COVID + Brokers: What will be the future of the Broker Industry?
The short-term and long-term consequences of Covid-19 on the global economy, as well as the insurance market, are still yet to be determined. It appears that the cost of claims will depend on the sector in question, and policy wordings, as well as government interference. In the text below, we have listed the ways in which this global crisis has impacted the insurance market, and the changes we are likely to see in the future.
Here are some key insights on what insurers need to worry about in 2021, and beyond.
Conducting Business Electronically and Cyber Insurance
The importance of digitalization in the insurance industry has never been more apparent. Insurance brokers, carriers, as well as clients would ideally have to communicate electronically without any disruption to the quality of service or mutual understanding. This is where insurance marketing automation platforms save the day. With these solutions in place, brokers can streamline client-facing communications using emails and texts. The software can automatically send out highly personalized pre-renewal and renewal letters, billing reminders, and many other marketing workflows. It does all this by integration with brokers’ existing management systems and pulling information about each individual policyholder, which it then uses to send out customized emails which can also be designed to nurture policyholders at each stage of the insurance life cycle in order to build loyalty and encourage policy renewals. Finally, policyholders can also make payments in-app, as well as have full access to all of their documents online, without the need to contact their insurance broker.
These automated communication solutions were once a convenient digital marketing tool, but are likely to become a necessity in the future. Online tools and resources can efficiently meet both brokers’ and policyholders’ needs, but this convenience comes at a price. It was estimated that around $600 billion is lost on a global scale due to cybercrimes, and transferring the bulk of an industry’s everyday workload online puts personal data at risk. As a countermeasure, SaaS companies have employed the services of cloud data storage experts at Amazon, Google and Microsoft in order to ensure that all documents relating to insurance policies are safely stored.
Impact on the Global Insurance Market
According to the Insurance Global Market Report 2021: COVID-19 Impact and Recovery to 2030 report, the global market will grow to $5050.31 billion in 2021, compared to $4474.49 billion in 2020. A compounded annual growth rate of 12.9% is expected, so overall, the future seems bright. Recovery, which is spurred on by proper social distancing measures and the increased popularity of remote work, is expected to reverse the business disruption which was experienced in many industries. In the same report, the insurance market was expected to grow over the upcoming years as well. As one of the strategies for future recovery, insurers are advised to consider forming crisis and emergency teams to coordinate future action plans quickly and efficiently. In the case that new safety measures need to be implemented or a company-wide communication system that would function offline needs to be set up, a coordinated response for employees, clients, and distributors needs to be put in place.
High Churn Rates and Policy-Specific Insurance
In the U.S. the churn rates for 2020 were historically high, affecting the insurance industry a great deal. For example, 2.4 million workers successfully gained employment in March and April of 2020, however a whopping 5.6 million eventually got laid off, losing their employer-sponsored insurance. Employer-Sponsored coverage, or ESI, refers to health insurance obtained through the employer, usually covering the employee and their family. Additionally, workers’ compensation insurance claims filed by businesses also reached an all-time high. Previously, the highest job-loss period was the Great Recession of 2009, where fewer workers ended up losing coverage. Other than health and annuities (for retiree workers) insurance, which saw a huge disruption in 2020, many business disruption insurance claims were also filed. Some retail businesses, such as restaurants and shopping malls, lost profits during the restrictive Covid-19 safety measures.
In 2021, the surviving businesses have added contamination coverage to their business disruption policies. Brokers specializing in auto insurance experienced fewer claims as more and more people worked from home and the roads were less crowded. In 2021, unlike in 2020, Covid-19 is no longer considered as an unforeseen circumstances for travel insurance policies. As for general liability claims, more are expected to be filed by supermarkets and pharmacies than, for example, retailers.
With the rising need to transfer the bulk of the workload of insurance companies online, more investments into digitalization and online visibility including SEO are expected in the future. Additionally, the insurance industry is expected to recover in the future, with the projections for subsequent years getting more and more optimistic. Still, the high churn rates and job-loss statistics indicate that the consequences to health and annuities insurance in the U.S. have been severe, and it will likely take longer to rebuild.