How COVID-19 will serve as a catalyst to reshape the insurance industry

September 28, 2020 3:27 PM

Insurers that see opportunity in this challenge will emerge stronger and be more profitable. Only the fit will thrive in the minds of consumers.

Consumer behavior has been evolving at a rapid pace in India with massive internet adoption, cheapest data services and the youngest demographic in the world.

With more than two months of lockdown behind us, consumers and insurers are beginning to venture out, both in the physical sense and in experimenting with buying and selling. For an economic engine that was in full gear, the pandemic induced lockdown could not have come at a worse time.

It hit in the early part of March, a month that delivers about 15-20% of annual premiums, and coming off the robust growth of the past two years. The first few days were consumed in the scramble to ensure employee safety, setup and enable WFH, serve customers and issue as much business as possible. Management teams have been implementing various programs in the past weeks to come to terms with the new normal.

Here is our view on what they need to consider and execute:

1. There is no time like NOW – If you have not already outlined plans on transformation priorities, then you are behind. Leaders are not waiting and have used a bulk of their time in April – May to plan several What-If scenarios around business acquisition, capital adequacy and service excellence. This is the time to innovate daily, fail fast, empower young leaders and learn even faster from your experiments.

2. Define and adopt a strategic cost reduction approach – It is imperative to leverage this opportunity to determine “affordable” and “appropriate” cost base to achieve profitability and transformation ambitions under these new market constraints. No matter what your expense ratios currently are, an 10-15% opportunity is clearly at hand to define new operating models in terms of layers, span of control, branch footprint and the ideal mix of WFH Vs Office presence. Ensure costs are optimized end-to-end, the change is embedded and sustainable. Leverage the immediate impact to fund needed transformation initiatives such as digital sales, bionic operations and key data and analytics upgrades.

3. D is no longer for Distribution, it is now for Digital Enabled Distribution – from digital onboarding of agents, to licensing, omnichannel needs analysis, analytics led prospecting, and a suite of digital tools to sell and service, insurers need to upgrade digital assets, enhance distributor training and support, and drive a fully digital world across agency, bancassurance and other proprietary distribution models. The distribution of the near future will be more engaged, productive and will forge stronger relationships. If your digital distribution adoption is not already in excess of 90%, then the time is now.

4. Turbo charge online sales – Consumer behavior has been evolving at a rapid pace in India with massive internet adoption, cheapest data services and the youngest demographic in the world. The COVID-19 crisis has turbocharged this transition across socio-economic strata and age groups. It has turned several insurance lines of business overnight from push to pull. Building and continually investing in a robust platform, specialized skills, frictionless customer journeys and a network of organic traffic, aggregator and digital partnerships is imperative to create a proprietary distribution of scale. Shape your efforts to grow the pie and the share of the pie – a double digit share from the online business is no longer out of reach.

5. Protect your book – Adopt a cross functional and battle-ready approach to protect your policyholder base. It is 3-5 times more expensive to acquire a new customer than to get an existing customer to renew. Lose no time to attack this with a multi-pronged approach – enhance contact ability, develop and deploy product experts at contact centers and branches, leverage propensity based analytical models, improvise incentive structures for sales staff, define customer engagement models to name a few. Early trends point to an increase in the cost and time to collect after adjusting for regulator prescribed grace period extensions.

6. Shape the trends – Each insurer needs to determine its innovation and technical maturity and develop offerings game plans; from bite sized products to pre-underwritten ones, from sharper customer prospecting to fraud management, from video / tele medicals to instant claim settlement, from personalized omnichannel engagement to immersive self-service.

The new normal is here –insurers that see opportunity in this challenge will emerge stronger and be more profitable. Only the fit will thrive in the minds of consumers.

(By Snehil Gambhir, Partner & Director at Boston Consulting Group)

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