From forced closures to operational transformation, the COVID-19 pandemic has impacted businesses both UK and worldwide. The world of insurance is no exception to this rule – but the nature of the industry and its interests have led to a layered set of challenges and opportunities beyond the obvious disruptions to working practices.
These challenges have been laid out in a recent report from EY, which lists a number of early pandemic issues for the industry including the tricky transition to remote working, a “strong push toward digitisation”, and the embrace of virtual interactions for clients and distribution partners. While these concerns may feel familiar, EY’s report goes on to draw out the specific difficulties faced by insurers, where COVID-19 has occasioned “mounting consumer, political, and legislative pressure to cover pandemic-related business interruption claims”.
Not only has the industry needed to embrace new technologies and practices to adapt to the pandemic, but it has also needed to address some of the COVID-driven burdens faced by clients. As such, the pandemic can be understood as an opportunity to re-evaluate what a good insurance broker looks like post-COVID, with the struggle to adapt by traditional insurers counterbalanced by a new, agile generation of challenger brokers built around the technology and approaches which the pandemic demands – qualities which will define insurance long after the COVID crisis subsides.
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Outdated tech models and approaches
The pandemic has demanded an unprecedented degree of change in the insurance industry. For some of the more traditional brokers, this demand has been difficult to meet. According to EY Global Cyber Transformation Leader, Matt Hynes, for example, insurers are facing heightened risk of cyber attacks due to a lack of existing IT security infrastructure to cope with shifts to the cloud and workers using personal computer equipment.
Outdated IT infrastructure has also been singled out by a report from Deloitte, which has found that the “legacy nature of much IT infrastructure can hinder agile responses”. This is a particular issue in an industry, as the report suggests, reliant on “overly manual” processes which are “not well integrated,” leading to slow turnaround times and increasing backlogs of work.
Given these pandemic-driven factors, it’s no wonder that, according to the Government’s actuarial department, insurers have faced challenging claim volumes and addressed them at slower speeds.
This is not, of course, to paint a doom-and-gloom picture of the insurance industry as a whole. But these challenges – outdated, vulnerable, and poorly integrated technology combined with an overreliance on manual processes – clearly need addressing.
As such, we can understand how the pandemic has created opportunities for young challenger brokers capable of responding to such issues with a fast, frictionless, and tech-forward approach.
The next generation of InsurTech brokers
What, then, does this new breed of insurer look like? And how does their technology mitigate the issues facing the industry?
In general terms, InsurTech brokers – that is, brokers who emphasise the importance of technology in insurance – have been built around the technologies to which more established insurers are still struggling to adapt. This means that such companies have had little difficulty in transitioning towards working from home, for example, or dealing with clients virtually, and they are not encumbered by the weight of legacy IT infrastructure.
More importantly, this tech-first approach allows challenger brokers to fulfil what KPMG has described as the need – highlighted by COVID – “for insurers to streamline, improve, and digitise operations and claims functions,” while providing “personalised offerings”.
Rather than sticking to elongated manual claims processes reliant, for example, on calling a broker for an update, the embrace of client-focused tech platforms allows InsurTech firms to give clients quick and transparent access to policy information, while expediting claims processes and delivering insights through business intelligence and data — therefore addressing the kind of work backlogs traditional insurers have struggled with over the last 18-20 months.
Though the pandemic has been a catalyst for the adoption of new and better insurance tech, these changes are here to stay. As EY notes, the shift to digital distribution needs to be sustained in the long term – and tech-based brokers are clearly in a position to both meet the challenges of the pandemic and, in a larger sense, usher in a new age of insurance, characterised by transparent client relations, quick and painless claims processes, and unprecedentedly personalised levels of customer care and attention.