COVID-19 has caused devastation to many industries and insurance has fared no differently. However certain lines of business have been affected more than others due to the specific nature of their product and the current circumstances.
For example, crimes such as burglary and violence have seen a 20% decrease in the UK, whilst COVID-19 related cyber-attacks have seen a 30% increase as of late. Since business interruption (BI) insurance is often contingent on there being physical damage to a property, it is unlikely to be of any help for COVID-19-related cases. SMEs are vital to the economy and, as micro businesses with 0-9 employees account for 96% of all UK businesses, the impact on them has been severe despite the support offered by the government. Unable to count on their BI policies; a rising number of businesses are considering legal options, and this has become a topic of legislative debate across governments and nations.
This has reignited questions about the exact role of insurance in our rapidly evolving and volatile world. What is its purpose? How can major structural and societal risks best be mitigated? As such COVID-19 has done a great job at marketing the need for it.
In this time of need, the industry needs to come together and show empathy, to help customers in whatever way they can - even where policy wordings and exclusions may suggest otherwise. Taking a short to mid-term hit on their bottom line could result in a reasonable uptick in sustained future business. Customer loyalty and lifetime value (LTV) has generally been an issue across the industry, as insurance tends to be relatively price sensitive. Insurers are therefore constantly working on initiatives to enhance customer relations and, along with Financial Services firms more broadly, would love to emulate companies such as Amazon and Apple, who tend to have a loyal customer base with significant LTVs.
Generally, insurance is seen as a necessary evil that is only purchased (except where it is a legal requirement) either when people have suffered a personal loss or when family/friends have suffered a loss. The pandemic has presented insurers with a unique opportunity to stand up in a time of need, positively change that perception for good and become trusted advisors in the process; a term that has such significance in this day-and-age. By being informative and empathetic, speaking the language of their customers and less rigid with their policy wordings and exclusions, they can really make a positive impact on the livelihoods of their customers in what are challenging times. As a result, they are likely to enhance customer loyalty, win greater business through word-of-mouth and address the ever-present challenge of increasing customer LTVs.
Isn't this the true purpose of insurance after all?
While it is uncertain how long this situation will last, as the Covid-19 pandemic has impacted travel worldwide, more people are now aware of the existence of travel insurance.