ECONOMIC SHOCK AND IMPLICATIONS
An acceleration of key trends in a COVID-19 world
By Georges Desvaux, AXA Group Chief Strategy & Business Development Officer
Group Chief Strategy & Business Development Officer, AXA
Before entering the COVID-19 crisis, the global insurance industry was in strong financial shape. Over the past ten years, (re)insurers had strengthened their balance sheets, driven in part by regulators. This makes me confident that we should not experience either a repeat of what happened to the banking sector in 2008-2009 or a dramatic business shift for the insurance industry. Our industry is proving to be resilient and able to fulfil the long-term needs of its policyholders and to contribute to society’s long-term health. The main effect of the crisis will be a sharp acceleration of some of the key trends already materialising before COVID-19. The most accelerated trend is the digitalisation of customer and distributor journeys – for insurers, it is no longer a should-have, but an absolute must-have. There is simply no alternative if they want to remain relevant in their markets and answer client needs for effective ‘phy-gital’ interactions. This does not mean switching to a pure online approach but complementing the human touch and expert advice of distributors and companies with remote tools and seamless digital, mobile-first, customer interactions to make our models more flexible.
"The most accelerated trend is the digitalisation of customer and distributor journeys – for insurers, it is no longer a should-have, but an absolute must-have."
This pandemic has also created greater awareness of risks, and therefore of the necessity and benefits of insurance. For example, COVID-19 has shown just how critical health protection and supplementary health insurance can be for individuals, in a context where we can expect a reallocation of resources in health between public and private sectors. This is partly because of pressure on public finances, but also because insurers are putting more emphasis on prevention through health services – largely deployed digitally. This greater risk awareness is also increasing among our corporate clients. When I speak to my colleagues in other industries, they all mention the need for higher resilience. Supply chains are a good example. They want to know – Where is my supply chain located? Where am I overexposed? – and often, corporates do not know the extent or nature of their risks. As we saw several years ago in the automotive industry, if you are a company relying on spare parts suppliers in areas in Thailand that happen to be subject to flooding, you can expect this one day to affect your factories in Europe or Japan. As a result, this crisis is increasing demand for new types of insurance, such as cyber, as well as for more mature insurance products. With the lockdown, even individuals are starting to worry about cyber risk. In parallel, business interruption covers will be more in demand in a context of uncertainty, and insurers will need to be transparent on what they can or cannot cover during pandemics or other exceptional risks. This need for innovation in risk coverage will also be needed in life and savings, where people want returns with security, a difficult balance in an era of low interest rates – more so with the economic crisis, so insurers are including more protection covers in their life and savings products.
“COVID-19 has shown just how critical health protection and supplementary health insurance can be for individuals, in a context where we can expect a reallocation of resources in health between public and private sectors...”
Last but not least, what this crisis has confirmed is that we need to go beyond traditional insurance – it is not about just insuring the risk anymore. What clients expect from insurers is that we assess, monitor, prevent. This means working closely with customers, first, to assess their risks; second, to monitor that risk over time, tracking any potential changes; third to take steps, where possible, to prevent the risk from materialising. If a problem does arise, we must make sure our customers are in a position to recover from that problem as quickly as possible. At AXA, this is what we have called our Payer to Partner strategy. Taking the example of health again, insurers need to provide additional services to customers that go beyond just covering the cost of treatment. Increasingly, customers recognize the importance of getting the care they want at the right place and time for them. To do that, they need advice and support – these days, health insurance should also be about lifestyle, wellness, mental health and access to the right doctors and hospitals. Likewise, healthcare is becoming a vital part of workplace benefits from employers. The COVID-19 crisis has taught customers that they can ask insurers to better support them, helping them to stay healthier for longer.
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- COVID-19 will accelerate the trend toward more online health, by Claudio Gienal
- In emerging countries, COVID speeds up telemedicine and interest in formal insurance, by Garance Wattez-Richard