The Covid-19 pandemic has altered consumers' (individuals and businesses) perception of insurers, putting even more pressure on the industry to respond to issues that are considered priorities in the coming decades, points out an analysis by Moody's.
The recent dispute between insurers and policyholders over Covid-19-related Business Interruption (BI) coverage has highlighted the mismatch, putting the performance of many insurers below their customers' expectations. In this context, the financial ratings agency expects insurers in the EMEA region to focus on product innovation and protection against risks such as cybercrime, climate change and pandemic.
One of the challenges highlighted by analysts at Moody's Investors Service is how to meet the demand for protection against risks that are becoming more difficult to insure, while reducing the protection gap between total risk and insured risk. According to the rating agency, the pressure on the sector is expected to increase significantly over the next 30 years, as increasing weather risk makes it more and more expensive to insure properties in certain regions.
Another area that insurers are expected to pay attention to is the shift of customers to digital channels, and a possible increase in merger and acquisition activity. "Pandemic-related roadblocks have encouraged customers to interact digitally with their insurers, and we expect many to latch on to these new habits," Moody's maintains.
Pandemic affected insurance reputation
A recent survey by GlobalData, a British data and analytics company, shows a decline in the reputation of the insurance industry worldwide, largely as a result of the response insurance has made to the Covid-19 pandemic.
According to the survey results, one-third of respondents felt that their opinions of global insurers had worsened substantially due to the pandemic. Overall, a total of 41% felt that the reputation of insurers had worsened, while 31% indicated improvement.
"The pandemic has definitely been an extremely difficult situation for insurers. Claims on some lines have skyrocketed and many lines have become difficult to insure," considers Ben Carey-Evans, insurance analyst at GlobalData.
"What weighed most heavily on the industry's reputational damage were the legal disputes around business interruption claims" throughout 2020. "In the UK, for example, major insurers were taken to court by the Financial Conduct Authority (FCA) for refusing to pay claims," arguing that the pandemic was not covered by policies. "They eventually lost, but the dispute and the delay in payments will have caused some damage."
Other customers have had to battle to get coverage for travel or income protection, and it is likely that this has also helped to affect the industry's reputation.
"Consumer trust has always been a key issue for insurers (...). Therefore, they cannot afford to allow further damage to their reputation," Carey-Evans added.