3 minute read
Short-term insurance in a time of COVID-19
SIMON COLMAN Business Head: Digital and Financial Lines, SHA Risk Specialists (a division of Santam)
Each year, our organisation conducts a survey entitled The Specialist Risk Review among almost 1 000 businesses, both within and outside of the insurance sector. The purpose of the survey is to identify trends and changes across the risk landscape. The 2020 edition had a particular slant toward the impact of the COVID-19 pandemic.
It is common knowledge by now that almost every business sector was adversely affected by COVID-19 and the lockdowns. Tragically, 40% of respondents outside the insurance sector reported that their revenue had dropped by more than 26% and that they had to downsize their workforce as a result. Inside the insurance sector, 11% of brokers indicated that they had to downsize their teams. The intermediaries we spoke to also indicated that they’d had a drop of around 18% in revenues. This would largely have been attributed to commercial clients cancelling or reducing insurance spend during the pandemic. Brokers that serviced industries that had ground to a complete halt fared significantly worse, with some reporting revenue losses in excess of 50%.
Prior to March 2020, the insurance industry was largely comprised of office-based employees and most brokers reported that they’d been able to switch to remote working relatively easily. We noted a 50/50 split between the brokers who wanted to return to the office versus those who wanted to keep working remotely. A hybrid workplace does seem to be the middle-of-the-road solution that most will adopt during 2021.
52% of brokers indicated that their clients would be happy to continue to meet on virtual platforms after thepandemic, but we suspect this will largely be driven by customer behaviour in specific sectors. In our general business survey, 21% of respondents said they would not be looking to continue to work remotely. This pool of business owners is more than likely based in the service and manufacturing sector, where remote working may not be an option.
The pandemic accelerated the pace of technological development across all sectors but with this came an increased exposure to cybercrime. 16% of general businesses reported cyber-security problems during the lockdowns, with almost half of the incidents relating to ransomware or extortion. Clearly cyber criminals sought to capitalise on the confusion created by the rush to get up and running remotely. Within the broker environment, just over 8% of intermediaries reported a ransomware attack in 2020.
At SHA, we noted a spike in usage by brokers of our own digital platform, Pocket Underwriter, during 2020, as well as a significant increase in gross written premium income. It became evident that many brokers were using the digital tool during virtual meetings with customers. The strike rate (that’s the percentage of quotes that turn into policies) went from 34% to over 70% when the brokers were using the tool themselves (rather than with one of our underwriters). We attribute this success rate to the real-time ability to tailor coverage to suit the client’s risk profile and budget. Repeated meetings and multiple emails are avoided and we saw deals being concluded within 15 minutes, rather than hours.
We are expecting to see greater adoption of technology in the risk assessment and insurance procurement during 2021. While there aren’t many opportunities to find silver linings in the pandemic, we can acknowledge the advances brought about by accelerated digital transformation. We must, however, encourage security awareness around cybercrime and data privacy if we are to succeed in the long term.
