The COVID-19 pandemic has become a milestone in history, and although not all the changes that have taken place since then are directly related to the global health crisis, 2020 can be considered as the first year in a new global context.
Five years ago, movement restrictions and forced lockdowns drastically altered society and global economic activity. Every sector faced significant challenges in the very short term: ensuring business continuity, safeguarding the health of employees and managing a general crisis that pointed to a global economic slowdown, as well as adapting to new patterns of social behavior.
This international scenario undoubtedly marked the start of a cycle change in many aspects, and some of them have in turn accelerated the evolution of the insurance industry. Below we will take a look at how the insurance sector reacted to the onset of the pandemic and the resilience it showed as the crisis endured.
Adaptation and response: the first impact
The COVID-19 crisis posed a major challenge for the insurance industry, which had to face an onslaught of claims, the uncertainty of its policyholders and a drastic change in risk patterns. In addition, the interruption to economic activity and supply chains increased market uncertainty, forcing insurance companies to double down on ensuring trust was maintained with is various stakeholders, issuing statements that guaranteed service to clients and collaborators. This was achieved thanks to unprecedented technological assimilation and the difficulty of adapting to the new needs of companies and institutions.
Communication was one of the pillars of resilience in the sector, both when conveying the situation and meeting the demands of the insured party. As Pilar González de Frutos, President of Unespa (Spain’s association of insurers) said during the MAPFRE Global Risks International Seminar held in 2022, the sector’s performance during such an exceptional episode was exceptional, given that in such a period of unprecedented instability, each company did its best to maintain its service provision network, and as a result, many policies and coverages were reviewed and adjusted over those intense and difficult months.
In Spain, important social initiatives were also carried out, such as the creation of a fund of 38 million euros, financed by 107 insurance companies and intended to provide coverage, in the event of death and hospitalization, to personnel working in public or private health and in care homes for the elderly or people with disabilities.
Unprecedented technological assimilation
The digital transformation of the main economic sectors was already underway prior to the pandemic, but the emergency clearly accelerated progress in this, for both the internal operations of insurers and for clients and risk management. Since then, technological assimilation has been exponential and progressive.
According to a report prepared by the Spanish Association of FinTech and InsurTech (AEFI) in 2022, digitalization encouraged the development of innovative products and personalized policies, adapted to the specific characteristics and requests of the client, as well as the creation of platforms that facilitated insured parties and brokers in filing and handling claims instantaneously.
Innovation also enabled massive data analysis, which optimized fundamental aspects such as risk prediction, fraud detection and damage assessment. These techniques, applied to predictive analysis, improved operational efficiency, thereby reducing costs and improving customer service.
This technological progress is unstoppable. As Javier Santiso, CEO and general partner at Mundi Ventures, said at the last MAPFRE Global Risks International Seminar: “Digitalization and AI are redefining entire industries, marking the beginning of an era of accelerated progress and significant changes that will shape humanity’s future.”
Employees: new benefits programs
During the pandemic, the labor environment had to adapt to exceptional circumstances: teleworking disrupted traditional office dynamics, generating new remote communication and collaboration formulas. These measures, initially planned as temporary solutions, have been consolidated as a permanent reality, and have redefined the relationship between employees and companies.
Insurers are rapidly adapting to an unstoppable generational and social change, driven by new expectations (personal and professional) and an increasingly fluid and digital environment. Ramón de la Vega, director of Corporate Risk Financing at Telefónica, speaking at the last International Seminar held by MAPFRE Global Risks remarked: “In selection processes, young and not so young candidates place a lot of emphasis on hybrid work and job flexibility, as it allows them to better balance their personal life with their professional life.” Personal well-being and physical and mental health are also now a much higher priority for professionals, and therefore for companies that want to attract and retain talent.
For these reasons, Employee Benefit Programs have become essential for the insurance industry, which are beginning to offer new solutions, not only focused on medical care, but also on the emotional protection of their teams. Large companies have opted to use captives to disperse risks, save costs and improve their credit rating.
New commitments and emerging risks
Aside from the pandemic, new emerging risks have emerged in the last five years that are becoming more important in the agendas of insurance companies.
The mass digitalization of the sector, together with the growing interconnection between companies, with collaborators and clients, has resulted in the emergence of increasingly common and destructive cybernetic threats. Thanks to research and technological advances, infrastructures have been created to protect individual users all the way up to corporate data processing centers. However, this scenario has created a challenge for insurers, who must design coverage for these risks, the scope and quantification of which aren’t always easy to calibrate.
Another emerging risk is geopolitical conflict and international tensions, which have reached alarming levels, comparable to those of the Second World War. According to the last Global Peace Index, prepared annually by Institute for Economics & Peace (IEP), which classifies 163 countries and territories in line with the level of peace they enjoy, and which covers 99.7% of the world’s population, 56 countries are currently facing active conflicts, many of them deeply internationalized, with the participation of up to 92 countries outside their borders. Europe remains the most peaceful region, while the Middle East and North Africa are the most affected areas.
Another factor that’s having the greatest impact on risk management is climate change. Extreme weather events and the effects of global warming – droughts, rising temperatures, and storms – have forced the insurance industry to tackle the challenge of creating new solutions and combine financial protection with prevention services. This global situation has also impacted industry policies. Insurance companies are increasingly committed to sustainability – at the environmental and social level – so they must meet stricter standards both in their internal operations and in the underwriting of risks in their client portfolio.
