The coronavirus pandemic has affected the insurance industry severely. In fact, PwC report says that insurance businesses – life, non-life and health saw a decline of 20% in net sales during lockdown.
While the insurance industry has to plan for long-term consequences, immediate focus should be on the following aspects:
Business continuity plan: Insurance catastrophe treatment deals with ‘one in (x) 100-year’ events which have to be considered as more frequent than expected. Business continuity in the light of natural disasters, environment issues and geopolitical crises and the stability (or instability) of global regulations must be considered and planned for. The industry which is supposed to help other industries and people cannot ignore risks to its own existence and must plan for disturbances which may be frequent in the future.
Employee safety and well-being: Despite the move to digital, a vast majority of the business is still done face-to-face or through one-on-one communication. In times like this, companies have to ensure employees and agents have the right equipment and access to resources to work from home safely and feel supported.
Crisis management task force: Companies need to install a cross-functional task force to monitor the evolving COVID-19 situation, draft response plans and communicate consistently and frequently with employees, agents and customers – not just during the lockdown but also once they return to office and physical operations in a controlled manner.
Capital and cash: Periodically, insurers should perform stress tests on financial projections and capital needs to ensure financial resilience. The cash flows may reduce due to non-payment of premiums or delayed renewals. This can also be caused by collapse of underlying business like decline in sale of automobiles. Decreased yield from the investment portfolio has to be monitored carefully as interest rates fall.
Stakeholder communication: There would be a need to consistently and frequently communicate with the regulator, customers, partners, agents, brokers, shareholders, etc., to build confidence that the situation is under control and that suitable measures have been taken to ensure proper continuity of service.
IT infrastructure stability and cyber security: Companies must ensure that their IT infrastructure can accommodate the required bandwidth for remote access and that the cyber security set-up is up to standard. Heightened risk of cyber threats, especially for insurance companies, is a natural concomitant of crises like this.