How the insurance industry has changed in the face of Covid-19

Sometimes, technology innovators make predictions that turn out to be remarkably accurate because they understood how needs and capabilities would advance. At other times, innovators turn out to be right for the entirely wrong reasons.

The Covid-19 crisis has highlighted the accuracy of many forecasts of the growth of areas like e-commerce, remote working and learning, and medical services – but not because anyone predicted that a pandemic would spark the change.

The insurance sector is the latest to provide examples of great foresight resulting in exactly the right kind of service for many consumers. A South Africa insurance startup called Naked, which provides quick cover and claims via an app, has for some time offered a “CoverPause” feature. This allows customers who do not plan to use their cars for a period to pause the accident element of their cover, and downgrade it to stationary cover.

It was never designed for lockdown conditions, but was perfect for lockdown.

According to towing and roadside assistance provider Global Choices, South Africa’s rate of car accidents fell by around 75% in April as people stayed home.

Naked co-founder Ernest North says: “It supports our decision to reduce premiums so that clients pay just roughly 10% of the normal comprehensive premium when they enable CoverPause.”

TransUnion, which collects credit data, sees even more of a knock-on effect as many people delay car purchases.

“We are expecting work-from-home to be a reality for many people for at least a year, meaning traffic won’t be back to usual levels for a while,” says Kriben Reddy, TransUnion head of auto information solutions. “Another trend that we’ll see is vehicle purchases moving online as people continue to follow physical distancing protocols.”

This is bad news for most insurance companies, but good news for those that have introduced flexible approaches.

As North puts it: “People are becoming used to the convenience, low costs and control they get from digital tools they are using to manage their lives at this time, so it’s difficult to imagine them going back to the old ways  Industries and companies that have not embraced digital will need to catch up – fast.”

Marius Botha, managing director of life insurer Stangen, sees lockdown and social distancing having a similar impact on long-term insurance. Ironically, for a company that has been around for more than 80 years, it was also prepared. Recently acquired by short-term insurer King Price, it was in the process of launching King Price Life when the pandemic began.

“The company has been transformed and re-transformed many times, and has been using a direct life insurance model since 2017. When the short-term industry moved towards direct sales models and even online sales models, it was only a matter of time before the life insurance industry did so.

“But large insurance companies have seen a slow adoption of direct fulfilment online channels. It was a market heavily dominated by brokers, which then transitioned into more of a call centre-based model. Covid-19 and the lockdown will start changing those dynamics, so life insurance can also move increasingly towards online sales models.”

Life insurance is not the same as short-term insurance, however, as so many risk factors come into play. Medical check-ups were a key element of addressing that risk. Doubly ironically, the current health crisis has meant that check-ups increase risk.

“One of the things that was most unexpected for life companies was that the regulator intervened to stop medical tests in the underwriting process so that the laboratories have capacity to test for Covid-19 instead,” says Botha.

“Many companies can’t adapt to that, and some of the traditional players still used paper application processes in their broker models. Those brokers couldn’t reach the customer.”

Stangen had one advantage: it had been a sister company to African Bank when that company went into curatorship, although it was the one entity in the group that avoided that fate. Nevertheless, it had to reinvent itself.

“We had to invest in a new technology stack that was fully integrated front and back end. We wanted to create a cloud-based solution that bolted online direct fulfilment capabilities.

“Pre Covid-19 a large part of sales, about 75%, was all done through call centre assistants. Direct fulfilment, where customers do the full journey on their own, was 25%. Post-lockdown, we’ve already seen another 10% shift to direct fulfilment.”

Stangen also found itself well-positioned to operate from staff’s homes, due to all operations being cloud-based. The challenge then was addressing medical risk. Here, too, emerging technology came to the rescue.

“When we launched three years ago, we cut out full blood tests in terms of a medical underwriting process, and everything was done through an online health-based questionnaire and then only a small percentage of customers was sent for an HIV test based on a scorecard. When we couldn’t send out the travel nurses to go and do HIV tests, we launched an Express Life product, which cuts out the need for even an HIV test.”

Arthur Goldstuck is founder of World Wide Worx and editor-in-chief of Gadget.co.za. Follow him on Twitter and Instagram on @art2gee

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