How the pandemic will continue impacting the insurance industry

The world has changed forever since the pandemic hit. How will it continue to change the insurance industry?

BIG CHANGES

On March 25, the president of White Pigeon Mutual Insurance Association, Mark Knouse, moved most of his Wilton, Iowa, staff to work-from-home status after receiving a call that an employee’s spouse had coronavirus symptoms.

Knouse said his company was able to transition smoothly thanks to already having a little experience after moving an employee to working from home the previous year. “This is simplifying it, but it was like our IT people flipped a switch and were working from home,” Knouse said.

Grinnell Mutual had made the same decision, and on March 16, the company escalated its corporate response plan to the highest level, transitioning nearly 700 employees to work-from-home status.

There was some trepidation about how this change would affect Grinnell Mutual’s ability to conduct business while maintaining the required level of service. After all, employees now had to set up their own home office, deal with possible Internet limitations, and tackle family responsibilities as well as adjusting their workflow.

But it soon became clear that employees were thriving in the new environment. Customer service levels were maintained to the highest level of satisfaction, while the transaction backlog decreased to its lowest level in five years.

And because of Grinnell Mutual’s nearly seamless transition, the company is in the process of reworking its policies to allow employees greater flexibility in where they work.

A NEW ERA OF WORK

Even before the pandemic, employers were facing pressures to be more flexible. According to a November 2019 study by Gartner, a research and advisory firm, “the pressure for remote work has reached a tipping point, enabled by digital-collaboration native Generation Z entering the workforce, an increase in the availability of technology for virtual meetings and virtual collaboration, and the rise of coworking spaces.”

Kurt Eaves, vice president of Underwriting, Sales, and Service, said that one of the most valuable lessons learned from the pandemic is that “people can handle the flexibility of working from home and still get the job done.”

Not only that, they like it. Gartner found that post-pandemic, 53 percent of employees would like to continue to work remotely some or all of the time.

Matthew Schulte, director of the Strategic Insights department, which keeps abreast of trends and competitors, said that Grinnell Mutual is paying close attention to how other carriers are changing long-term work-from-home policies. “For example, Nationwide has decided to close several offices and transition some employees to permanent work-from-home status. As you look at the industry, some companies have already started to respond as it best meets their business needs.”

As for White Pigeon and its employees, they were able to return to the office in June. “It’s nice to know the option of working from home is available,” Knouse said, “but I think right now, we’re all pretty happy to be back here in the office.”

GO DIGITAL OR GO HOME

For insurance companies, the ability to serve customers through electronic means is one of the critical make-or-breaks during this time.

Steve Naught of Naught-Naught Insurance Agency in Eldon, Missouri, said that customers have changed their feelings about physical documents. “Electronic proposals, applications, policies, and other documents continue to become more prevalent than paper versions.”

Jeff Menary, Grinnell Mutual’s president and CEO, said that as states’ stay-at-home mandates continue to fluctuate, there will be an increase in online insurance interactions. “It won’t affect all areas and lines of businesses at the same time, but we will have to be ready for that,” he said.

While doing business online offers plenty of advantages, it’s not without risk. Knouse worries that as more processes move online, it could impact the security of his company’s documents and records. “I feel like we have a pretty good grasp on our security, but that just seems to be a constantly changing field. If we’ve got employees working from home and their computers are vulnerable, that can present a risk.”

Knouse is not the only one with this concern. A July survey by Chubb found that 46 percent of Americans are concerned about cyber security while using tools to work remotely — and nearly 50 percent said they had used their personal devices to conduct business.

UPDATING OUR TOOLS

The way business is conducted isn’t the only thing that’s changed these past months. “As a company, it’s going to be very important for us to pay attention to how customers change their behaviors in response to what we’ve gone through in the last several months,” Schulte said.

For insurers, that can mean refocusing on telematics, granular pricing, and electronic estimates.

For example, Grinnell Mutual introduced Easy Estimate, a photo-based estimating tool for auto claims, earlier this year and it has reduced the claims cycle for users by 10 days. Claimants and physical damage appraisers never have to meet in person — a clear win to keep business running efficiently as the pandemic continues.

Eaves also credits Grinnell Mutual’s ongoing implementation of its new state-of-the-art software platform with helping the company be able to cope with the pandemic with minimal disruption. “I think we're early in the game for moving towards a more digitalized workflow and experience, and we're going to be glad we were.”

LITIGATION AND NEW PRODUCTS

Perhaps one of the most significant issues for the industry in the COVID-19 era has been with business interruption insurance. According to the University of Pennsylvania, over 870 COVID-19 business interruption insurance coverage lawsuits had been filed as of Aug. 19.

Eaves said that while legal decisions are pending on the scope of business interruption coverage, he believes that the impact could be dire if the courts rule in favor of such claimants. “It could bankrupt the industry, and without insurance, commerce would stop. So that would be the ‘zombie apocalypse’ result, which I don't think will happen.”

Insurance trade groups agree. In April, organizations such as NAMIC, BIG, APCIA, RAA, and CIAB, wrote a group letter to the U.S. House of Representatives that “...recent estimates show that business continuity losses just for small businesses of 100 employees or fewer could amount to between $220 billion to $383 billion per month. Meanwhile, the total surplus for all of the U.S. home, auto, and business insurers combined to pay all future losses is only $800 billion.”

Naught believes that as a result of pandemic, insurers may add exclusions, and he and Eaves agree that some insurers will add products related to pandemic risks in the future. But, “It will probably be a very pricey product,” Eaves said.

THE LONG-TAIL IMPACT OF COVID-19

In March, the APCIA and Verisk reported that the property-casualty insurance industry had suffered its largest-ever drop in surplus — from a record-high of $847 billion down to $771 billion.

Small businesses are closing at an alarming rate. In July, 55 percent of all businesses on Yelp shut down — for good. Despite the Paycheck Protection Program (PPP) providing capital assistance to businesses, over one fifth of borrowers still expect to lay off one or more employees after using up their loan, according to a July survey by the National Federation of Independent Business Research Center.

“Insurance is a lagging indicator because a lot of the changes that have already happened don't affect us financially until several months down the road,” Eaves said. “For example, with workers’ compensation, one of the things we've seen is that there will be an impact on written premiums due to furloughed employees. That will come out in premium audits.”

ONE THING THAT WON’T CHANGE

Despite all the new changes in technology, behaviors, lifestyles, and laws, everyone agrees that to thrive in a post-pandemic world, there is one thing companies must do: focus on serving their policyholders, agents, mutuals, and their employees.

“We need to think about business through other viewpoints in addition to our own,” said Schulte. “What we do will be driven by our customers’ needs and how we can best support them as those needs change.”

Naught said that many people are more protective of their time than ever. “With the changes in attitudes and environment, delivering a positive customer experience is essential.”

In order to do that, companies will need to stay ahead of the curve on technology and adapt to change as it comes.

Knouse believes that means the Grinnell Mutual and its mutual members will need to stick together. “Just because of the fact that things are changing so quickly, sharing information and skillsets helps us all,” Knouse said.

Eaves hopes that in the end, people will see and understand that the insurance industry honored its contracts and protected people’s assets, incomes, and livelihoods for the perils they were insured against. “And that we didn't let our customers down when they needed us.”

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