The year 2020 started with the same dynamics as 2019 for the insurance sector. January saw a certain increase in the percentage of projects and emissions per insurer. However, in February, at the same time that the health alert grew due to the increase in cases of coronavirus, the activity in the distribution of insurance decreased by 4% in emissions and 7% in projects.
March showed a significant reduction in activity since the 11th, when the WHO declared the coronavirus a global pandemic. Since then, the national insurance sector has invested around 50 million euros in collaborative projects to tackle the virus.
The funds have been used to help vulnerable groups, to purchase health equipment, to finance medical research projects and to provide support for health workers. All with the aim of facing the crisis in the best possible way and thinking about the prompt reactivation of the activity.
In addition to the insurers’ duty to collaborate at the social level, there is also the concern to protect the health and safety of employees and partners, while at the management level, the entrepreneurs try to maintain the continuity of their business.
This leads to other headaches for insurers, such as the economic stability of the company and its workforce, redirection to new emergency and response operating models, and a new set of safety protocols that can be adapted to the difficulties that may arise as the crisis continues to unfold.
The state of alarm has led to a decrease in the marketing of insurance, negatively affecting the insurance sector. According to the data, senior insurance executives agree that the drop in sales has been the aspect of the business that has suffered the most, followed by the financial situation (30%) and the increase in the accident rate (13%).
The main consequences of the Covid-19 in the insurance sector show differences according to the branches of business:
Depending on the size of the insurance company, it is clear that small brokerages have been most affected, with differences of up to 7% in projects and 8% in emissions. On a national level, the autonomous communities most affected have been Murcia, Valencia and Extremadura, which suffered reductions of over 60%. Among the communities that experienced a fall of less than 40% are Aragon, Asturias and Madrid.
According to data in this first quarter, the impact of Covid-19 on the insurance industry is probably deeper and broader than it currently appears, and could last until the third quarter or longer. As a result of the virus’ effects, global GDP growth in 2020 could drop by as much as 1%, from 3.3% to 2.3%, making recovery in 2021 unlikely.
According to estimates, a longer and more intensive outbreak could reduce global growth to only 1.5 per cent in 2020.
The new normality brings with it a new style of demand, and new opportunities for insurers to do business:
The evolution of the crisis forced companies to adopt new, more flexible and therefore more digital operating models. Many created their own model of the epidemic to anticipate the negative effects of the virus and design plans to respond more effectively in the long term.
The pandemic has accelerated the digital transformation of the insurance industry. The digital enterprise seeks to improve connectivity, automation and operational optimization of its processes. Efficient, digital companies conduct their planning, budgeting and financial forecasting in a simple and collaborative manner, paying special attention to the user and offering a global vision of the company.
Some of the main trends that have come to the industry and have been strengthened as a result of Covid-19 are:
A good example of the industry’s intention to adopt technology to accelerate digitization is the recent collaboration between MSG Life and Signaturit. The idea of the companies is to facilitate and speed up the process of electronic signature of documents, preserving the legal validity of the same. This will help improve the process of welcoming their new customers, which will become 100% digital and will take place in a matter of minutes, without any travel or added inconvenience to the user experience. At the same time, the electronic signature will reduce costs, optimizing the time spent and facilitating the centralization of information.
The insurance sector is prepared for a possible second wave of the Covid-19, and also foresees mergers between traditional companies and Insurtechs to facilitate digitalization by increasing the budget, and thus improve effectiveness and response capacity to the crisis. It is possible that entities already suffering from solvency problems will opt to merge with each other to become more competitive. At staffing level, a reduction and freezing of recruitment is expected. While the vast majority of projects are continuing as usual.
On the other hand, the reputation of insurance companies has improved thanks to the various social actions they have carried out during the pandemic.
In addition, clients are reconsidering how to make an appointment with a broker to take out a policy. These are times of social alienation. For this reason, among others, many have switched to 100% digital insurance companies, which represents a danger for traditional insurance companies that do not have a digital renewal plan, and at the same time shows a great business opportunity.