By the middle of 2020, insurance companies were bracing themselves for the worst. The pressures of the COVID-19 pandemic and resulting economic upheaval were driving multiple industries to the brink. Wildfires raged around the globe and the Atlantic saw the most named hurricanes in recorded history.
Yet by the year’s end, most insurers found that the bottom hadn’t dropped out at all. Some segments of their business were, in fact, doing quite well.
In the spring, for instance, auto claims declined sharply as more and more drivers opted (or were ordered) to stay home, and come summer, more customers were seeking policies to suit their new, socially distant lifestyles.
“People were buying boats, people were buying RVs, people were buying second homes because they needed something else to do,” Crystal Johnson, an IBM managing director who works with State Farm, said in an interview. “Across the industry we saw the number of policies grow.”
Volatility—predicting and protecting against it—is insurers’ business. Yet in one of the most unpredictable years in recent memory, where outcomes for both carriers and the wider world defied expectations, the companies that did best tended to have a few things in common. For many, these practices were already helping them succeed even before the world went sideways.
Successful carriers were the ones who were diversified, both in their mix of business lines and geographies. And these carriers were innovative. They embraced technology to manage not only their increasingly complex books but also their increasingly far-flung workforce.
“Insurers are really trying to rethink their clients’ needs, to be more transparent and simplistic with their offerings and create more voluntary, rather than commodity products,” Bea Elbert, global general manager for insurance at IBM, told Industrious. “After the past year, insurance has taken on a whole new meaning.”
Insurers race to digitize
Even prior to the pandemic, leading insurers were employing AI and automation to improve efficiency and accuracy in claims processing. They were ahead of the curve in customer service at a time when pandemic stress added to the urgency of fast processing and reimbursement.
Claims adjusters are adapting to the challenges of the pandemic
“Insurance companies who, say, have the digital technology in place to do image-based processing which can help quickly assess damage to a car or a house remotely—they’re doing much better than those who don’t,” explained Girish Ratnam, who leads IBM’s application innovation team for the insurance industry in North America.
He points to some carriers who have even deployed drones to help quickly inspect disaster areas. And there is the proliferation of embedded features in insurers apps and sites that allow consumers to submit their own photos and videos—a time-saving feature in regular times and a safety feature during COVID times.
Such automated tech can also empower claims adjusters in the field, especially when it’s preloaded onto their mobile devices and apps. Whether visiting a disaster site or reviewing a routine claim, adjusters can provide answers to customers in a matter of minutes.
“Claim adjustors can now have everything at their fingertips,” explains Eddie Gaehwiler, an IBM managing director working with Allianz. “They can look at their device and say, ‘Okay, this is the information I need. This is what I can offer you,’ They can settle the claims right there and then” without spending time, and money, reporting back to the office.
Digital self-service has become increasingly popular during COVID-19.
“We’re working with insurance companies to improve their customers’ digital experience so they can do things in a single click versus five,” Ratnam said.
Yet people still have a pivotal role to play, especially when it comes to customer service and complex claims. That was why it was so important for insurers to establish new ways of working remotely without dropping all the balls the pandemic was throwing at carriers.
“When you’re going to spend money on insurance” Johnson points out, “at times you want to get validation from a human contact.”
Diversified products and big data
And in 2020, there was lots of money going around, as performance varied widely among insurance segments.
S&P Global found that both automotive and medical claims had a “positive impact” on insurers’ loss ratios thanks to strict lockdown measures. Less driving and less elective surgery meant less wear-and-tear and accidents (whether on vehicles or bodies).
Segments that fared less well included real property policies, a consequence of those record fires and hurricanes in the United States—not to mention the reality of people spending more time in their homes, both noticing and causing more damage. Helping customers move forward on repairs proved taxing as demand for building materials soared just as the pandemic caused massive supply chain disruptions.
With people driving less, insurers have paid fewer auto claims during COVID-19.
As with customer service, the right technological capabilities can help insurers thrive even when performance among their business lines falters. It’s a big reason a diversified portfolio is more important than ever.
Insurers have long sought different types and geographies for coverage to spread their risk. Scale now brings an equally important advantage: data. The bigger the customer base, the deeper the data lakes that carriers can create to store and analyze customer information. This analysis can feed insights that drive decisions, including dynamic pricing and sales leads.
Eventually, Ratnam sees a future where insurers can use data to track not just customers but also new enterprise partners—such as buildings goods suppliers or auto manufacturers—so carriers can prepare in case of new demand or disruptions.
“Supply chains were rarely talked about in insurance circles,” Ratnam said. “This year has been one where they’re starting to take a look at it.”
Spending more time at home has led to more property claims.
Insurers can also use data analytics to determine opportunities for new products and services, touching everything from cybersecurity to pay-as-you-go car insurance to in-home care for seniors. That’s of critical importance as leading insurers contend with scrappy start-ups intent on disrupting the insurance landscape.
“After the ups and downs of 2020, insurance will never go back to being just a reactive industry,” Elbert said. “Insurers are going to be more proactive for their customers.”
Saving money, staying nimble
One place where the past year saw decided ups and downs was in the financial markets. The ripple effects this can have for insurers can fortunately be mitigated by the right tech, too.
Two issues are creating notable pain in the year ahead. Lower (and in some cases, negative) interest rates continue to take a bite out of returns, while pandemic-related budget headwinds could hit insurance customers hard in 2021, leaving them little recourse but to cancel existing policies and hold off on new ones.
Accordingly, reducing costs will be a top priority for insurers this year as they seek to bolster bottom lines and reignite share prices. Automation can help here, too, reducing expensive manual processes. Analysis by AI is helping predict future needs and challenges, helping insurers plan ahead and avoid costly mistakes and miscalculations. Process outsourcing, both through AI and large-scale partners like IBM, is another promising avenue
“With hundreds of insurance customers around the world, we have economies of scale, as well as technology to deliver cost effective intelligent workflows,” Gaehwiler explained.
Many adjusters are using digital tools to review claims remotely.
Such savings helps insurers not only weather the near-term economic storm but also free up resources to invest even more in customer experience and continued digital transformation.
“Lowering cost while ensuring a wonderful customer experience is going to be incredibly important to insurers to stay nimble and stay competitive,” Johnson said. “Underpinning both those things is data and AI.”
While things may be looking up in 2021, if the past year has taught insurers anything, it’s take nothing for granted—least of all the technology that’s helped prepare for the unexpected.