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  • Gabriela Nainggolan

COVID-19 and the Digitalization of the Insurance Industry

The pandemic has affected the insurance industry in many ways. On one side, it exposes some types of insurers (such as health and life insurance) to higher claim rates, which could potentially affect their short-term profitability. On the other hand, the pandemic also gives startups in the industry a chance to innovate, digitalize, or automate the longstanding and very-much traditional business.

Aside from higher claim rates, commercial insurers might face some other challenges including determining validity of insurance claims, determining new business-interruption, and premium pricing. On the other hand, the pandemic also presents new ways commercial insurers and insurance startups could potentially expand their offerings such as through event cancellation coverage, insurance coverage for remote workers, or cybersecurity-related insurance as the risk of cyber-intrusion and other possible data breaches due to unsafe network connections from public Wi-Fi increases.

Auto Insurers are also affected in different ways. As more people stay home and less people drive, claim rates could potentially be lower. On the other hand, this could lead to many users rethinking about the usefulness of their current auto insurance and therefore lead to higher churn. To retain customer loyalty, bigger insurance companies have been giving premium discounts or partial refunds. To do this effectively, they need real-time data. Historically, auto insurers have been relying on customers to self-report their driving habits, which could lead to inaccurate data and underreported driving level. This is where insurtech and insurance enabler startups could potentially step in. They could find ways to digitalize data collection technique on driving behavior and car conditions to allow companies to accurately allocate premium discounts during the pandemic, underwrite more accurate premium pricing, prevention of premium leakage, assess traffic risks, provide real-time warning in high-risk regions, reduce data verification costs, and effectively prevent fraudulent claims.


Aside from commercial and auto insurer, there are other aspects of the industry that could potentially be digitalized or even disrupted by the ever-growing insurtechs and insurance enablers. Automation of the claim process using AI one example of an interesting growth path. By taking advantage of scanned documents and photographs and comparing them with the customers’ contracts, insurance companies can determine whether a claim should be paid out more effectively and efficiently. Another example is Crowdsourcing, which acts as the crossroad between technology and traditional insurance. Instead of employing full time personnel, Insurance companies could hire individuals for surveys. Aside from the examples motioned above, there is still a huge field of possibilities for startups to take advantage of. It’s only a matter of finding opportunity and seizing it the right way.

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