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COVID-19: 5 key questions for insurers

Insurance Consulting and Technology
COVID 19 Coronavirus|Insurer Solutions|Risk Culture

By Alice Underwood | June 12, 2020

When we come out the other side of the COVID-19 crisis, we’ll have better, more flexible ways of working.

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About our COVID-19 coverage

In our ongoing coverage of the COVID-19 outbreak, experts from across Willis Towers Watson share insight into what you need to know to manage your business and employees and reduce your risk.

Individuals and businesses alike are now faced with the question of what the near future holds in a post-COVID-19 world. Reflecting that, I was recently asked to participate in a webinar panel discussion on that question from the perspective of insurers and, in particular, actuaries. Here are my thoughts on a few of the topics we discussed.

How well have insurers’ models done in helping them manage the impact of COVID-19, and what lessons can be learned?

Pandemic has been a key insurance risk scenario for a long time. While, for the most part, insurers’ business continuity plans are working, and their capital and solvency generally remain strong, the pandemic has shone a light on various areas for improvement. For example, very few business continuity plans contemplated shifting the entire workforce to remote working. And while most insurers with sound enterprise risk management programs will have contemplated a pandemic scenario, many property & casualty (P&C) insurers focused their scenario building on the claims side without also analyzing the wider economic impacts.

What do you think is a realistic worst-case scenario of insurance losses from the pandemic?

A recent white paper from Willis Towers Watson colleagues describes a “moderate” scenario (six months of social distancing) that could bring $32 billion of insured loss in the U.S. and U.K. P&C insurance market (including Lloyd’s). The “severe” scenario contemplates $80 billion in insured loss, primarily driven by business interruption and contingency coverages and U.S. workers compensation. Other lines of insurance, such as auto/motor, will see reduced claims due to people staying home.

How are actuaries helping during the pandemic so far?

Many actuaries have played important roles in helping to educate key stakeholders – businesses, governments and the wider public – about how to understand pandemic data and risk assessments. Our team in Italy, for example, has offered to support the government there with specific analysis – and members of our team in the U.K. are contributing to an actuarial initiative to inform the public about trends in the pandemic data and what can and cannot be concluded from these.

A unique complication of pandemic risk is that, unlike a hurricane or earthquake, it remains ongoing and it’s influenced by what we do. We all are the hurricane now: Our actions will affect the outcome, so it’s important to interpret forecasts through that lens. Over the coming months and years, as our global society moves through this crisis into recovery and resilience measures, actuaries will continue to contribute.

How do you see the government/insurer relationship changing?

There are always lessons to be learned after major events – many things changed in the insurance industry after September 11, 2001. Currently, many countries are debating the need for a pandemic backstop and what role insurers might play in that.

How well has the insurance sector adapted to changed working practices and what will be their lasting impact?

The “forced experiment” we’re living through has demonstrated the potential to better leverage flexible schedules, remote working and videoconferencing. It’s accelerating a lot of these trends that were already in play pre-COVID-19.

But we must also recognize that these are very stressful times – we are living through a devastating human tragedy and massive economic disruption, and our comfortable routines have been upended. People are working under new circumstances, often without the benefit of their normal support networks, and since home is the workplace it can be difficult to establish boundaries. At Willis Towers Watson we’re paying special attention to colleague wellbeing, including mental health. I’ve asked my team members to look out for their colleagues and reach out if someone seems to be struggling.

In some ways, since we’re connecting with one another in our homes, it’s a more personal environment. I think there’s increased recognition of the value of inclusion and diversity, and the various challenges that we all face. We’re digitally visiting the homes of our colleagues, clients and partners – meeting one another’s children and pets. And these days, it’s just as easy to work with colleagues from across the globe as colleagues from across town.

When we come out the other side of this, we’ll have found new and better ways of doing some things – it’s not going to all go back to the way it was before. I expect we’ll see much more flexibility in ways of working.

I do hope that, of the many lessons we’re learning from COVID-19, this greater humanization of our ways of working will be something that endures.

Author

Alice Underwood
Global Leader of Insurance Consulting and Technology

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