was hiring, and my former business was failing fast.
My thoughts are many people will experience a similar scenario as I had faced and find themselves entering the insurance sales business due to little job options.
6. It is costing companies billions of dollars
Sarah George, Car Insurance Expert at Finder
One way the coronavirus is impacting insurance: Nearly all car insurers are refunding premiums to customers.
This kind of payback is unprecedented in the insurance industry because it’s costing companies millions or even billions of dollars.
However, companies have said they’re giving it back because customers are staying home and getting into fewer accidents across the board. It works out because insurers aren’t paying as much for car accident claims.
To receive the payback, customers typically don’t have to do anything as long as their address and payment details are up to date. They can expect refunds or credits toward future premiums ranging from 15% to 25% of their usual payments for several months. Some companies like Nationwide are giving flat refund amounts.
7. Lack of technology is an overlooked problem
Joel Zwicker, Business Development Lead at Agency Revolution
From an insurance operations perspective, in theory, it should have minimal impact except for the need for everyone to work remotely.
The problem, however, is that most insurance agencies have ignored the need for or not invested in the technology to enable a seamless transition to a remote work way of life. In our industry, there’s almost been a cultural predisposition against giving staff the freedom.
This attitude led many agencies to upgrade their computer systems, for example, but replaced them with desktops instead of laptops to maintain the status quo and keep staff members tied to the office.
Economically, there are huge implications for individual insurance agencies and the insurance industry at large. In simplest terms, Personal Lines agencies should see the least impact. In times like these, maybe families downsize from 2 cars to 1, but they still need insurance. We expect to see Commercial Lines agencies take the biggest hits.
If I insure 10 businesses in town what are the chances of all 10 of them
- A) Staying in Business and
- B) Operate at the same capacity they did?
There is a whole other slew of economic impacts here, just a few examples: Workers Comp (rating is based in receipts), Business Interruption Insurance (Virtually all claims will likely be denied).
8. Utilization of technology can help mitigate effects
Walt Capell, President of Workers Compensation Shop
Insurance is an industry that, as a whole, has been slow to adapt to the technological age.
In today’s business environment, businesses must meet their customers where they are and do business with those customers the way they want. More often than not, that place is online. This creates opportunities to streamline processes that used to take enormous amounts of time.
This streamlining helps when it comes to offering a quote, but it also applies to the processing of claims. From the side of an independent agency, this streamlining requires the agency to create policies and procedures that are compatible with the multiple carriers they partner with.
Some carriers make this process easy, and others have a lot of work to do. This makes employees with strong IT Skills a valuable asset. They can create internal computer programs that make processes easier for employees and programs that are compatible with a majority of the carriers the agency partners with.
Having a business owner that values technology and gives the IT department the freedom to create innovative programs is one aspect that currently separates many agencies from their competition.
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9. Policy examination and automation in Insurance Operations
Melanie Musson, Car Insurance Expert at Car Insurance Comparison
For their future, companies are going to have to consider the huge change to risk and adjust policies accordingly. Some states may open up, and many of their drivers will go about business as usual.
In those cases, insurance policies may require very little change. Some states, however, will remain in lockdown for an extended period of time.
While people living there will be making less money and needing cars less, insurance companies can expect a huge decline in revenue.
They will have to examine policies so that the customer’s premiums accurately reflect their risk. But any time there is a lack of revenue, jobs will have to be cut. Insurance companies will need to streamline their employee lists. They may have to move to more automated services to accomplish the work that needs to be done.
10. Change in underwriting guidelines
Chris Abrams, Founder of Abrams Insurance Solutions
Operationally, in theory, it should have little impact aside from everyone needing to work remotely.
The problem, however, is that most insurance agencies have ignored the need for or not invested in the technology to enable a seamless transition to a remote work way of life.
In our industry, there’s almost been a cultural predisposition against giving staff the freedom. This attitude led many agencies to upgrade their computer systems, for example, but replaced them with desktops instead of laptops to maintain the status quo and keep staff members tied to the office.
The biggest impact COVID-19 has made on my insurance business is the change in underwriting guidelines. Before I get into that, I can say that it’s mostly business as usual. Before COVID-19, I was working from home and helping people around the country get life insurance.
That has not changed, and business is actually up. I believe this is due to people being at home and having more time to take care of their personal financial and insurance needs. Plus, the pandemic has brought the need for life insurance front and center. Yes – life insurance does cover COVID-19.
What has changed is the underwriting for many companies. Underwriting guidelines are company-specific, so there are variances between companies and their guidelines.
Here is a brief summary of the changes for some companies:
- Clients over age 70 or higher risk are being postponed. Therefore, it’s important to find an insurance company that has not issued these guidelines for this group of people.
- People returning from international travel are being postponed for 30 days before they can get coverage.
- If a client is diagnosed with COVID-19, they are being postponed 30 to 90 days after recovery.
- Clients must sign a “Good Health Statement” before the policy is put in-force. This health statement documents that the client has not had any changes in health since starting the application process.
- Some companies are raising their no exam limits to help more people get coverage without having to submit a blood and urine sample.
- Some companies are now accepting a recent doctor’s physical in lieu of an insurance exam.
- Some insurance exams were being postponed, but that seems to have subsided. Nurses are essential workers and are still meeting with clients to collect blood and urine samples. These nurses are showing up in masks, gloves, and taking other precautionary measures.
Bottom Line: It is still possible to get life insurance during the pandemic. However, you may need to be flexible and make sure your agent has you apply with a company that will work with your age and health issues during this time.
After reading the suggestions and recommendations provided by different insurance experts, we should know that technology plays a significant role in various business phases and emergencies like the current. Technology is vital in the current time as it reduces workload, process complexities, and ensures accuracy and quality in work.
Apart from that, outsourcing is becoming a significant trend amid the pandemic. Many insurance carriers and agencies are taking advantage of the insurance business process outsourcing and achieving desired results within a short turnaround time.
Outsourcing does not only help you with project completion but also supports cost-cutting. You can find highly competent services at affordable costs, significantly reducing your overhead.
Similarly, Cogneesol offers high-quality services at lower prices in order to help insurers get through these tough days. We offer an extensive range of insurance back-office outsourcing services across the globe. Contact us to know more about how we can help your insurance business mitigate the effects of COVID-19. Call us at +1 646 688 2821 Or email at [email protected].
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