Unsurprisingly, the significant changes Covid-19 caused in financial markets on a global scale impacted the insurance industry heavily. As the text below will show, the pandemic has prompted insurance companies to focus on ramping up their digitization efforts and automation processes. Many policyholders reacted with anger and disdain after learning about the details of their insurance coverage only when things went wrong.
This reaction significantly damaged insurers’ reputations. Now more than ever, the importance of services such as insurance apps and insurance email marketing shrines through. Designed to be user-friendly and easy-to-understand, these services enable quality communication between insurers and policyholders, giving insurance companies an advantage over competitors.
Impact of the Covid-19 Pandemic on Property and Casualty and Commercial Insurance
Auto insurance: As schools close and more and more people work from home, the number of auto insurance claims has dropped significantly. That goes for both accident and theft coverage, as there the number of vehicles on the roads has reduced significantly. Still, frequency-severity in insurance costs varies depending on geography (city, country, state), and industry. And even though some auto insurers agreed to a return in premium, insurance companies are likely to come out on top in 2021. Judging by 2020 data, the reduction in losses and claims filed by far surpasses premium returns.
General Liability: The difference between businesses deemed essential and non-essential resulted in a huge difference in the way businesses treat general liability. While retailers and the hospitality industry companies will file fewer general liability claims, pharmacies and supermarkets will file more claims. Additionally, businesses that have stayed open during the pandemic will need more resources for sanitation expenses and disinfectants.
Business disruption: Whether businesses, regardless of the industry, are eligible for business disruption insurance depends most of all on the wording of their policies. For many businesses out there, the pandemic significantly reduced their profits, at times even resulting in closures. Regardless of whether insurers decided to pay up or not, an overwhelming volume of business disruption insurance claims from non-essential companies, administrative costs will skyrocket.
Additional tip: Business disruption and commercial property Insurance are stated to cover damage to property and physical loss. At first glance, Covid-19 cannot be the cause of any physical damage or loss the way an earthquake or a storm might. At the beginning of the pandemic, a large number of insurance claims were turned down due to this difference. In 2021, however, a slight difference in interpretation was a key contribution to coverage. Contamination (including Covid-19) can make a place of business unsuitable for use, a state which is covered by your usual business disruption packages. Structural damage is therefore not considered a necessity.
Travel Insurance: The volume of flights and trips canceled for unforeseen reasons kept increasing in 2021. The impact of Covid-19 on travel insurance will vary significantly depending on coverage wording and other specifics. For example, policyholders who have purchased “cancel for any reason” coverage will receive at least partial reimbursement. On the other hand, most standard packages differentiate between foreseen and unforeseen circumstances for canceling trips. Some policies even state that after a year, the pandemic is considered a foreseen risk.
Long-Term Impact of the Covid-19 Pandemic
The consequences of the pandemic had an overall negative impact on the reputation of insurance companies, according to two-thirds of insurance brokers. With an increased number of policyholders learning about the specifics of their coverages only after the fact, two main facts were uncovered. The first being that higher transparency and communication with users are necessary to avoid confusion in the future. User-friendly, accessible, and foolproof apps that hold all relevant data users want to read up on only a click away play an important role in bridging this information gap. Automated services such as emails reminding policyholders to rate insurance brokers and insurers can be of vital importance for the future of insurance. Encouragement to offer positive and negative feedback forms a dialogue, and lets insurers fix unsatisfactory aspects of their service.
The second insight has to do with an increased demand for insurance products. Perhaps unexpectedly, the companies that managed to meet their clients’ demands have built trust and will experience higher demand for their services. Some auto insurers, for example, offered partial auto-policy premium refunds to policyholders or cut premiums due to changes in risk levels. Gestures such as these will go a long way in building up the insurance companies’ good names.
Many insurers have suffered seemingly permanently damaged reputations for not reimbursing insurance holders after suffering damages directly or indirectly related to the pandemic. Other insurance companies have taken this opportunity to build trust by paying up at least partially on the rising claims. The overall sharp shift in insurance strategies, as well as marketing efforts, has changed towards using automation, email marketing, and helpful apps to rebuild trust, improving communication and transparency.