The COVID-19 pandemic and its rapid spread has broad-ranging impacts on Life and Annuity insurers. While the need of the hour for insurers is to device an immediate tactical response to the situation, it is critical to have a robust plan to address the mid/long term implications. With that context, let us look at the key impact areas and strategic imperatives that will help insurers stay strong during and post this global crisis.
Immediate impact areas and ways to address
As the pandemic spreads at an unprecedented rate it is critical for insurers to quickly put together a support ecosystem to ensure the safety of their employees while ensuring business continuity with minimal disruptions to customer experience. The following key focus areas will help insurers address the immediate impacts.
Medium to long-term impacts and ways to address
According to Insurance Information Institute (III), COVID-19’s impact on global growth and the insurance industry could last well into Q3 and beyond. III also highlights that the impact of this pandemic “could reduce global GDP growth from 3.3% to 2.3% and delay recovery by up to 12 months”. This will lead to a lower premium growth. Owing to the prolonged impact of the virus, high mortality rates would lead to an increase in Claims payouts. To make things worse, lower interest rates and volatility in the equity markets will hit the bottom line for the insurers. In order to ensure a safe exit from the current crisis, and remain competitive, insurers should start preparing for their recovery journey. Some critical considerations that would help in their recovery journey are:
The proactive way forward
In summary, the rapid spread of the virus and the resulting consequences will need insurers to respond really fast to the new market reality. They have to not only focus on sustaining their business as usual but also prepare for the “new normal” once the situation gets better. To remain successful in the market, the guiding principle should be to ensure financial stability while minimizing any customer experience impact.
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