Insurance is an industry characterized by numerous disruptions including new technologies, insurtechs, changing customer expectations, and changing regulations. Add to this the pressure of the current Covid-19 crises. How can Nordic insurance companies not only survive, but thrive in a post-Covid world?
The insurance industry has been thrown into turmoil by the Covid-19 crisis, from an inundation of life and non-life claims to having to rapidly adjust to remote working. Insurers have seldom faced this level of disruption in such a short time frame.
What issues are keeping insurers awake at night then? Among other things, there is an ongoing discussion about insurance policies with clauses that exclude pandemics. What does it mean to those made redundant? Is income protection insurance valid or not now? What about changes in lifestyle; will the general lower pace of life during lockdowns affect the tendency to take out insurance policies, besides from the mandatory ones? Will people’s deteriorated private economy affect future possibilities to even get an insurance?
It might take a few quarters, but the coming financial downturn will surely impact the insurance industry. However, in the midst of the turbulence there is also a silver lining to the insurance industry.
Covid as a catalyst
This crisis could well prove to be the push needed for insurers to pull the plug on wide scale digital rollouts. From chatbots to pre-emptive highly personalized policies, insurers will now need to utilize an increasing number of digital technologies to cope with demand, boost revenues, cut costs, and deal with a remote workforce.
At first though, let’s be frank: even before the crises, insurers had a huge challenge with fulfilling the expectations of a modern customer. Most insurers are following the same straight-line philosophy: wait for the customer to contact us, offer standard packages based on general parameters, and collect an annual premium. But traditional insurance models no longer fit the modern customer. Insurers need to do the thinking for them and turn reactive models into proactive support.
What capabilities are needed?
All that will require a mindset shift in the industry, and a new attitude about data, partnerships, service, and success. Among other things, I believe the following areas will be important to survive the crises and to build a stronger, more resilient business of the future:
• Prioritize regulations and governmental guidance. Make sure you’re on board with all necessary regulations during the crises; this should be top of your agenda. Beyond the current situation, regulatory changes are often viewed as hurdles to overcome. Forward-thinking organizations, on the other hand, view them as opportunities rather than obstacles, something we saw in banking when the EU payment services regulation P2SD came into force.
• Communicate with customers. Strive for an ongoing, honest customer communication to enhance engagement. This is especially important to secure long-term retention; during or after a crisis, customers are more likely to end the relationship. Transparency should be your mantra – during the crises as well as after.
• Amplify the customer experience. Tomorrow’s customers will demand more personalization, access, security, and options. So often, insurance customers have been provided a minimum of digitalization. This needs to change now, because just like in banking, modern customers expect a digital seamless experience. Think, for example, of a single, integrated insurance package that encompasses health, life, property, liability, and financial services. Each time a customer gets a new job, takes up a risky new hobby or buys a new car or gadget, this integrated insurance package could be adjusted and aligned to the customers’ new reality.
• Flex your digital muscles. To achieve an enhanced customer experience, the highest imperative is a fully digital platform. Moving to more responsive, AI enabled architectures that accelerate data management and deliver insights, will further help insurers drive business performance, something we helped this Nordic insurance organization do. Think AI-assisted conversations, chatbots for use in mobile applications and more proactive actions. Accelerating cloud migration is also important to survive beyond the crisis, as well as considering blockchain’s potential for ensuring privacy and trust.
• Culture trumps strategy. To adapt to a new landscape, incumbent insurers need to foster a culture that embraces change. Senior leaders need to recalibrate how they position and manage change, especially during the pandemics. It’s about individual accountability, flat organizations, no fear to speak up, and implementing agile methodologies. Here, Nordic insurers are well positioned thanks to the prevailing work culture. Companies in the forefront are already making necessary changes and, again, banks have been more innovative. Modern banks encourage collaboration, innovation and communicate the strategies with its employees (I call them killer banks; read more in The New Banking Genome Report).
• Competitors or partners? Smart incumbent firms view competitors as potential business partners; it’s a quick way to access digital solutions. To offer a seamless experience that supports changing customer needs, insurers simply need to partner with other industries, start-ups, and service providers. Insurtechs are already paving the way to more adaptive insurance offerings. In Germany, Clark is an insurance robo-advisory platform that provides transparent, inexpensive and comprehensive insurance coverage by analyzing a customer’s situation and gives propositions based on information from 160 insurance companies.
So, how prepared are Nordic insurance companies to tackle the crises? In general, adoption of digital technologies is rapid in the Nordics, which makes it likely that initiatives like automated chatbots will take off. Add to that the flat hierarchy at most workplaces, which is a breeding ground for innovations, and Nordic insurers should be well-positioned to both survive and thrive. The insurance customer of 2025 will expect a fully customized digital experience and the Covid crisis could well be the catalyst to make that happen.
For more information, please visit our Covid-19 response page.