COVID-19 has turned into a global crisis, evolving at unprecedented speed and scale. It is creating a universal imperative for governments and organizations to take immediate action to protect their people.

The virus continues to rapidly spread, to every continent and nearly every country with tens of thousands of new cases reported daily.

There is a high probability of a global economic recession in 2020.

The Secretary-General of the United Nations has warned that the global economy is likely to decline more than usual.

The International Monetary Fund (IMF) managing director, Kristalina Georgieva, said regarding the outlook for global growth: For 2020 it is negative—a recession at least as bad as during the global financial crisis or worse. But the IMF expects recovery in 2021. To get there, it is paramount to prioritize containment and strengthen health systems everywhere.

Since February 2020, several major global stock markets have seen their worst performance since the 2008 financial crisis.

The short-term impact on Greater China's economy is obvious. But there are also challenges on the medium- and long-term horizons.

Economists have revised down growth forecast for 2020. IMF managing director, Kristalina Georgieva, said regarding the outlook for global growth: For 2020 it is negative—a recession at least as bad as during the global financial crisis or worse.

The decline of related industries/markets will also have a substantial knock-on effect on the insurance industry

Automotive

The demand for cars has declined as result of the economic slowdown and spending power has been hurt.

Retail

Residents have been less likely to go out shopping, significantly impacting the sales of non-essential goods and the catering industry.

Travel

With several countries on lockdown globally, and personal and corporate travel restricted, the travel industry has been severely impacted.

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As a result of the outbreak, insurance premiums have fallen sharply

Life insurance premiums have declined significantly:

Weakened demand: The volume of new personal life insurance orders through traditional offline channels has declined, and the acceptance of older customers for online direct-to-consumer channels is low. Therefore, during this period, the demand for new life insurance orders has been dampened.

Limited sales channels of bancassurance: During the first two months of this year, the premiums of new orders in the bancassurance market of the life insurance industry have decreased by more than 40 percent, of which, the premiums of new orders dropped by 69 percent in February, the lowest number in seven years since 2014.

Auto insurance business growth has declined:

Offline insurance marketing activities were blocked in February, and the visiting frequency and activity rate of personal insurance channel agents has been frozen. In terms of auto insurance, the continued sluggish sales of new cars with the double impact of pandemic factors has led to a sharp decline in the growth of the auto insurance business.

In the first quarter of 2020, insurance premiums of listed insurance companies in China A-share stock market declined dramatically in February but rebounded quickly in March, though life insurance premiums still recorded negative growth.

Insurance premiums of the five A-shares listed insurance companies.

The existing operational models and product strategies of insurance companies are being challenged

Constraints in the manual operations model

CBIRC: The CBIRC has issued the notice on strengthening the financial services of the banking industry to cooperate with the prevention of pneumonia, requiring banks and insurance institutions to strengthen online business services.

Physical examination verification: Medical resources are limited, and a large number of life insurance products are insured with physical examination requirements.

Claim processing: Claim management and processing, which relies on manual operation, has become a bottleneck of the insurance company's business development under the influence of COVID-19.

Limitations in product strategies

Product response speed becomes a challenge: By February 24, P&L insurance companies expanded 1,810 product liabilities to cover the outbreak response. The ability of product research and development to deal with emergencies has become a key factor in the scramble for market opportunities.

Less innovation, more gimmicks: Major insurance companies have launched a lot of gimmicky products. This has been suspended by the bank insurance regulatory commission.

Product homogeneity: Product homogeneity results in a situation where all insurance companies are faced with the same product sales difficulties because of COVID-19.

The emergence of COVID-19 pandemic also puts forward new transformational requirements for insurance companies

Optimize online and offline channel integration

The traditional channels struggled to service. Insurers must provide flexibility to consumers through seamless online/offline integration.

Improve operation automation and intelligence

Due to travel and social distancing constraints, insurers need to rethink their manual operation processes to be more straight-through or automated.

Accelerate product innovation to meet new demands

Effective remote teams require more intentional practices to drive alignment and program execution.

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Next steps:

With the current challenges, insurance companies need to be flexible to seize opportunities.

Holistic digital strategy

Digital+Agile, “Change” Applied Now.

Phygital—online/offline integration

Collaboration and synergy between online and offline channels will become an important focus of insurance companies.

Customer insights

Establish a whole life-cycle strategy for customers with data insights and change the traditional business model of insurance sales.

Product innovation

Demand-side driven innovation of insurance products to flexibly respond to market changes.

Lean operation

The combination of artificial intelligence and automation technology can improve operational efficiency and control operational risks.

Open insurance

Exploring an open business model of win-win cooperation with ecological partners to achieve breakthrough growth of new businesses.

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The COVID-19 pandemic is a catastrophe with damaging impacts across the personal, social, commercial and economic dimensions. Banks have no choice but to respond, to defend not only their own solvency but also that of their customers.

While addressing these immediate imperatives, however, it makes sense to keep an eye on the future. There is much banks will learn from COVID-19, which will force many of them to move more decisively into digital. These lessons will inform their wider-scale digital transformation initiatives, helping them develop more engaging customer experiences that will underpin their growth once the world has recovered from the pandemic.

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