The Insurance Industry and Covid-19: Challenges and Solutions
By Leor Melamedov
The coronavirus may have brought a slowdown to other industries, but not insurance. Insurers are busier than ever as they grapple with new claims, whether it’s related to business interruption, employment practice liability, or managing policies as insured companies go out of business. And to further complicate matters, insurers that previously relied on face-to-face meetings and physical paperwork have been forced to suddenly serve their customers remotely.
All this is a lot to grapple with. But insurers can come out of this crisis stronger than before by creatively approaching the challenges they encounter. Here are just a few of the common situations insurers may find themselves in, and how they can be overcome.
Customers filing claims outside the policy
Problem: Policyholders have taken a financial hit from the coronavirus, and many are now expecting to be covered by their business interruption policy. Some policyholders are in dire straits and even on the brink of going under. But business interruption insurance doesn’t cover pandemics, which don’t meet the requirements for physical property damage. While most policies explicitly state exclusions, that hasn’t stopped business owners from attempting to secure compensation.
What to do: The first thing to remember is the golden rule: treat your policyholders as you’d like to be treated. While their efforts to recoup some of their losses via insurance may seem irrational given the policy limitations, it’s important to remember that they are under enormous financial and emotional pressure right now. Just taking the time to listen to policyholders’ struggles and showing sensitivity can do a world of good, which will not be forgotten even when the pandemic ends. On the other hand, brushing off their claims outright can damage an insurer’s reputation, not to mention jeopardize customer retention.
On a more practical level, it may actually be wise for insurers to encourage their customers to carefully document their losses. While it’s not currently possible to get coverage for corona-related losses, there’s always a chance that might change in the future. Loopholes in insurance policies might be found, or the policies may be reinterpreted.
As for whether it will be possible to offer a pandemic-specific policy, it’s unlikely there would be much demand for it. It’s simply too narrow of a policy, and its significant costs would exceed its benefits to policyholders.
2. Dealing with the looming threat of law
Problem: A minority of companies who have had their corona-related claims rejected will pursue lawsuits against their insurers. But it isn’t trivial, and something worth paying attention to. As of the time of writing, over 800 lawsuits have been filed in the U.S. in relation to the coronavirus so far, more than 150 of which are against insurance companies. This number is only poised to grow as businesses continue to remain shut in much of the country.
Some recent examples of this are lawsuits filed by the Chotaw Nation casinos in Oklahoma and one by the law firm of Los Angeles-based celebrity attorney, Mark Geragos. Of course, insurers are quick to point out that throwing money at the problem is not going to help, as the insurance industry must maintain its $800 billion surplus to cover other unforeseen events such as natural disasters.
What to do: Insurance companies that have a virus exclusion shouldn’t be overly worried. However, insurers that have vague wording in their insurance policy contracts should be prepared for at least the possibility of litigation, and even class-action lawsuits. That’s why it’s extra important to treat policyholders with extra empathy these days, and even reduce insurance rates or offer flexible payments. Insurers that proactively accommodate their policyholders in other areas may be better positioned to thwart escalations such as lawsuits.
3. Contending with a new remote reality
Problem: Most insurance companies have relied on face-to-face sales and servicing, and working in physical locations. They are also accustomed to requiring physical paperwork to be printed and scanned. With both agents and customers unable to leave their homes, these traditional ways of running an insurance business are less feasible, if not impossible. Customers can’t be met physically. And many of them lack the usual channels of delivering paperwork, such as printers and scanners. In fact, a recent Lightico survey found that only 55% of consumers have a printer in their home.
It also doesn’t help that customers and insurance agents have little separation between their personal and professional lives in this reality. Insurers simply cannot expect parents, for example, to fill out mountains of complex forms, and print, scan, and email them –– while juggling their full-time jobs and childcare demands. Customers never had patience for time-draining bureaucratic processes, and now they have even less. The same can also be said for overworked and overwhelmed insurance agents who must process large volumes of claims under time constraints.
What to do: If there was ever a time to switch over to digital form, signature, and document collection, the time is now. There are many eSignature solutions on the market today that can digitize insurance companies’ sales and claims processes. The most advanced ones, such as Lightico’s platform for insurers, allow insurers to manage the entire lifecycle through their customer’s smartphone (or computer, if they prefer). Not a single physical form or document is required, and the customer is able to seamlessly glide through the process, from FNOL filing to authentication to settlement.
Digitizing all customer interactions isn’t just a workaround for the coronavirus period. It’s actually proven to lower settlement time by 85%, reduce touch points per policy by 60%, and increase customer satisfaction by 15%. During these times of restricted movement, digitization is a lifeline. But after the restrictions are lifted, insurers will continue to reap the business-boosting dividends of modernized processes.
Insurers can be efficient and appreciated by customers –– today more than ever
While it is certainly stressful for insurers to see policyholders attempting to file impossible-to-fulfill claims, and under lockdown to boot, this need not break the customer relationship. In fact, it’s imperative that it doesn't. Now is the time to focus on reducing the tension inherent in this situation, and put the customer experience first.
Insurers who choose to view the pandemic as an opportunity to provide their customers with more compassionate, flexible, and digital service will avert some of the more damaging outcomes that some insurers have already had to contend with. They will also come out as winners when this is all over.
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