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  • Writer's pictureUpendra Belhe, Ph.D.

Some insurers say, "Use Analytics to Adapt to the New Normal or else ..."

The COVID-19 crisis is continuing to cause significant impact on the insurance industry. Many of the deep changes, some of which may be irreversible, are due to extended period of volatility, uncertainty and gloomy economic activity.

Commercial insurers are facing millions of claims by small businesses that want their insurers to cover their losses from COVID-19 lockdowns. As per the carriers, most of these claims are either unwarranted or specifically excluded because of exceptions. However, states are likely to force the insurance industry to provide retroactive coverage to policyholders, regardless of their insurance contracts. And with loss estimates for small businesses reaching as high as $383 billion a month, according to the American Property Casualty Insurance Association, both sides say they’re fighting a war for their very survival.

It is true that the long-term ramifications of COVID-19 on life insurance aren’t yet known. In the short to mid-term, it’s likely that the coronavirus will have a larger impact on people who are applying for a life insurance policy than those who already have a policy in place. Many life insurers are postponing application approval, if one has returned from travel outside of the U.S. within the last 30 days or have plans to travel abroad. Some life insurers are imposing restrictions for the customers, who are older or have certain medical conditions that might make them more susceptible to the coronavirus.

On the other hand, COVID-19 is reflecting on analytics capabilities. As stated in the recent McKinsey’s report [1], “Organizations are standing up analytics capabilities in a matter of weeks to inform business responses to COVID-19 challenges and prepare for the future.”

We are observing that forward looking insurers are already gearing up their analytics activity to face the dynamic business drivers stated above. Some of them are midsize companies and their stance reflects their belief in analytics as a life force towards their survival and growth rather than their investment capability.

The carriers using analytics to prepare to combat “new normal” business situation seem to be using one more of the following approaches:

  • Use data driven insights and empower the Business Enabling Teams to determine strategies as well as to drive "what-if" scenarios.

  • Understand most urgent tactical actions needed to be performed based on market data and organize to communicate action plan frequently.

  • Gather and share key observations about consumer confidence and commercial legal environment in non-insurance sector and internally discuss possible repercussions on the carrier performance

Not using analytics aggressively to adapt to the “New Normal” may not be an option for the insurers?

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