For centuries, major crises have reshaped societies, driving improvements and innovations that help them to better prepare going forwards. The insurance industry is no different. In 1666, the Great Fire of London led to the destruction of over 13,000 homes – but from those ashes arose the foundations of modern property insurance. Following the catastrophic 1906 San Francisco earthquakes, radical changes in assessing risk were made to create a more sustainable and resilient insurance sector that better-protected economies.
The Covid-19 pandemic is a cataclysmic event of even greater proportions, with devastating health impacts and, according to Bank of England predictions, the most profound economic shock for 300 years. Major businesses on the brink of collapse pre-Covid are now calling in the administrators; more robust companies are facing insolvency. The insurance industry is at the forefront of the crisis, and it needs to adapt to tackle the structural challenges that Covid-19 has presented; it can do so by adopting technology, and embracing the new world of ‘insurtech’.
Some insurers are supporting an increased digitisation of services; AXA PPP, for example, has embraced the enhanced use of virtual GP services. Younger insurance businesses are leveraging technology platforms to launch new products at pace, such as Digital Risks’ extension of unoccupied cover to protect empty premises (whilst staff are furloughed), or Zego’s rapid launch of a new insurance product for taxi drivers delivering fresh food to our doors during the lockdown.
Many existing insurtechs already offer highly flexible products and have thrived during the crisis – such as London-based By Miles, which has seen an unprecedented demand for its pay-as-you-go car insurance.
However, the crisis has resulted in a dramatic uptick in claims, which has put pressure on the industry when their capacity may be reduced due to remote working or sickness. There has also been frustration and confusion over whether business interruption policies cover pandemic circumstances. Customer trust is at stake, and the industry needs to respond quickly and efficiently to rebuild consumer confidence.
To deal with increased claims, insurtech Claim Technology has developed an AI tool to automate a wide range of low-value insurance claims on the cloud, allowing a chatbot to collect important claims information from customers. This is helping to reduce the temporary strain on important insurance sectors such as travel and health, and could be a quick win to simplify the claims process for consumers.
Time for change
Just as the 2008 financial crisis opened the doors for the agile fintech sector, so Covid-19 has challenged industries to adopt better ways of working. It is vital that the insurance industry realises that it is only by leveraging cutting edge technology that they will be able to best serve their customers in this new world.
The pandemic is the current challenge – but it sits atop many global, growing problems. Climate change is the most obvious, and it reaches beyond the problems caused by flooding and wildfires – it will affect international travel, business productivity, and our individual habits as we shift towards a carbon-neutral economy. With these changes come new risks, and the new challenge is for the insurance industry to embrace these through technology and innovation.
Insurers were already beginning to provide customers with greater flexibility in the types of policies they were offering, but the brisk adaptability that this pandemic threat has demanded would have been unimaginable without insurtech. What’s certain is that the insurance sector, like so many others, will be changed forever by the impact of Covid-19. Through innovation and adoption of technology, the insurance sector can respond to improve economic resilience and, ultimately, protect lives and livelihoods better.
Our Fintech sector growth programme is now open to insurtechs. Apply here.