How COVID-19 Could Change Insurance For the Better

The COVID-19 pandemic has already changed every industry on earth — air travel, retail, healthcare, you name it. There are so many things we can’t control about the novel coronavirus, but one thing we can do is ensure some of its lasting effects on the world are positive.

In response to the pandemic, some insurance companies have already made positive changes. For instance, back in March, auto insurance providers announced refunds and discounts to compensate for the fact that we aren’t driving as much these days.

“There aren’t many positives to the situation we’re in,” says Raymer Malone, a CFP with High Income Protection I spoke with over the phone last week. “However, for people looking to buy insurance in the future, they will be met with a more pleasant experience than before.”

The pandemic presents a unique opportunity for the insurance industry to evolve and support more people than ever before.

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      Insurance could be more accessible and affordable

      “The biggest change that we’re seeing is that insurance carriers are being forced to adopt new technology in today’s socially distanced world,” Malone says. “E-applications, e-policy delivery, and waiving of physical exams are all innovations that are marching to the forefront.”

      And this shift isn’t only relevant for a society battling an incredibly infectious disease.

      “For the consumer, this will likely lead to access to more attractively priced insurance products (through increased competition), a simplified application process and ultimately a better purchasing experience overall.”

      Digital insurance startup companies have been able to lure some customers away from the largest insurers by offering these types of solutions, even before the global pandemic made them a necessity. While insurers have begun investing in these types of companies (insurtechs raised $6.37 billion in 2019 alone), this could solidify the need for more investment in technological innovations in the long-term.

      Now, insurers are being forced to take these steps on their own. This pandemic won’t turn large, traditional insurers into a lean, scrappy startup (they also have a lot of loyal customers that like things the way they’ve always been) but it may encourage an accelerated growth in this area.

      Coverage options could be more personalized

      As electronic systems are improved to enable better customer experience, they can also be leveraged to provide more accurate pricing based on consumers’ actual driving for auto insurance. While traditional auto insurance prices are based on primarily historical and personal information like history of traffic incidents and age, usage-based policies determine your risk based on how you drive (measured by miles driven or other driving-related factors.)

      “One of the trends that we have seen at CMT that has also been observed by JD Power is the increase in interest in personalized pricing of insurance policies powered by telematics,” Ryan McMahon, VP of Insurance at Cambridge Mobile Telematics (CMT).

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      With a traditional policy, your risk has been predetermined and you’re charged a fixed premium every month regardless of whether you drive 10 miles or 100 miles a day, but people are now driving a lot less. According to Arity, a telematics data firm, total miles driven is down 49% as of April 29, 2020.

      “There has been a sustained rise in individuals who want to save money based on how they drive, and as the gaps grow between those that drive safely, those that drive less and those that do not, there will be a greater need for the insurance industry to respond with options that give consumers the most flexibility and greatest control over what they pay for insurance at a time where our economy has slowed considerably.”

      Your information could be even safer

      “I believe cybersecurity is going to be at the forefront of everyone’s minds coming out of COVID-19. We are regularly seeing updates about various businesses being hacked and shut down on account of security breaches,” says Kirk Mason, Partner, HMC Lawyers.

      While this will have a great impact on businesses seeking this type of insurance, it will likely affect the industry as a whole. As people increasingly conduct their insurance business all online and sign up for telematics-based car insurance programs, insurers will be holding onto even more personal data, data that will need to be protected if insurers are to build trust with their customers.

      Consumers will need to be in control of their own data as well. Crises, including a global pandemic, are a popular time for scammers to strike, targeting people in vulnerable situations, but as more and more aspects of our personal lives are available online, this will continue to be a valuable protection for people. Allstate has already offered free identity protection for the remainder of the year to its customers in response to COVID-19.

      Is your insurer keeping up?

      I would encourage you to take note of how your insurer has reacted to the COVID-19 crisis and evaluate whether the measures they’ve taken are in line with what you’re looking for from a provider tasked with protecting you.

      If you’d prefer to go back to working with your insurance agent in person after the pandemic — if social distancing allows — or you have no interest in trading your personal driving data with an insurer in order to save money, I would still encourage you to look to your insurer to make sure they are supporting the services that are important to you.

      But for those looking for a seamless online experience, tailored pricing, and top-notch cybersecurity, if you’re not seeing these changes in your insurer, it is time to shop around.

      Experts cited

      Raymer Malone
      Raymer Malone

      Raymer is a Certified Financial Planner with High Income Protection with over 20 years of experience in the financial services industry.

      Ryan McMahon
      Ryan McMahon

      Ryan is the Vice President of Insurance at Cambridge Mobile Telematics, the leading mobile telematics service provider.

      Kirk Mason
      Kirk Mason

      Kirk is a Partner at HMC Lawyers, an Alberta-based law firm that serves a wide range of litigation types. Kirk specializes in insurance law.

      COVID-19 and your finances

      See the articles below for more resources.

      Samantha Kostaras

      Insurance Reporter

      Samantha Kostaras is an insurance reporter at The Simple Dollar, covering financial services and insurance. Before becoming a writer, she worked as a financial analyst and earned her Bachelor’s degree in Finance from the University of Alabama.