COVID-19 may prove to be a disruptive catalyst for the sector – pushing insurers to reframe their strategic priorities.
COVID-19 has had a major impact on societies, economies and businesses across the Middle East over the last few months. Whilst there are ongoing debates on the recovery scenarios, potential risks of a second wave, and how long it will take for the Middle East economies to recover fully, there are a number of takeaways for insurers in the region as we navigate the new normal.
The Middle East insurance industry showed its true resilience in dealing with the crisis by living up to the challenges and meeting expectations of the insured population – corporate and retail clients alike. Most of the insurers were quick off the blocks with their business continuity plans and remote working, ensuring the most critical parts of the business were continuing as usual, ie, policies being renewed and issued, claims being settled, and client queries being addressed. The sector also contributed towards the social responsibility causes, where some insurers doubled medical benefits for frontline healthcare workers treating COVID-19 patients, whilst others offered free extension to motor policies and other coverage. Goodwill gestures such as these help reshape and improve public perception of insurers.
Having said this, the crisis has also highlighted some key challenges for insurers. As the lockdown eases and economies enter the new normal, there is a lot that insurers have to think through. The list is long and overwhelming, running through the entire value chain across the front, middle, and back offices. More importantly, the change in the buying behaviour and client expectations requires deep-rooted changes in how insurers serve and interact with their customers.
Even in the pre-COVID-19 era, the growth rates in many of the Middle East insurance markets have been subdued over the last few years, primarily due to the slowdown in the economy and lower oil prices. On the supply side, the industry continued to face the issue of fragmentation and lack of scale, resulting in ever-increasing challenges around profitability. COVID-19 has just compounded the urgency on the need for action to address some of the strategic priorities.
Expected increase in penetration and demand
As a strong endorsement for the industry, COVID-19 has brought the role of insurers and the importance of insurance to the public’s attention. Besides underlining the role of health, travel, and other standard insurance products, it is widely expected that the need and importance of life insurance and savings products, involuntary loss of employment cover, credit shield, and other similar coverage would gain fundamental ground post-crisis.
From a corporate standpoint, the demand for coverage around business interruption, cyber, export credit, and other similar benefits is expected to increase.
Besides dictating how, where, through whom and what they buy, customers will demand a lot more features, riders, and optional coverage. These would require insurers to respond with flexibility, some of which might even test and require changes in regulations.
There are a number of tech-enabled COVID-19 responses that are transforming the industry. We are already witnessing the exponential increase in the adoption and usage of telehealth (USA), zero touch virtual selling (APAC), replacement of wet signatures with digital signatures (global), digital KYC (UAE), among others. This momentum is expected to continue and reshape the insurance industry.
COVID-19 may prove to be a disruptive catalyst for the insurance industry, where insurers will have to start thinking out of the box and challenge the status quo. Consolidation, digitalisation, re-engineering of operating models, cost optimisation, capital efficiency, new revenue streams and business models built around alliances and partnerships are a few of the strategic priorities insurers will have to evaluate carefully to navigate this difficult period and stay relevant in the post-COVID-19 era. M