Like many other businesses across industries, insurance companies have been heavily impacted by the current COVID-19 crisis. Interestingly, insurtechs and mobile solutions are exactly what can help insurers cope with the most recent challenges. Here’s why the current COVID-19 crisis might actually be an opportunity rather than a threat to insurtech products.
Insurance companies in the midst of COVID-19
There’s no doubt that insurance companies play an important role during difficult times like the COVID-19 crisis. They help businesses and individuals manage risks and secure their future, but they are also vulnerable to sudden changes in financial markets. In order to keep afloat, insurers have to change the way their companies operate.
Traditionally, insurance companies employed agents to sell their policies and relied heavily on manual, human input. It’s no longer the case, though. To start with, customers’ preferred modes for researching and purchasing insurance policies have changed – and it happened even before the crisis hit.
Basically, face-to-face meetings and manual paperwork have lost their charm. It’s hardly surprising, given that paper applications take a lot of time to be processed and often require in-person meetings and medical exams, which are not exactly possible right now. Gone are the days when agents were the only source of information and primary sales channel – today, consumers research available insurance options as they please, and they use a variety of channels once they’re at it.
This change of heart forces insurers to act fast and adapt to the new reality. Especially since customers are still willing to buy insurance, now maybe even more than ever.
Research shows that more than 70% of customers understand the need to have their life and possessions insured. Not many of them act upon
it, though, at least not without an “incentive”. There are at least a few things that are likely to influence their purchase decisions – such as a catastrophe or global crisis like the current COVID-19 pandemic.
In difficult times like these, people are scared of what the future holds and thus, more open to what insurers have to offer. The only problem is that insurance companies have to be prepared for such high demand – not only in terms of having insurance policies that cover risks related to COVID-19 in their offer but also keeping both employees and customers safe and healthy. The question remains, then:
How can insurers keep working effectively during the COVID-19 crisis?
With the coronavirus lockdown making customers use digital channels for almost every transaction, going digital is actually the only way to go anywhere. In fact, successful customer engagement throughout the current COVID-19 crisis depends on the effectiveness of the online channels and remote work.
There’s also one more player that counts these days: mobile channel. The difficult situation caused a shift in the adoption rate of mobile technologies, which was only a matter of time. Even before the COVID-19 outbreak, customers have already been used their mobile devices for buying and managing insurance products. The lockdown simply encouraged them to further explore these possibilities.
As a matter of fact, the insurers who are not ready to offer mobile solutions and automate their processes to some extent, might not be able to cope with the COVID-19 crisis and its aftermath. For many businesses out there, going mobile seems to be the most important thing on the agenda – and insurance companies are no different.
COVID-19: A threat or an opportunity for insurtechs?
Meanwhile, the current COVID-19 crisis is a major chance for all insurtech companies. As consumers expect last-minute insurance policies and increased safety, more agile businesses are simply better equipped to adapt and meet these expectations. Insurtechs are definitely stepping up their game with contactless payments, faster claim processing and collaboration tools, just to name a few.
First, however, insurtech startups have to survive the liquidity and operational challenges created by the coronavirus. COVID-19 has definitely caused workforce disruptions and delays from their partners. Many insurtechs are still treated as enablers for incumbent insurance players and thus, have felt the negative impact of these big insurance players switching their attention to more critical functions during the COVID-19 crisis.
At the same time, the overall funding for insurtech investments also decreased significantly – by 54% during the first quarter, compared with the numbers last year. Despite the considerable percentage drop, though, there’s still a lot of activity seen in early-stage funding rounds.
What’s more, established insurtechs like Lemonade or robust comparison platforms will still have a chance to thrive in a more “digital” environment that the COVID-19 crisis created. In fact, those insurtechs that facilitate digital transformation will most likely remain safe and sound – mostly because they can keep partnering up with bigger players. How so?
In difficult times like these, insurance companies are practically forced to embrace ecosystems and collaboration with mature insurtechs or third-party specialists. Only then, they are able to develop innovative solutions relatively fast and keep their competitive edge in the process. Many insurers seem to understand that, with 80% being prepared to invest in digital channels such as mobile apps. This opens up new possibilities for insurtechs that are mature and capable enough to partner up and enable quick market launches.
Insurtech will pick up the pace once again
There’s no doubt that insurtechs have made great strides in the last decade. The rapid growth might have slowed down, but the truth is that many insurtechs are now capable of helping insurance agents and companies get through the COVID-19 crisis.
Even though the economy is suffering because of the coronavirus, insurtech innovation is expected to be wounded only in the short term. That’s precisely why it’s worth collaborating with insurtechs and embarking on a digital transformation alongside them. This way, insurance companies will be able to cope with the COVID-19 crisis and pick up the pace when the storm passes.
Emil Waszkowski, Head of Consulting at Future Mind,
a full-stack software development company that designs and implements web, IoT and mobile projects.