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Ways Insurance Companies can Survive the Impact of COVID-19
Transforming existing business models before implementing digitization will assist companies in meeting the needs of next-generation users, customers, and business partners, as well as preparing for the next potential crisis
Fremont, CA: Insurers are judged based on their ability to handle claims during natural disasters, crises, and disruptions. This means that when life or business is disrupted, the implications for insurance companies are profound. In the case of COVID-19, insurers are declining payments for business disruption because properties were not damaged unless businesses have purchased pandemic insurance. Some states are also considering legislation to require insurers to cover COVID-19-related losses under business interruption policies.
As a result of these unprecedented circumstances, insurance companies must optimize costs, automate, and modernize in order to stay in business and increase shareholder and policyholder value.
Reduced Costs: Cost-cutting initiatives, which can be divided into short-, medium-, and long-term opportunities, will have an impact on every aspect of an insurance company. Look for quick hits in the short term (4–10 weeks) by negotiating a discount with suppliers and reviewing existing contracts, usage, as well as billing by software and network companies. Companies can implement a governance tool like GovernX® in the medium term (3 – 6 months) to manage all spend contracts and third-party risks. Not only do companies need more efficiency and visibility, but they also need to eliminate the labor-intensive operations that come with contract management right now. Consider renegotiating supplier contracts as well. Finally, in the long run, companies need to reconsider their service, software, and network providers, reduce their reliance on offshore resources and consider right-shoring as they work to automate and modernize their legacy systems. A new sourcing strategy could include a combination of 20 percent onshore, 20 percent automation, 30 percent nearshore, and 30 percent offshore.
Automation: Let's Consider automation in two parts: both short-term and long-term. In the short term, build use cases using existing tools to automate the current business model to the greatest extent possible. Companies can consider a support model that combines onshore and offshore operations, with a large percentage of employees working remotely as part of the exercise. Long-term, they can consider opportunities for digital automation by going beyond previously established use cases and reimagining future business models. Transforming existing business models before implementing digitization will assist companies in meeting the needs of next-generation users, customers, and business partners, as well as preparing for the next potential crisis.
Modernization: To date, the majority of modernization has been focused on front-end engagement systems. It is time to think about modernizing back-end legacy systems, also known as systems of record. By modernizing legacy systems, insurance companies will be able to create product innovations such as flexible premium and usage-based products, get them to market faster, and push "just in time" products. Customizations that have been built over time or embedded product rules are impediments to legacy system modernization, especially when they are unknown or when talent and technology are insufficient to decipher them. Companies can create strategies that take into account their products, distribution channel, customer base, culture, as well as organizational readiness for change to mitigate this risk. Looking at cost optimization options for their current business can be one of their funding modernization strategies.