May 2020 featured report:
More than a quarter (27%) of consumers feel overwhelmed and anxious about their financial futures, according to new research from Swiss Re.
The research, the COVID-19 Consumer Survey, interviewed 2,500 consumers across four APAC markets – Singapore, Hong Kong, mainland China and Australia.
Demand remains strong
Demand for life and health insurance has increased since the COVID- 19 outbreak. Almost half (46%) of respondents sought new policies across the region, while almost one third (32%) actually bought one. Half (50%) said their insurers had been proactive in approaching them with products.
That demand was strongest in mainland China where 73% searched and 56% purchased a new policy.
Australia experienced 43% search, with 23% making a purchase, while demand in Hong Kong increased by 14% for search with 22% new policies.
Singapore also saw strong search interest (31%), though only 16% made a purchase.
Health and welfare
Access to virtual healthcare services and priority access to healthcare providers is more important than cash payouts across the region, said the survey.
These were seen as most attractive as add on services among consumers in China (68% and 67% respectively) and Hong Kong (66%/54%) than in Singapore (57%/56%) and Australia where it falls away below half to 47% and 44% respectively.
Anxiety was highest in Hong Kong (31%) and Singapore (30%) but a further 40% across APAC said they were “stretched but coping”.
The positive news for insurers is that while more than a quarter of respondents are worried about the state their finances will be in after the COVID-19 pandemic, insurance is not something they feel they can do without. Many found when reviewing their policies that they had cover they were unaware of that offered protection during COVID-19.
Saving money is also not the primary concern of consumers. Those surveyed said speed, simplicity and fulfilment were the most important factors concerning insurance policies. Processing policies and claims online was a top priority for more than half of consumers in each region, reinforcing the need for insurers to push ahead with their digitalisation programmes.
If consumers did have to cut costs, more than 75% in all regions would sacrifice dining out, while more than 50% in each would give up gym memberships to keep cover going.
More Australians would sacrifice their life insurance over home or car insurance (14%), though very few consumers in mainland China (7%) and Hong Kong (9%) would be willing to stop life insurance payments.
A quarter of Singaporean consumers and 20% of Hong Kong would give up home or car insurance if they were suffering from financial stress.
“From the survey, we can see that there is a priority to keep insurance policies in times of extreme stress like COVID-19,” said Russell Higginbotham, CEO of Swiss Re Asia. “We have also learnt that consumers value service and access most highly. Chinese insurance companies seem to stand out as an example for the rest to follow, especially in how they engage their customers.”
Lessons on engagement
Experiences of engagement were very mixed across the region, with more than 75% of Chinese respondents having engaged their insurer, researched or purchased new policies. More than half (55%) identified new or additional benefits they were unaware of.
The Australian experience was quite different, where only 14% researched or engaged their insurer. Of course, China had a lot more experience dealing with COVID-19 than other markets.
Mental health was more important to Australians than sickness and social disruption, while in Singapore, an inability to care for others was the primary concern. Those In Hong Kong and mainland China were more concerned about a lack of opportunity for exercise.
While 85% of mainland Chinese consumers believed that insurers would pay out valid claims, that figure was only 54% for Australia. Hong Kong (56%) and Singapore (59%) fared little better, showing that insurers still have a long way to go to build trust with their customers.
It’s getting better every day
The deployment of artificial intelligence will not only improve claims processes, but reduce fraud. This will certainly have an effect on customer satisfaction. This is an important part of the consumer demand – as high as 77% in China – for an end to end seamless online claims process.
Respondents in Singapore, Hong Kong and China also wanted faster claims payments and greater flexibility, neither of which were considered priorities by Australian consumers. They preferred a premiums holiday or future discount on insurance policies.
Trust is essential
Trust is an important component of the digitalisation process for insurers in all regions.
Some insurers in APAC extended free COVID-19 cover to some of their existing customers. Insurers in mature markets have received criticism for what was perceived by the public as a slow response to the pandemic.
However, most policyholders would not have held cover to protect their businesses against the impact of COVID-19 – or any other pandemic, for that matter.
Insurers in the US did offer premium rebates to customers to reflect the reduction in car usage. A number of UK insurers also offered nominal refunds. Yet, rebates are an inefficient and retrospective way to ‘reward’ customers, especially during a period that mandated remaining in one’s home, says Oxbow Partners in its blog, Suitability, transparency, certainty: The three imperatives for post-Covid insurance propositions.
The UK regulator, the Financial Conduct Authority (FCA) announced in May that it expects insurers to “consider whether and how coronavirus may have materially affected the value of their insurance products”. In particular, it references public liability insurance for hairdressers, bars and restaurants where the “insured events can no longer happen for any holders of the policy”.
This places the suitability of insurance products for customers under fierce scrutiny and Oxbow believes it could accelerate a move towards usage-based insurance as they better align the premium to the underlying risk, which the FCA considers a key measure of ‘suitability’.
New model insurer
In particular, parametric models may flourish. These structures offer the insurer and customer the ability to agree a settlement value before any risk event, thereby removing the greatest bone of contention in the claims process.
It simplifies and speeds up the claims process, greatly reducing claims and actuarial costs significantly, as the difference between exposure and incurred losses is removed.
In simple terms, a business interruption policy might allow customers to determine the number of days that would trigger the agreed settlement amount.
The final analysis
The Swiss Re survey summarises by asserting that the pandemic has raised awareness of the need for protection. And, as we have seen, protection remains a high priority for most, with the majority prepared to economise in other areas of their lifestyle in order to maintain cover.
The pandemic offers “a great moment for the insurance industry to put the customer at the centre of everything we do and deliver solutions that at last show progress in closing the protection gap and making society more resilient,” says Higginbottom.
We should anticipate an increased urgency to begin the process of digitalisation in the insurance industry. Particularly among those insurers who today have lagged behind the pack.
For infographics for each market, see the full report.
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