COVID-19 & The Insurance Industry! What are the Biggest Challenges?
Coronavirus is a massive challenge to humanity that is not only making things complicated for human sustenance but also the worldwide economy. The insurance industry is one industry that has been impacted the most by COVID-19 and let us know from some industry experts as to what all challenges they are facing presently.
1. Dealing with a Bulk of Customer Calls
Alexis Feinberg, Senior Account Executive | Matter Communications
One challenge you may want to consider for your story is that right now, insurance companies are being hit with a surge in customer calls-from issues surrounding healthcare bills to concerns about auto payments. The number is staggering: hold times during COVID-19 have ballooned by as much as 38%. Dealing with longer hold times means more frustrated (and often angry) customers. So how can insurance companies balance handling huge numbers of customer inquiries while keeping customers happy?
The answer lies in the right combination of training and technology. More specifically, insurance companies should be strategic about training and which technology they select because:
- A well-trained representative is much more valuable-they personalize the customer experience, which will resolve issues faster and with better customer satisfaction
- AI-based technology can help automate simple tasks, which allows representatives to spend the bulk of their time helping customers
This game-changing combination will ultimately help with the volume of customer calls while giving representatives the support they need.
2. Medical Underwriting has become a lot Complicated
Heidi Mertlich | No Physical Term Life
Due to stay-at-home mandates most states have in place to varying degrees, medical underwriting has become difficult, in not impossible in many cases.
As a result, life insurance applications have been delayed. Some carriers
are turning towards no exam life insurance underwriting.
Several carriers have severely restricted the ages of potential applicants. For instance, a large number of life insurers won’t even accept life applications for clients over the age of 70. Furthermore, your application may also not be accepted if you’re 60 or older with certain health conditions.
There are still a few carriers that will write policies on these people, however, it certainly limits the universe of carriers that an independent agency would normally have access to.
3. Not Investing in Enrollment Technology
Adam Hyers, President at Hyers and Associates, Inc.
There are several challenges to our industry right now. One is that many insurance carriers are behind in rolling out enrollment technology. So, many insurance transactions have been face-to-face through the years that many companies did not invest in this technology. Now that we can’t meet with our clients, it’s difficult to finalize some insurance purchases. Mailing mounds of paperwork back and forth for a life or annuity policy is not easy for some consumers. And many don’t want to visit the post office.
On the group health insurance side, there are many smaller companies that have temporarily shut down. They are trying to keep their employees on payroll while also maintaining their health insurance coverage, but that’s even difficult for some. The last thing they want to do is to drop a plan and then try to reconstitute it later. Many of the insurance companies are deferring premiums, but it’s been difficult to work through this on the fly.
4. Prior-Authorization Request Elimination is making Customers Irritated
Our healthcare system is currently overwhelmed. In response to the influx of new claims, insurance companies have altered their normal workflows in order to expedite processing. Many no longer require prior-authorization requests. While, in theory, this eliminates a step toward getting medical equipment covered for a patient, if you’re an out-of-network company or you bill under a miscellaneous code, we’ve seen claims that normally would’ve been approved get denied over the last two months. Why? Insurance companies still largely rely on outsourced customer service call centers and representatives who have limited access or decision making power during the claims process.
Previously, a prior-authorization request from an out-of-network company could’ve been supplemented by a gap except for a request. By providing insurance companies with supporting evidence – from a medical letter of necessity to the doctor’s chart notes – we’ve traditionally been able to get our durable medical equipment covered for patients. However, with the elimination of the prior-authorization step, insurance companies are immediately (almost automatically) denying out-of-network or miscellaneous claims. This has obviously been frustrating for patients who are counting on their insurance to cover their medical supplies and services.
5. Insurers are Struggling with the Adoption of Technology
Shawn Plummer | The Annuity Expert
From my perspective, agents are not sure how to conduct their business virtually in an efficient manner. I see them starting from scratch in terms of marketing, communication, and processing new business electronically.
They’re going from paper applications and dinner seminars to figuring out to market virtually via the internet or digital marketing. I see insurance companies scrambling to figure out how agents and advisors should market themselves in a compliant way, and process new business virtually at the same time.
My recommendation for insurance companies is to develop agent-assigned affiliate landing pages or portals that they can send to their clients to fill out applications directly. Some insurance industries have adopted this method, while others are slow to catch up.
6. No Sharing of Space with Roofing Contractors
Jonathan Abramson | Metro City Roofing Denver
Our sales professionals typically meet with insurance adjusters at a customer’s property and are on a roof together during the insurance adjuster’s inspection. Once an insurance claim is approved, we work to settle each insurance claim with a supplement process.
Since COVID-19, insurance companies have established new processes where they cannot meet with roofing contractors on a roof together. Depending on the insurance company, policy prohibits a contractor to be present, share the same ladder. We had one insurance adjuster in Loveland who required the homeowner to be out of the house 1 hour ahead of the inspection so no recent air breathed could escape through a vent while the adjuster was on the roof.
On another recent Denver insurance claim, we were asked to arrive 1 hour ahead of the insurance inspection and mark the roof with sidewalk chalk, so when the adjuster arrives, she could immediately see where we believe there is hail damage. Once we’ve marked the roof, we needed to get off the roof, remove our ladder, and wait in the car.
7. Increased Claims leading to Financial Disruptions
Anna Barker, Logical Dollar
One of the biggest challenges facing the insurance industry at the moment is *in relation to their liquidity*. Much like companies in most other industries, these are particularly challenging times from a financial perspective.
Unlike other companies, however, *this isn’t an issue that insurance companies have historically had to face in light of their business model* of receiving premiums upfront and being able to invest these funds in preparation for any payouts.
*The dip in the market also coincides with a significant increase in claims*, including medical, life insurance and, where applicable, business interruption claims. *This further contributes to issues of financial viability*.
*Insurers will thus have to take similar financial steps that other companies are now facing*, including canceling dividend payouts and reducing operating costs – which may, unfortunately, mean that the insurance industry could be the next one to start to see staff layoffs.
8. Pandemic Claims may Lead to Bankruptcies
Being in the insurance industry (as an Independent Agency Owner), I’ve learned, or should I say had it reaffirmed, that while most commercial insurance buyers understood the fact that Pandemic/Virus “claims” are basically not covered, some see it as an attempt by insurance companies to not cover claims, “just because.” Technically, all property policies exclude (do not cover) such claims, and there’s not another source or method to buy the coverage. The same exclusionary language exists for flood, and yet flood is almost always available and usually reasonably priced; however, the number of flood policies purchased each year falls woefully short.
So, which calamity would you have bet on to wreak havoc in the U.S.? If you were offered Pandemic/Virus coverage last year, would you have laughed it off like being offered Volcano coverage?
While there aren’t many reports out yet to determine the dollar value of what would be considered covered Pandemic/Virus claims, most guesses are that it would have eclipsed the trillions that the Federal Government expended and would have caused widespread bankruptcies in the insurance industry.
The premiums currently and historically charged for property coverage contemplates known perils (fire, wind, etc.) and without calculating and charging for the potential expense of paying an excluded item such as Pandemic/Virus, it would cause the widespread, if not total devastation, in the insurance and financial markets.
9. Client Acquisition and Retention
As the owner of a small independent insurance agency, I feel the two biggest challenges in the insurance industry associated with COVID-19 are likely the same, or similar, challenges faced in other industries at this time as well-
- First, how to obtain new clients when people are unemployed, financially hurting, and looking to more immediate needs and benefits
- Second, with revenue decreasing as a result of business slowing down, how to retain and pay current employees.
However, as business slows, small business owners now have a great opportunity to spend time thinking, innovating, and planning for the future. COVID-19 will not keep business down forever, but it will change industries, consumer interests and desires, and how transactions occur. As a result, by spending time looking to the future through careful study, planning, and continuing to invest in their business, small business owners will be able to both survive the current circumstances and come out better as a result.
10. Absence of Physical Communication is making Everything Difficult
My company works specifically with Medicare Supplement insurance plans. Because we serve the segment of the population that is, arguably, the most affected by the COVID-19 disruption, we have faced both major challenges and major opportunities as a result of the current crisis. The biggest challenges for us are the ability to meet with clients in a face-to-face setting – this has gone away for the time being due to the virus.
Everything we do has moved to online and phone meetings. Additionally, there are the psychological challenges of dealing with a population that is anxious about the potential contraction of the virus. We have fielded more phone calls than ever from clients concerned about the impact on them of this virus. At the same time, this has represented opportunity as more and more people in this age group are taking their needs seriously for optimal health insurance coverage and pursuing plans that limit their financial exposure to out of pocket costs should they need medical care due to the virus or other illnesses.
11. Multiple Challenges associated with Reopening
The impact of COVID-19, from an insurance perspective, is changing daily for business owners. There were a series of challenges over the last 8 weeks. The most current involves understanding their obligations to their employees and customers as they begin the phase of reopening.
The primary exposures are liability, worker’s compensation, and employment practices liability. The business owner must understand what measures they are required to take in order to protect the general public, how to address employees returning to work.
From a Worker’s Compensation and HR perspective, how does the employer deal with an employee who is afraid to return to work? What happens if an employee contracts COVID-19 during the course of their work? Has the business owner followed all safety rules?
12. Refining and Re-defining the Insurance Processes
There is zero doubt that Covid-19 is changing every aspect of the world as we know it. It is changing the insurance industry as a whole.
Just about every insurance company is going remote. While this is just a small piece of the puzzle, it could have big ramifications. For example, Nationwide has announced that they consider continuing to have remote employees even after the pandemic is over. This could potentially leave many commercial buildings vacant.
In addition, life insurance carriers are revisiting their guidelines when approving coverage. As an agent, it is interesting to me to see how fast the industry is shifting. Most carriers we represent, have made adjustments to their underwriting, and have added additional Covid-19 questionnaires.
In addition, life insurance companies will be paying close attention to the illustrated rate of return on the illustration of their permanent insurance policies. Also, many of the traditional annuity seminars or informal dinners have been canceled and are replaced with virtual meetings and webinars. This is just a small sample of the metamorphose the industry is experiencing.
On the business insurance side, people will be paying close attention to their policies. Many policies do not provide interruption of business due to declared pandemic. Unfortunately, businesses forced to close were left with no help. As of now, I am not aware of any major shifts in the personal line insurance policies such as auto and homeowners insurance.
13. A Plethora of Internal and External Challenges to Deal With
Doug Groves, Principal | Program Insurance Group
Major challenges for business opening back up after COVID-19:
- Making sure customers are ready to visit your operation.
- Making sure your operation is safe and following CDC guidelines.
- Making sure your employees are safe and comfortable and trained.
- Patience with all.
- You are not going to rush customers, employees or suppliers, patience.
That is the way we are answering questions to clients around the country. Different kinds of businesses might have a few different concerns, and a visit with an insurance professional is always in order. We have stayed in touch with our clients and are wishing everyone to get open as soon as you can meet the above requirements.
Five types of insurance are critical through COVID-19 and in any crisis:
- Property Insurance
- Liability Insurance
- Employment Practices Liability Insurance
- Workers’ Compensation
- Automobile Insurance
14. Dealing with the Rising Cyber Threats
Jack Kudale, Founder & CEO of Cowbell Cyber
COVID-19 challenges for the insurance industry go beyond business interruption claims, with a rapid shift in the risks and exposures that cyber policies might have been designed to cover.
For example, businesses with work-from-home employees have a completely different cyber risk profile than what their security efforts might have prepared them for and face increased cyber exposure. Brick and mortar companies have started to transact online opening their business to cyber threats. Email scams related to COVID-19 are targeting relief operations.
One imperative for both policyholders and insurers is to review existing policies and evaluate whether they address the new threat landscape. This is also a good time to consider standalone cyber insurance options to get clarity over coverages, limits, as well as protection from new threats, including social engineering and ransomware.
15. Travel Insurance Claims have become Complex than Before
Travel Insurance has been particularly hit with COVID-19 claims. Not only from a trip cancellation standpoint- but a medical coverage standpoint as well! If you look at the market, most international companies have withdrawn or will withdraw Cancel for Any Reason Coverage, and moreover, you will probably see a do-away with $15 – $45 policies, which have become the norm.
The post-Covid-19 environment will see either rates rise, policy coverage more restrictive, or withdrawals itself from the market. INF stands by our members- providing travel medical coverage for Covid-19 sicknesses.
16. The Travel Industry is at the Receiving End during COVID-19 Crisis
Judith Segaloff | K2 Global Communications
Travel insurance can certainly claim a prime spot among the industries taking a particularly large hit due to the COVID-19 crisis. The Association of British Insurers (ABI) expects travel insurers to receive 400,000 COVID-19-related claims, resulting in £275 million in cancelation and disruption payments to customers – almost twice as much as the previous record of £148m back in 2010.
To date, more than 30 insurers have temporarily stopped selling travel insurance, and a further 19 have altered their policies to exclude coronavirus-related claims as well as future pandemics.
Yet the future might not be so bleak for insurance companies.
Firstly, we expect to see a general increase in appetite for travel insurance. We will be particularly wary of having our holiday plans canceled or of experiencing health problems abroad without appropriate medical coverage. Secondly, we anticipate seeing a significant change in the coverage offered by travel insurance.
Insurers should start using services, enabling sick or injured travelers to seek help from a network of qualified and vetted medical professionals. At Air Doctor, we tested this model with the Phoenix Insurance company, with stellar results. Overall, we observed a 30% increase in traveler’s health insurance revenues, coupled with a 14% reduction in medical visits claim costs. The numbers speak for themselves: integrating such services can be a game-changer for travel insurers.
COVID-19 brought the world of travel insurance on the edge of change. Time for insurers to adapt and thrive!
17. Retaining Customer Trust is becoming Tough
Being an owner of an insurance brokerage company, I’ve had discussions with many companies. Based on that, here’s my assessment of the challenge the sector is facing: Lack of Trust.
This is a big reason why many people are hesitant about entrusting insurance companies with hard-earned money. This lack of trust can be attributed to the malpractices of some corrupt insurance firms that fail to pay claims to their customers, besides not being transparent in disclosing the benefits and offers they can leverage.
Some people even classify insurance companies as a financial burden. Owing to these challenges, many insurance firms have had to shut down. The customers
who have suffered losses at the hands of such players are reluctant to purchase insurance policies again in their life.
To overcome this challenge and inspire trust among their potential customers, insurance companies are now focusing on consistent communication via different channels such as social media, emails, and text messages.
18. Delayed Insurance Coverage Purchases due to Social Distancing
James Pollard | The Advisor Coach LLC
One of the biggest changes is that a lot of people don’t want to have a nurse come into their home to give them a medical exam. Thus, a lot of people are either delaying insurance purchases or opting for insurance without a medical exam, which can be significantly more expensive.
Other than that, insurance agents have been doing a lot more virtual work. Some love it, and some hate it, but I’m confident that the industry will adapt over time.
19. Rising COVID-19 Claims and Complex Documentation are Leading to Errors
We are seeing an alarming number of business insurance claims being filed from local business owners negatively affected by COVID-19. In major metropolitan cities such as Los Angeles, there are thousands of these claims that are being immediately denied by insurance companies due to the misreading of policy terms by their adjusters.
There are more than 6,000 insurance companies currently dealing with the economic fallout of COVID-19. A typical insurance policy is anywhere between 550-600 pages. With highly complex documentation like this, it’s common for these claims to be wrongfully denied, leaving business owners at a major loss and at risk of even further damages. One of the most vital pieces of our society is being left out to dry when they need assistance now more than ever, as they are forced to either accept the loss or take up the fight in court.
Well, this clearly lets us know that it is not just one challenge but multiple challenges in the form of rising claims, technology adoption, increasing customer queries, etc., that the insurers are facing in the present COVID-19 scenario. Every insurer is trying its best to quickly adapt to digitalization and make the best use of available resources to retain and acquire clients.
However, a lot of processes, especially the back-office ones, are making things complicated for insurers owing to a lack of staff, expertise in using technology, and more. So, what should insurers do about this? The best way to deal with this challenge is to collaborate with one of the top insurance outsourcing companies. This will help insurers in freeing themselves from back-office management chores and instead focus on prime tasks.
Meet Insurance Support World, a renowned insurance outsourcing company worldwide providing quality back-office support to firms for more than 12 years. Start a free trial by getting in touch today itself!
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