Reimagining insurance

18 May 2020

Alistair Chamberlain, Head of Product and Actuarial, Global Insurance, HSBC Life

Battling coronavirus is one of the greatest challenges the modern world has faced. It has the potential to impact the lives of nearly everyone on the planet.

Huge pressure is being put on healthcare services across the globe and governments are having to change their policies daily. For business, the watchword is ‘agility’, adapting to new ways of working to protect the health of the workforce while trying to maintain continuity for clients, customers and business partners.

The beginning of 2020, when the COVID-19 crisis started, already seems a lifetime ago. Some markets are slowly making a comeback, others are mitigating risks of new waves of infections and many may need to wait it out much longer in lockdown.

While the race is on to find a vaccine and cure, countries across the world find themselves debating how to emerge from lockdown to energise economies severely impacted by measures imposed to stop the spread of the virus.

The impact to our businesses and the wider society comes from multiple sources.

Disruptions to operations

Most office-based businesses rapidly switched to enable employees to work remotely. While conference call facilities and servers are challenged by the volume of traffic, and family interruptions on work video calls are now commonplace, most organisations and their employees have adapted rapidly to this ‘new normal’.

Following this crisis, the largest work-from-home exercise of all time is likely to change the way we work forever. If productivity and morale remain high while people work remotely on a mass basis, we may see an acceleration of the trend for reduced office capacity and more flexibility in where we live. Overall, the business disruption impact seems largely manageable and rather minor in the context of the unfolding crisis.

Demand for insurance

In the first three months of 2020, consumer behaviour changed in a way we could not have imagined as recently as January. Sorting out personal finances, often seen as a ‘job for tomorrow’, fell even further down the priority list. A long face-to-face meeting with a stranger, a standard part of financial planning in many places, is currently unimaginable.

In its place, financial planning over video conference is likely to be accepted and normalised very rapidly. Consumer appetite for insurance is also likely to change, with awareness of life-threatening risk at an all-time high and an increasing demand for new types of cover.

People will start to think about their policy, and the cover provided, in more detail – and hopefully make better-informed decisions about addressing gaps, choosing products that truly meet their needs and working only with trusted partners who will be there for the long haul. In some markets, we are already seeing a large increase in uptake of protection products that consumers have, in the past, struggled to engage with.

Planning around uncertainty

The global spread of COVID-19 also meant that the impact on financial markets has been all-encompassing. In the SARS crisis, we saw a sharp market drop and then a rapid recovery over a short time period. This crisis initially looked similar but now appears very different, with the potential for multiple waves, and a quick return to the prior state currently seems unlikely.

The insurance industry needs to make careful business decisions to prepare for what may yet come. More than ever, our investment and product teams need to work closely to ensure we manage market volatility while making sound assumptions about the future economic landscape and customer behaviour. Helping individuals and companies make sense of the numbers in fast-moving and uncharted territory is a moment when all our skills, knowledge and judgement are put to the test.

Back to the basics of trust

So far, the insurance claims impact has largely been felt on general insurance product lines, with a massive wave of travel cancellation claims and business disruption cover potentially triggered. Indeed, many suppliers responded by completely withdrawing travel insurance products from the market even before government-imposed travel restrictions.

At the same time, we’ve also seen many insurance providers rise to the occasion, quickly setting up ‘green’ lanes for faster claims processing and adding special benefits related to COVID-19, to name a few examples. This situation will test insurance industry bodies, insurers, reinsurers and intermediaries to determine how far they are willing to go to define the risks from which they are prepared to protect individuals and businesses in what is an ‘unexpected, unforeseen event’ for a customer.

Thinking about the future

The long-term impact of this crisis may range from relatively minor (greater desire for remote working) to major questions about how we organise as a society on a local, national and global basis.

For insurers, the impact will be felt for some time across life and general insurance, covering pricing and product accessibility and exclusions. Questions will be raised about policy limits, wording, exclusions and coverage levels – how will insurers, corporates and individuals react if another ‘unforeseen’ event hits? We will need to find new solutions to these societal challenges.

First, we must keep going through these tough and strange days, which include extended working from home whilst managing our personal lives and supporting family near and far. These things should not be trivialised and it will test our perseverance and impact aspects of our mental and physical health.

Second, we must do what we are required to do in our professional capacity – manage the immediate and also take the long view, exploring and optimising a range of potential outcomes. Our businesses and societies are being asked tough questions and so are we. While we won’t have all the answers, our ability to problem solve, address customers’ needs, and support business partners with level-headed and sound decision-making will define how well we will face a new future together.

This is a version of an article that first appeared in the The Actuary in May 2020.