Insurance: The COVID-19 Opportunity

April 23, 2020

Covid-19 sheet of paper

*The insights and recommendations shared in this article are based on the circumstances as of May 6, 2020

How should insurance companies handle the coronavirus crisis? We share five recommendations on how insurers can turn COVID-19 into an opportunity.

The world’s situation is currently full of fears on health, job-security, economic downturns, social cohesion (on a large and small scale) and sometimes – it just about depends on that life-saving stock of toilet paper. Many of these fears are justified, but let’s look at the opportunities that the current situation offers. We are convinced that we, as an industry, can emerge from the current crisis with enormous tailwind. But to do so, we have to be proactive and get to work.

Keep your promises

Firstly, ask yourselves what is important now? In the current situation, people rely on their insurer - now, more than ever. For example, a COVID-19 infection is no longer covered in some insurance policies, as it is now considered a pandemic. Customers do not understand this exclusion, as after all, it is still an illness. The difference, is a WHO nomenclature. The disease is the same, and so are the resulting problems of the customer. It is no wonder that people get angry and lose all trust in their insurers. Therefore, it is essential to keep your promises and retain a sense of proportionality. The way you behave now will have a major impact on the industry’s reputation in future, which will either secure or waste your opportunities.

Understand what moves customers in times of the crisis

People used to take their health for granted, and were unaware of their own vulnerability. At the beginning of the outbreak, it did not occur to many that these would impact them so greatly, and that it will only majorly affect the older generation and those with lower immune systems. There were even talks of relieving the burden of pension funds. This is not the case as many outside the “of-risk” groups have since been affected. Their health and financial situations have never been this vulnerable. The government wishes to step in, but how fast and how much will each individual get to benefit? For the insurers, this will be a huge opportunity, if they know exactly what moves the customer. This requires very tangible information which can be translated into concrete measures.

There are five recommended strategies that insurers can take:

1. Talk about your customers' concerns

COVID-19 has changed the hierarchy of customers’ needs, and as insurers, you will need to be able to consistently show your customers how your offers can address their needs and fears. In the past, the insurance industry has acted far too much on price, and it is now time to move on to value-based selling. This is obvious in the case of personal insurance, but it also applies to property insurance, where financial security is sold.

2. Retain your customers

The insurance industry is a subscription business. Subscriptions in our industry sometimes only run for a year, and for some, for more than half a lifetime. There is only one major danger with subscription models — unsubscription. The current financial hardship that many are facing now may cause insurance cancellations. This is where you should set up targeted measures. This could range from a “win-back” hotline to the use of deferral options, premium breaks, and so on.

3. Offer new value propositions

COVID-19 will permanently change your customers’ preferences. Granted, people are forgetful and some memories will fade. But the meta-themes will remain. The vulnerability will remain in the memories of many. The fear of losing one's job, the deep cuts of reduced working hours and furloughs, and the need to be able to pay off the next installment for their house and car. The fear of getting sick while travelling and having to abandon vacations and work trips. The list of changes are profound and there will be no "back to normal" in the coming years. Insurers that react now, analyze these shifts in needs, and adapt products accordingly, will be able to create real solutions to customers’ problems.

4. Set fair prices

What is a fair price? Even the Romans had the same term for price and value: Pretium. A fair price is one that reflects value. Costs do not represent value, so they are not suitable for setting fair prices. Rather, we must understand what perceived and tangible values we create for the customer. This value must be measured to design clever products that exactly address the pressure points of the customers. For these products, the willingness to pay is significantly higher than the costs. If we remember the concrete examples from the COVID-19 crisis and use them neatly in discussions with the customer, this quickly turns into willingness to pay. But beware: do not overdo it. If you price insensitively during this crisis, customers will not forgive you. So, stay fair.

5. Sell digitally, on all channels

The purchasing behavior of customers is changing radically. The COVID-19 measures, including the recent Circuit Breaker, forces many into contact with new digital interactions that they would not have used before.  Amazon has gained more than 15% share price in the last two weeks, and has done the unthinkable — they have increased hourly wages and are desperately looking for new employees. The value of Zoom, the provider of software for video conferencing, has exploded by almost 40% in the last two weeks alone. All experts agree: Customers will be more invested in digital in the future. Nevertheless, the insurance industry will not be able to work without real salespeople in the medium term. The customer wants to be advised and not just cover their known needs with a machine. More than ever, they expect competent advice when navigating through the jungle of perils.

Nevertheless, retail visits and sales talks on the customer's couch will become less frequent. It is therefore crucial to digitally enable the agents to advise and sell remotely. To do so, you cannot simply put the salespeople in front of the webcam and expect them to sell well. You need digital sales processes with structured human interaction. These processes must be linked to the internet and mobile phones — exactly the kind of omnichannel solutions that the industry has been talking about for so long.

None of these recommendations are rocket science. However, they require foresight, boldness, and above all, hands-on action. Those that delay these measures will see their portfolio and new businesses fall apart. Those that start now will sell more.