Oct 2020

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A push towards industry innovation

Source: Middle East Insurance Review | Aug 2020

COVID-19 may catalyse industry innovation, including long-overdue improvements in customer experience and personalisation, and collaboration platforms used by insurers who recognise the need to transform.
Adil Abid, Partner, KPMG Lower Gulf
How has the pandemic affected the Middle East insurance business so far?
Considering many policies were renewed during 4Q2019 and 1Q2020, insurers’ underwriting revenues were largely protected at the start of the year. Solid year-on-year results for medical and motor businesses have resulted in positive underwriting results for insurers. Effective business continuity plans ensured most insurers functioned without significant disruption under lockdown. 
Renewals are likely to start declining in 4Q2020, continuing into 2021. Property, casualty and commercial insurers are expected to face higher claim incidence with varying severity. As most policies exclude exposure to pandemics, they are unlikely to settle business disruption-related claims. This may result in protracted negotiations, with potential litigation as businesses try to recoup lost revenues and profits.
With large numbers of customers potentially disappearing overnight, insurers may have to compete against each other to retain existing customers and attract new business considering the lowered business volumes. 
From an actuarial perspective, where a company relies on past trends to predict future events, estimating IBNR may be difficult as the frequency of claims has dropped to unprecedented levels across most businesses. Additionally, pricing both new and renewable business where only claims data is available for the past year will be challenging, considering past events will not necessarily dictate future performance.
Is the sector doing enough to manage the fallout from the pandemic? 
When determining obligations, insurers evaluate the extent of coverage and the impact of exclusions and limitations, including any new directives requiring insurers to provide coverage or incur claims for events not typically covered. Regulators may pressure insurers to cover such claims, regardless of policy exclusions – as seen in Europe and North America. For the Middle East, it is still a wait-and-see approach. Auto insurers have experienced increased pressure from regulators to provide premium reductions or policy extensions, stemming from the mandatory lockdown. 
What are some of the lessons learnt from this crisis? 
COVID-19 may catalyse industry innovation, including long-overdue improvements in customer experience and personalisation, and collaboration platforms used by insurers who recognise the need to transform. 
Increased claims from COVID-19 may potentially amplify complexities in claims handling for health insurers, including delayed claim reporting by health providers. Many hospitals may increase costs, borne by the insurer. Delayed treatments and postponed elective surgeries, rescheduled once restrictions ease, may increase insurers’ healthcare expenditures. Hence, health insurers should consider additional controls to ensure claims are valid in the current environment and increase premiums related to future coverage. 
On the operational side, remote work has led some insurers to reconsider office space requirements and revisit business costs. 
How can the sector emerge stronger after the crisis?
Perhaps the most significant changes will be in how insurance products are sold and serviced, including use of customer data. Having long struggled with the fact that insurance is not as personalised as other products, insurers may need to review their channel strategy approaches to serve this demand. This may entail greater investment in integrating channels and creating end-to-end digital pathways. A renewed focus on efficient internal processes will drive automation, e-workflows and AI.
The growth of telehealth services may lead to wider coverage under health policies going forward. M 
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