Insurers continue to face revenue and cost pressures related to COVID-19, but it’s not all gloomy news. Let’s remember this is an economic crisis—not a financial one.
While the insurance industry is financially sound, the current economic challenges will require insures to respond by finding new revenue opportunities and smart ways to reduce costs. As we note in our report, Strategic Plays for Recession Recovery, the most likely scenarios would have this recession last anywhere from 8 to 24 months.
Retain customers to grow revenue
Many insurers are now seeking to grow revenue by rolling-out new products and services and moving prospecting and sales to digital channels. Amid these shifts, it is crucial that insurance companies keep their focus on their unique areas of competitive advantage and on retaining their existing customers.
On the personal lines side, existing customers represent the vast majority of business for most insurers. These customers will expect experiences that make renewal simple and seamless. A clunky customer experience may send them searching for a more satisfying experience elsewhere.
The best insurers will also be looking for ways to signal to their customers that they understand the struggles that many continue to face. Providing customer-friendly offers, such as the rebates to those who are driving less, may help with customer retention and defend the insurer’s top-line revenue.
Control costs through structural change
When economic news looks bad, the response is often to cut costs fast and deep without considering long-term impacts. Instead, insurers will want to look at structural cost reduction levers such as third-party spend, elimination of legacy tech debt and organizational and operating model changes.
The pandemic forced enormous and sudden operational changes as companies went to remote workforce operations. Many insurers experienced difficulties with those operational configurations in the process. As a result, operational risk and resilience have become major topics in cost reduction conversations with our insurance clients.
Whatever the cost control approach an insurer may take, it must be implemented without sacrificing customer experience and jeopardizing customer retention. In digital channels, competitors offering a more seamless and satisfying digital experience will only be a swipe away.