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Pandemic is providing opportunities for insurers

While covid can unsettle the traditional, it affords chances for the insurance companies to be innovative:

Marianne Gilchrist

When the whole world is facing the prospects of recession and India can be very badly impacted in the wake of COVID, the insurance industry could face considerable disruption in terms of physical customer engagements due to social distancing measures, but we can expect a positive impact on demand for insurance solutions in the medium to long term due to increased public awareness of their protection needs. This is how Marianne Gilchrist, Head Globals and Life & Health South Asia, at leading reinsurer Swiss Re, responds when queried about how the covid pandemic is going to affect the prospects of the insurance sector in general. She believes that with the increase in risk awareness, insurance penetration should improve as consumers increasingly recognize the value of insurance. “As a result, we could see greater interest in protection products,” she predicts.

She recently spoke to Banking Frontiers over a virtual interview about the release of the Swiss Re Covid-19 Consumer Survey on India. The report provides key insights into covid’s impact on the consumers’ health, personal finances and their views on insurance during the pandemic situation. About 1000 respondents in Mumbai and Bangalore participated in the survey.

Gilchrist highlights the findings of the survey: “More than half (61%) of consumers surveyed had been contacted by their insurers, with 65% of them intending to purchase insurance as a result. 62% of respondents had searched for new policies in the past 3 months with 28% of them having already purchased a new policy, making India the second most active of our surveyed markets in Asia.”


Gilchrist says post-covid efforts would be focused on building resilient societies, and this would include 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.

She also expects an integrated digital journey to happen from underwriting, purchasing to settling claims, which she says is becoming more of a necessity than an advantage in the increasingly competitive market.


Does she think covid has demonstrated the value of insurance, and this is likely to open up good business opportunities for reinsurers like Swiss Re?

“Our survey has highlighted that people want us to meet them at their point of need. The pandemic has changed the outlook for many people, and what they used to take for granted may now retain a greater measure of importance,” she responds.

And she observes that the most life-changing decisions take place at defining points in a person’s life like death, illness, divorce, birth or even a once-in-a-lifetime travel experience. The still raging pandemic is one defining point that cuts through all of these, she stresses.


Reinsurers like Swiss Re, she says, are prepared in managing the surge in insurance claims in the wake of the pandemic. She explains: “Knowledge and understanding are critical factors for decision makers when responding to the uncertainty brought along by a pandemic. At Swiss Re, we have been running pandemic modelling to help insurers stay strong by significantly increasing the understanding of the financial risks we face and using that knowledge to manage our capital over the long-term.”

Swiss Re’s pandemic model, she says, is a probabilistic model, which uses large data sets to calculate the likely losses from different pandemic scenarios. “In simple terms, it is based on understanding the characteristics of diseases, such as influenza, that could result in a pandemic. We then combine this with data that helps us understand society’s ability to cope with a pandemic event,” she elaborates.

One of the most important features of the model is that it continues to evolve as more data sources and insights on the pandemics come to light. Currently, the model statistically analyzes 50,000 different pandemic scenarios to see what the impact of a certain strength of pandemic might be on a modelled portfolio.

She says the SARS outbreak had sharpened the company’s focus on pandemic risk management. “As one of the world’s largest mortality reinsurers with a strong commitment to the Asian life insurance market, it was clear that we needed a robust way to model pandemic risk and understand the financial stress of large pandemic scenarios. Therefore, in 2006 we started developing our own pandemic model. The model allows us to undertake stress tests on our portfolio – in a similar way while meeting natural catastrophe risks. In turn, this information helps to make key business decisions, such as setting our risk appetite or managing our capital,” says she.


She says the Indian insurance industry is poised to take a digital leap. Covid, she says, has prompted consumers to review their own personal protection gap and reconsider the merits of stable, longer-term protection. The survey too has showed that the pandemic has transformed consumers’ view of insurance products and the way they purchase insurance. And the industry in India has long acknowledged the urgency of undertaking digital transformation and insurers with stronger digital capabilities will be in a better position to meet consumers’ expectations in the future.

Gilchrist is, however, of the view that despite the fact that consumers are looking to purchase online, agents and brokers still have a key role to play. “For example, when it comes to future insurance purchases, prospective customers in India will look more closely at coverage details (54%) and be more vigilant about having a broader range of cover (47%). This underlines the need for expert and trusted advice and highlights the ongoing importance of intermediaries in customer engagement, especially when customers are unfamiliar with their specific protection needs,” she adds.

Finally, how will insurers tackle the impact the pandemic has caused on investment portfolios of insurance companies and delayed premium payments authorized by the government and defaults?

Gilchrist quotes Winston Churchill to say ‘we must make sure this crisis does not go to waste’. She says from a financial markets’ perspective, fluctuating asset prices and changing consumer demands present new investment opportunities with large upside potential emerging. While the pandemic is stressing systems and exposing vulnerabilities, it also reminds one why downside protection matters.

She cites Swiss Re: “For us at Swiss Re, one thing is already very clear – sustainability drives resilience. In Q1, our investment portfolio was able to weather the storm specifically because we had been decisive about taking environmental, social, and governance (ESG) criteria into account early on. Our credit and equity benchmarks outperformed their traditional equivalents, even more so during the big market sell-off in March. We also saw several broader market indicators of why a sustainable portfolio is a more resilient portfolio.”

She adds: “By shifting capital towards sustainable investments and rebuilding in an inclusive and climate-friendly way, we get the benefit of protecting our own portfolios, while contributing to a more resilient world – helping both ourselves and the systems around us.”

Swiss Re conducted a survey in India to understand how the covid outbreak has impacted consumer sentiment towards their financial situation, overall health, and future insurance purchases. Some highlights of the survey:

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