Crisis-driven adaptations are good for insurers' future

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Warren Buffet’s said of recessions and depressions that “when the tide goes out, you see who has been swimming naked.” Thankfully, as a global depression looms, very few insurers have been caught naked -- but some have definitely been spied in the skimpiest of Speedos.

A global pandemic of Covid-19’s magnitude and speed wasn’t articulated in business continuity plans -- even if SARS and Avian Flu introduced passing references in insipid likelihood and impact RAG colours. It was the rampant infection speed and spread of Covid-19 that took everyone unaware.

Losses will be huge in travel insurance, event cover and business interruption. Meanwhile actuaries are ensconced working from home in back bedrooms revaluing huge books of life insurance and pension business. And in the U.S., auto insurers are actually making refunds due to lack of car use. The indemnity swings and roundabouts are in furious motion but it’s behind the operational doors of insurers that the most interesting action is taking place.

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 c) COVID-19”. It’s funny because what the industry was too risk averse to do for itself, Coronavirus forced upon many with the irony that when this is all an anxious memory, companies who dropped the red tape holding them back and embraced radical change may well 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 interact in ways that the retail sector has taught them to expect and appreciate. While insurers receive faster, richer information that - coupled with an appropriate digital claims platform to manage automation, workflows, supply chains and feedback to all parties - ends up increasing NPS scores whilst reducing settlement times and indemnity costs.

A little like stronger plants emerging after bushfires, Covid-19 has made the past irrelevant and the present a transformational learning point.

Some insurers have continued to try to adapt legacy systems. The problem there is that the limitations are baked in. No amount of digital PR will turn a sow’s ear into a silk claims purse, but many will spend eight figure sums trying. They may succeed but the moment will already have passed and the opportunity cost of failing to ditch their sunk cost bias will haunt some forever.

No-code systems are changing many industries. They put control of the business in the hands of the business rather than placing it at the mercy of developer resources and the pit of despair that is the IT priority list. The urgent will always trump the important but those who separate the important from their internal IT stand a chance of changing their business paradigm to the benefit of customers and shareholders.

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