Can Covid-19 Be a Catalyst for Positive Change in the Insurance Industry?
18-May-20
Can Covid-19 Be a Catalyst for Positive Change in the Insurance Industry? Aside from the devastating human health cost of Covid-19, the pandemic has been a disaster for many businesses and for the economy, with the UK GDP reported as being down by 3.9% last month.[i] With regards to the insurance sector, Keith Buckley of Fitch Ratings points out that Covid-19 has delivered a two-pronged attack on the industry; with investments potentially suffering, as well as the increased claims caused by Covid-19 related losses. [ii] The Association of British Insurers estimates that a total of around 1.2 billion pounds will be paid in compensation in the wake of the Covid-19 pandemic. 75% of this will cover business interruption.[iii] While this all paints a rather bleak picture, it is important to also look at the positive lessons and outcomes that can be taken from these difficult circumstances. It is possible for the insurance industry to come out of this difficult period stronger and more robust, ready to face new challenges as never before. A time to change The insurance industry has survived catastrophic events before, forcing changes that have built huge new insurance giants. Take the devastating Hurricane Andrew that Florida experienced in 1992; this disaster led to a demand for insurance companies to evidence an ability to survive a “one in 100 year” disaster. At the time, there was no way to do this kind of modelling, which led to the beginning of AIR world-wide (now part of Verisk) and RMS. These companies still dominate the world stage in terms of risk modelling for large scale catastrophes. [iv] For years now, the insurance industry has been resisting change. Small tech start-ups have been battling to move the industry forwards, but the change has been too slow to keep up with the swift advances made by other industries. Perhaps this difficult time will be a catalyst for the insurance industry to catch up to other sectors in terms of technology and ...
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