Post-COVID-19: Stay ahead in a reshaped landscape

In the past few weeks, Hong Kong made first steps to emerge out of the COVID-19 crisis, with public-facing businesses resuming operations gradually. Restaurants are open with restrictions, sports facilities have resumed bookings, and offices have returned to a sense of measured normality. But in several other APAC economies, COVID-19's impact lingers. Singapore, for example, has extended its "circuit breaker" measures into June, and recently announced a step-by-step move to get out of its current state.

Hong Kong and Singapore share many demographic, economic and cultural similarities, and Swiss Re's recent COVID-19 survey unveils some common yet fascinating insights on how consumers in these markets are reacting to COVID-19's impact. These present unique opportunities to narrow the protection gap.  

Insurance: much more than just a pay-out

Hong Kong and Singapore are both thriving financial hubs with relatively mature insurance markets and a decent level of insurance penetration. So, it is unsurprising that insurance is often seen as a source of financial support. Hong Kong consumers in particular, look towards insurers as a source of market insights and data, much like a financial advisor, to enable informed decision making, especially in times of crisis.

What I have learnt from these findings is that insurance is no longer viewed as just a backstop for financial losses. Consumers seek assurance through quick and smooth claims and access to essential resources in a crisis. They also trust insurers' professional expertise to guide them through a time of uncertainty and as Russell Higginbotham pointed out – people want us to care for them and meet them at their point of need.

Insurance has met, and hopefully will continue to meet, that desire. Based on the responses we've received, there is evident emotional value at these times. Around 60% of consumers in Hong Kong and Singapore feel that the ability to rely on claims helps ease stress. Speed and simplicity of the claims processes here contributed to 70% of them feeling satisfied that claims have matched their expectations.

While add-on benefits in policies were 'good-to-haves' during normal times, these benefits have now become more visible. Around 40% of those who looked further into their insurance policies in both markets noticed these additional benefits. These include access to healthcare products and services, as well as receiving immediate financial support (outside of a claim payment). In fact, it ranked as the most appealing to have.

Post-COVID-19: A hybrid purchasing mode

COVID-19 has tremendously accelerated digital transformation in our business and our lives. Video conferencing and virtual events have become the norm. For the insurance industry, physical lockdowns and social distancing have driven consumer demand for end-to-end online processing. The digital journey of purchasing insurance online is here to stay.

Across all markets surveyed, which included Australia and the two Chinese megacities of Beijing and Shanghai, this is the top consideration for selecting an insurer. And because of the fear and uncertainty surrounding us, around half of Hong Kong and Singapore respondents said they are more likely to buy insurance online post-COVID-19.

That said, agents and brokers will still play an important role. Our qualitative studies tell us that a trusted and familiar agent is the key to consumers' purchasing decisions in both markets.

Demand for insurance grew on the back of greater awareness driven by COVID-19 concerns, but it also drove people to look more closely at coverage details, and to take a more cautious approach in decision making. While there is a rising interest to explore different policies, people will look for more basic types of products due to financial constraints as a result of the pandemic.

What does this mean?

Post COVID-19, we are likely to see a hybrid purchasing mode, where consumers continue to trust reliable, accessible and knowledgeable insurance agents while seeking online options. The agents' expertise and professionalism are much sought after to help consumers understand the products, compare different options, and optimise their purchase.

Rising awareness: protection against loss of income

Among the markets we surveyed, Hong Kong and Singapore respondents are most anxious about their future financial stability. Three out of four Singapore consumers we spoke to experienced pay cuts or reduced work. The uncertain economic outlook makes more than half of all respondents concerned about their ability to care for families. In Hong Kong, small business owners are getting more vigilant about income loss protection – business interruption coverage has become a high priority.

Which is why customers are looking for some form of income protection from their insurance policies when they do lose their jobs or have been put on no-pay leave. For insurance companies, this could be a vital add-on element to what they currently offer.

How do we proceed from here?

Having insights on consumers' needs enable us to do more in making societies resilient – designing products that offer quick pay-outs and attractive add-ons, offering strategic financial guidance during uncertain times, explaining complicated products and strengthening consumers' confidence in making decisions. Insurers need to play a more active role as people who have been contacted by their insurance companies demonstrate a higher intention to purchase during COVID-19.

Digitisation of the insurance value chain gains priority. An integrated digital journey from underwriting, purchasing to settling claims is becoming more of a necessity than an advantage in the increasingly competitive market. Insurtech start-ups have begun using big data and artificial intelligence to process policies and settle claims at record-breaking speeds, attracting millions of customers1. We can't afford to fall behind.

The economic impact of COVID-19 is greater than what the industry can singly bear. Governments around the world are doing what they can, but that may not be enough. The U.S. Small Business Administration has injected USD349 billion to keep workers on payroll, and the fund was exhausted after just two weeks2. In Singapore, the government has committed to a fiscal injection worth USD 42 billion, or 12% of GDP3 to its economy. Yet, it prepares for a worst-ever GDP contraction that can go below -4%4.

The reality is that Public-Private Partnership is a viable option. As an industry, we can be part of the design and even carry some of that risk, but with transparent risk assumptions and strict accumulation controls that ensure solvency and sustainability. 

We don't have to wait until the pandemic is over to act. These consumer insights provide us with a good head start to do more in building resilient societies.

1 https://www.ejinsight.com/eji/article/id/2262999/20190930-insurance-tech-revolution-is-more-than-just-digitalization
2 https://www.bloomberg.com/news/articles/2020-04-16/virus-rescue-program-for-small-business-runs-out-of-money
3 https://www.scmp.com/week-asia/economics/article/3078598/singapore-unveils-us36-billion-stimulus-package-third-boost
4 https://www.channelnewsasia.com/news/singapore/covid-19-economy-singapore-will-enter-recession-2020-mas-review-12683096

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