Warren Buffet’s said of recessions and depressions that “...when the tide goes out, you see who has been swimming naked.” Thankfully, as a potential global depression looms, very few insurers have been caught naked but some have definitely been spied in the skimpiest of swimwear.
A global pandemic of Covid-19’s magnitude and speed has changed the world in just a few months but we have to assume that it wasn’t articulated in anything like its global spread in many insurers’ business continuity plans. SARS and Avian Flu would certainly have introduced passing references but the likelihood - if not impact - scores would have featured in RAG colours insipid enough for most to have stopped well before outlining comprehensive mitigations for national lock-down scenarios.
Across the world, we understand that losses will be huge in travel insurance, event cover and business interruption. Meanwhile actuaries are working from home in back bedrooms revaluing huge books of life insurance and pension business. And while the price of oil hits zero for the first time in history, auto insurers have already talked about making refunds due to lack of car and aviation usage. The indemnity swings and roundabouts are in furious motion but it’s perhaps behind the operational doors of insurers that the most interesting action is taking place.
We have all learned a lot in a very short space of time about risk register maintenance, working from home capability and the impact of consumer behaviour when it shifts tectonically online. However, insurers’ most fundamental duty is the fulfilment of the insurance contract to pay valid claims whether they are related to Covid-19 or simply to everyday fender benders and escape of water claims. Consequently, real life has come very fast at those insurers whose claims systems require their staff to be co-present in an office due to lack of digital claims platforms with cloud capability and supply chain automation.
A meme doing the rounds in the last week of March posed the question: "Who led the digital transformation of your business? a) CEO b) CTO or c) COVID-19”. It’s funny because what the industry was too risk averse to do for itself, Coronavirus has forced upon many. But the true irony that when this whole episode has settled into an anxious memory, those very companies who cut through red tape holding them back and embraced radical digital transformation may well be the ones who reap huge long term benefits.
The genie is out of the bottle now. With the right systems, staff can work from home. Digital notification of loss for customers means they can interact in the ways that the retail sector has taught them to expect and appreciate. Meanwhile, the carriers receive faster, richer information that - coupled with an appropriate digital claims platform to manage fraud identification, workflows, supply chains and feedback to all parties - that can end up increasing customer satisfaction scores whilst reducing settlement times and indemnity costs.
In a manner very like plants that emerge from the scorched soiled after bush-fires with refreshed strength, Covid-19 has made this period a transformational learning and turning point for many brokers and carriers.
Some will have been forced to continue to try to adapt legacy systems. The problem with this approach is that the limitations are usually baked in. No amount of digital PR will turn a sow’s ear into a silk claims purse even if the business spends eight figure sums trying to. They may make some progress but legacy is very hard and very expensive to adapt. The moment will already have passed and the opportunity cost of failing to ditch their sunk cost bias may haunt some forever.
This period could be the golden for no-code claims systems. The no-code approach is already changing many other industries because it puts the keys to control of the business in the hands of business decision makers rather than leaving at the mercy of developer resources and the pit of despair that is the IT priority list.
In IT transformation, the urgent is always more likely to trump the important but those who use the lesson of Covid-19 to separate the important parts of their business - like the ability to pay claims in a crisis - from their internal IT constraints now stand a chance of changing their business paradigm to the benefit of both customers and shareholders.
Written and published by Paul Stanley, 360Globalnet CEO.