8 Impact Areas of COVID-19 on Insurance Operations: Part 2
| date: May 26th, 2020
5. Increased Litigation and Reputation Risks
The rise in calls and inquiries also brings with it’s the thorny discussions about claims especially around ‘what is covered’ and ‘what is not covered.’ Recently, the Insurance Regulatory Authority (IRA) issued a directive that insurers must settle all COVID-19 claims. For most insurers, pandemic risks like COVID-19 fall under the exemption clause and so they are not under any obligation to pay such claims.
Already, according to the Business Daily Africa, insurers are seeking ways to limit COVID-19 related payouts and protect themselves. Being forced to cover risks that they never signed up for in the first place however, puts insurers in an extremely precarious position. They face potentially negative impact on either their bottom line or their reputation depending on which direction they decide to lean. Besides, insurers who come off as neglectful or dismissive of customers’ concerns might be opening themselves up to litigations.
With a solid communication plan in place, insurers can preempt certain conversations around policy coverage. It is a given that many policy holders rarely if ever read the fine print until something goes wrong. Proactive and frequent communications with policy holders (and the public in general) advising them on the coronavirus and how it affects their coverage is a great place to start.
6. Remote Working
In March, the Kenyan government issued an advisory encouraging corporation and businesses to allow where possible employees to work from home…and where not possible to ensure that social distance requirements are adhered to.
Many businesses complied amidst great reluctance and trepidation due to the general lack of preparedness all around. The work from home policy is now in full force with many companies having overcome the initial paralysis to transition their employees to working from home.
The seamless transition to working from home required insurers to provide their employees with remote working tools including collaboration, video conferencing, performance management tools as well as software for remote access to company systems from home.
It would also help to open multiple channels of communication – email, phone and intranet – and establish regular meetings to keep up social interaction and keep employees updated on any new developments including policies and procedures that might impact their work or personal lives.
7. Increased Inquiries and Claims
As mentioned in the previous article, during and even after this pandemic insurers should expect to be flooded with inquiries and claims. With thinly staffed call centers, the average wait time for each client increases with customers having to wait longer on the line to get any response and even longer for their issues to be resolved if at all.
This can be a major source of friction between the customer and the insurer. Unfortunately, in this era of social media, any little friction with a client can be blown out of proportion putting an insurer’s reputation at risk.
To mitigate against the high influx of inquiries and claims while complying with the social distancing and lockdown measures, insurers might have to consider enabling their contact center agents to work from their homes. This can be made possible through access to the internet and cloud-based contact center technology readily available in the market.
8. Solvency & Liquidation risks
The COVID-19 crisis has adversely impacted global economies driving markets into extremely volatility and creating insolvency concerns for many businesses. Demand for certain products and services has reduced drastically. The insurance industry is expected to see a reduction in gross written premiums as fewer people take up new policies and some default on payments.
COVID-19 losses might threaten the solvency of some insurers which could further be exacerbated by the recent move by some regulators to grant policy holders facing financial difficulties a moratorium on premium payments and renewal. This is happening at a time the regulators are also requesting insurers to settle all COVID-19 claims whether exempt or not. Liquidity constraints are also highly likely in the event of product cancellation, increase in surrenders, and decline in renewals and new business due to the prevailing economic conditions.
Insurers seem to be in a catch 22 situation where they are ‘damned if they do’ and ‘damned if they don’t.’ Hit from all directions they are potentially facing huge losses on one end and brutal public backlash and reputation damage on the other. They have a lot to do in terms of implementing new directives and adjusting their operations, IT systems and business processes to align with the current situation.
Amidst all the pressure and uncertainty, insurance remains a business that must take care of its solvency and commercial viability. Above all therefore, foresight and wisdom will be required in dealing with customers while at the same time attempting to balance between reputational risk and financial risk. According to PwC, how insurers “respond to a stressful event can shape employee and public attitudes far into the future and be a defining moment for corporate culture.”