Covid-19 brought in unprecedented challenges, the group insurers also faced a new set of challenges. So, the industry was already stressed due to the increasing medical costs, reduced demands, severe competition for markets share, etc. The bouts of waves are indicative of repeated economic disruptions and pressure upon medical infrastructure. In fact, the industry has been transforming itself to respond and operate efficiently amidst the pandemic and in the post – Covid 19 world. So how the landscape has changed for Group Term Insurance post-Covid 19?
Industry trends during the pandemic:
The industry has numerous issues, and while some of them are direct, others are a ripple effect of the changes that happened across the economy. So, let us understand the basic trends:
- As per Deloitte, 15% of employers expected cost-cutting in benefits programs which includes Group insurance policies for employees post-covid 19
- This, in turn, increased the risk of mortality and morbidity across all group insurance plans due to Covid
- Loss ratios due to increased claims for 2020 and 2021 have remained high
- Also, an increase in unemployment rates has driven down premiums and squeezed margins, increasing premium defaults and policy lapses
- Lower demand for non-medical premium benefits which were coveted before the onset of the pandemic
- Increased negotiations on renewals and a challenging competitive environment
- Medical underwriting continues to remain under stress due to the inability to conduct in-person meetings
- Need to upgrade and adapt to elaborate tech infrastructure
Additional Read: How does group term life insurance work?
New landscape, new challenges:
Among the many strategic threats that the group insurance industry was facing, the prominent ones were:
Abysmally low demand:
With the onset of economic disruption, employer-paid benefits took a backseat; as they threatened the business’s financial feasibility amidst shrinking margins. Many companies had to downsize, many had to shut shop and the one industry that bore the brunt was the group insurance industry.
Lower revenue growth:
This grim situation was evident in the lower revenue growth and the margin pressures across the industry. The low–interest rate environment continued to add to the woes by hurting the return on investments.
Rising expectations of customer service:
While there has been an increase in inquiries and claims over the past year; it is evident as many customers have started using digital channels to interact with the providers. This is where the group insurance companies had to not only enhance the tech infrastructure to meet this requirement but also facilitate work from home for their employees.
The broker-client engagement under severe stress:
Typically, broker-client engagement happens over ‘face-to-face’ meetings, with limited digital engagement tools and virtual meetings becoming the only means to conduct business. In such a case, the client prospecting and servicing aspect have been under stress.
Workplace dynamics are changing:
Group Term Life insurance companies, post-covid 19 are evaluating the future of workplace dynamics and assessing the risks associated with the remote working of employees. A projection of possible medical issues, and claims frequencies have to be evaluated to align the products/services in accordance with the changing dynamics.
Macro-factors and Implications on Group Insurance Industry
Low economic growth:
The economic disruption caused by the pandemic was unprecedented, and this is reflected in the substantially low level of GDP across the globe. Studies indicate that the recovery may take a while. This is especially due to higher spending on public health infrastructure and low productivity on the backdrop of repeated lockdowns and constrained economic activities.
Unemployment and consumer spending:
The unemployment rate is in double digits for most sectors. Thus, there needs to be a consecrated effort to restore the supply chain. Due to the higher unemployment rate, consumer spending has remained low; which translates to a low-interest environment.
Emerging tech-driven ecosystem:
This industry is seeing a paradigm shift with many tech-enabled companies emerging as direct competitors to veterans. These InsurTechs, corporate ventures can better accommodate tech-savvy consumer service requests.
Regulatory framework and changes:
The regulators have also brought in many changes such as credit accessibility, moratoriums, etc., within the system; to ease the pressure on the financial ecosystem, and this has had a ripple effect on the industry.
The macro factors continue to stay grim, the group insurance industry continues to thrive under these pressures. However, these are systemic aspects beyond the control of the companies and hence, elimination of these risks may not be possible. The Group insurance companies only focused on creating marketplace differentiation and enhancing operational efficiency; to create a competitive edge that will facilitate sustained long-term growth.
Future outlook
The group insurance industry is rapidly transforming itself to recover from the effects of Covid and continues to innovate to accelerate growth and profitability factors.
Enhanced tech infrastructure:
There has been enhanced investment in tech infrastructure to improve digital capabilities. As a result, the need to facilitate work-from-home for its employees and cater to the evolving tech-savvy customer expectations have driven group insurance companies to increase their digital presence significantly.
Data analytics:
Data has become the new oil; the underwriting process is being revamped to include data-driven enhancements which enable better risk assessment. So, the insurance industry leverages the benefits derived from big data and artificial intelligence to make a realistic assessment of underlying risks.
Achieve operational efficiency:
There is consecrated effort to reduce costs and improve margins amidst low revenue growth. However, the prospects remain grim amidst the onset of yet another wave and the emergence of a new variant. This is where group insurance companies continue to leverage technology to automate processes, cut down discretionary spending and reduce fixed costs.
Consistent innovation:
The only means to maintain a competitive edge is to consistently innovate and tailor-make products which meet the evolving needs of the customers amidst the tough environment. Hence, the need to retain clients has become even more challenging with the advent of portability in the insurance industry.
This grim environment due to the pandemic has reiterated the importance of insurance policy; so, employers are also inculcating morally responsible behavior by extending required employee benefits, especially in the form of group insurance; which is the key to sustained, long-term growth.
With an increased number of plans and players in the space, it may become quite challenging to choose the right plan which aligns well with your requirement and budget. SecureNow is a digital platform that facilitates the comparison of group insurance policies; to enable you to gain a comprehensive understanding of the offerings available and make an informed choice.
References:
- https://www2.deloitte.com/content/dam/Deloitte/us/Documents/financial-services/us-covid-insurance.pdf
- https://www.pwc.com/us/en/industries/insurance/library/plan-for-post-pandemic-future.html
- https://www.mckinsey.com/business-functions/risk-and-resilience/our-insights/covid-19-implications-for-business
- https://moneymonc.com/covid-19-the-changing-landscape-of-insurance-in-employee-benefits/
- https://www.spglobal.com/ratings/en/research/pdf-articles/201117-slides-top-risks-for-the-global-insurance-industry-100047463?utm_campaign=corporatepro&utm_medium=contentdigest&utm_source=Insurance
About The Author
Varun
MBA Finance
Varun has established itself as a knowledgeable and reliable expert in the field with 8 years of experience. Specializing in group-term life insurance, they have dedicated their career to helping businesses and individuals navigate the complexities of insurance products and services. Currently writing for SecureNow, he produces insightful blogs and articles that demystify group-term life insurance, offering practical advice, industry updates, and strategic insights. Their deep understanding of the insurance landscape and talent for clear and engaging communication make their content invaluable for both seasoned professionals and newcomers alike.
