Post COVID - Getting Back to Normal – React, Recover, Reinvent

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4 May 2020
Karlyn Carnahan

If you’re like me, you’re getting ‘COVID- cranky’. Days that start off just fine turn into crankiness quickly. Things that never bothered me suddenly do. On the one hand, I’m delighted to be home and not on an airplane. It’s the first year in a long time that I’ve been able to stay ahead of the aphids on my roses. But after two months of being at home under a shelter-in-place order, I’m REALLY ready to get back to normal – which of course, isn’t in the near term set of probabilities. There’s not much I can do to prepare for normal here at home. But insurers who are thinking about recovery have a lot of things to consider.

When this first began, most insurers were simply focused on the work needed to move to a work from home environment. Let’s call this the “React” phase. For some, this was relatively easy as they had already begun to enact practices that enabled work-from-home. Others had a harder time. From rapidly making equipment available, to assuring scalability of the VPN, CIOs were consumed with the basic set of activities necessary to keep their firm running and operational. This was no small task for most. But things that normally would have taken three months were done in a week... which of course, begs the question of how to continue this sense of urgency once this is over.

Once the initial flurry of activity was dealt with, the next set of realities most dealt with was reassessing priorities because of the economic realities of this virus. Carriers with heavy workers compensation books are being impacted by the loss of payroll. Commercial lines carriers, especially those with books of hospitality, travel, or entertainment have begun seeing businesses with lower revenue projections. And all insurers are waiting to see what actions the government might take to retroactively attach coverage to insurance policies that weren’t designed to cover this kind of exposure. We’ll call this the “Recover” phase.

About half the insurers have reviewed their budgets and most are looking at reducing IT budgets to try to control expenses. After all, if premium drops – even if losses drop with them, the expense ratio will increase unless steps are taken. So scenario planning activities are occurring at most insurers. They’re looking closely at the drivers of cost and how much is based on GPW and how much is fixed. They’re looking at the different projects and priorities and trying to consider the impact on expenses should they be postponed as well as the potential impact on revenue. They’re considering the long-term strategic impact of postponing projects as well as the short term hit. If you stop a project today – how easy will it be to start it up again in the future – and what can’t get done until this particular project is done. While most have told us that existing major projects are moving forward – those that haven’t started yet are being postponed while insurers stop to consider the various scenarios. And short-term projects are most likely to move forward only if there is a clear and certain impact on expenses.

But eventually, we’ll all get to go back to what will pass as normal. Insurers are in the early stages of thinking about what it will look like when it’s “over. I put that in quotes, because it’s not clear that this will ever really be over. But to move to that new normal as quickly as possible, insurers need to start thinking about what it will look like and preparing. There are several areas to start thinking about:

  • How do you bring employees back to the office? Or do you? Creating the capability of letting people work from home creates a flexibility that allows you to attract a lot more talent than you otherwise could as you’re no longer limited to those who are geographically proximate to the office. A number of insurers have told us that they are planning to retain a large level of work-from-home. Nationwide announced it pretty publicly. Insurers have found that productivity hasn’t suffered with work-from-home – in fact, it improved. Which begs the question - does an insurer need big buildings or call centers? Which roles can work well from home. Will it be an optional choice so that those employees who thrive in a more social setting can come to the office and those who prefer to work at home can do that as well
  • For those that do come back to the office- will you need to maintain social isolation? How many people will be allowed in the building at any one time? Will you need to build physical distance between employees? Will there be staggered hours to avoid contact? How will you handle restrooms and cafeterias? Should you consider testing employees
  • For those who continue to work at home, CIOs will need to assure the workers have stable, scalable and hardened infrastructure for remote access. What short term changes can you make to reduce expenses? Can you negotiate rate card reductions, stop maintenance for end of life applications, delay or avoid upgrades? Should you reduce working hours, put on a hiring freeze, accelerate retirements? Should you stop new hardware purchases or reduce the number of development environments?

The last phase is what we'll call “Reinvent”. Most crises spawn a flurry of new inventions. WWI resulted in zippers, teabags and daylight savings time.The great depression of the 30’s spawned the electric guitar, nylon, jet engines and the polaroid camera.9/11 resulted in translation software, backscatter X-rays and exo-skeletons.The 2008 housing crisis sparked Air BNB, solar shingles and smart thermostats.What will come out of COVID-19? While we can’t predict societal reinventions, we can predict areas for insurers to investigate for their own reinvention.

  • The focus on growth and retention will become intense. This has an asymmetrical impact on insurers as certain industries are more heavily impacted by the shrinkage in revenue. We’ll see competition intensify in some areas as insurers look to keep their revenues from shrinking. Will you need additional classes of risk to address what has changed in terms of people’s risk profiles and risk appetite? New underwriting standards? New pricing mechanisms? Will you need to modify business rules for STP?
  • How important will digital online channels be for policyholder self-service or agent self-service. Which of the existing projects will need to be accelerated – and what will need to drop or be postponed in order to free up capacity to move quickly on this?
  • Can you use data more effectively to assess someone’s risk profile for cross sell? To make self-service easier? To reduce the reliance on human beings for some decisions?
  • What permanent changes can you make to reduce expenses? Is now the time to consider outsourcing billing, payments, or print? Is it time to move to the cloud? Or is it time to move quickly at sunsetting older systems or automating business processes with RPA.,

I don’t know when things will get back to normal, although I’m sure, like me, you’re feeling antsy and hope it will be soon. But putting plans for recovery in place now that balance the need for cost containment with the need to invest for growth will position you for reinvention.

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