Insurer Lessons From UK Court Ruling on Business Interruption: Put Customers First

COVID-19 has led to the disruption of millions of businesses around the UK, particularly for SMEs who have been beset by an average of £130,000 in late payments. However, the Supreme Court ruling in January provided business owners with much needed answers.

The ruling, which was spearheaded by the Financial Conduct Authority (FCA), led to business interruption insurance claims of around £1 billion ($1.4 billion) being paid to small businesses – helping them to trade beyond the pandemic.

While it certainly was a lifeline for business owners struggling to survive lockdown measures, it also presents an opportunity for insurance firms looking to prove their value in the “new normal.” After all, the need for the insurers to evolve in line with the needs of a modern customer will now be instrumental to their own survival.

In a post-COVID economy, how can insurers adapt to the current climate and become a much-needed ally for their customers?

Data Is Key

Data is key to better understanding a customer’s needs and to analyzing the full extent of a claim. And, according to a recent Global Insurance Consumer Study from Accenture, consumers are more than willing to share their personal information with insurers if it means reduced premiums.

This is a positive for firms that already should be employing a data-first approach to help them better react to changing regulatory requirements, such as the EU’s General Data Protection Regulation (GDPR). And, while insurers are currently using data, a sharper focus is needed in the future if they wish to continue attracting new customers and retain old ones. This sharper focus will ensure that insurers deal with businesses on an individual basis, thereby removing the traditional “one size fits all” model and, instead, replace it with a customer-centric approach.

An example of data being optimized can be seen in the digital marketing sector. By analyzing the latest data, the sector regularly uses insights to inform the credibility of clients, partners and competitors. The monitoring of statistics in the digital market sector has also guided strategic business decisions, providing a competitive edge in a crowded market.

It is now more important than ever for the insurance sector to start using the latest available data to provide appropriate solutions for individual businesses, flagging potentially catastrophic financial threats.

Taking on Advisory Roles

Insurance is often seen as a necessary annual tax for businesses, with many hoping for limited or no interaction with their providers as it would signify a time of financial distress. But this interaction doesn’t need to have negative connotations. Instead, insurers must look to take on a much more holistic, educational and advisory role with their clients, so the interaction is thought upon more positively.

Only then can insurance providers become the asset they aspire to be – one that proactively supports their customers, rather than reactively fighting fires – and with that, inform behavioral change in an organization to help prevent the loss of products, costs or time.

In turn, this advisory role will enable customers to understand the true value of insurance before an incident happens, and providers that offer on-going guidance to clients will ultimately succeed over their competitors by establishing client trust.

An example of an insurance model that advocates a holistic, educational and advisory role with customers is in the healthcare sector. Unlike traditional insurance policies, healthcare providers have created a culture of prevention by incentivizing fitness with rewards and discounts, encouraging regular health check-ups with their doctors and providing on-going dietary education.

These investments are mutually beneficial; individuals are more likely to stay fit and in turn this will reduce costly insurance pay-outs for providers. This is a process that needs to be adopted across all insurance buyers so that insurers can remain relevant and credible in the “new normal.”

If insurers have a broader range and depth of data coverage, they will have a deeper understanding of the risk exposure and a more robust 360-degree view of their customers and prospects, enabling them to provide a more accurate assessment and advisory role to clients.

Evolving Product Innovation

The way in which we live and work has drastically changed and so too must the insurance industry. The gig economy (a type of labor market where organizations hire independent workers for short-time commitments, or “gigs,” such as food delivery) has grown exponentially in the past five years. The pandemic certainly has accelerated this trend.

In the first quarter of 2021, there were approximately 4.4 million self-employed workers in the UK, according to Statista, the statistical analysis firm.

This means that a freelancer, who is working with a variety of clients to earn an income, will be personally liable for the work produced. Looking ahead, it is vital that those individuals should have professional indemnity cover to limit liability and protect themselves from any costs from claims.

Innovative insurance start-ups have been quick to recognize the demand for freelance insurance and have devised well-rounded and straight-forward solutions. Now all insurance providers must look to capitalize on this trend in order to keep their offerings pertinent and relevant.

Both now, and in the future, the effect of national lockdown measures will continue to cause havoc for millions of businesses. And to help mitigate the impact of restrictions, it is vitally important that the insurance sector help businesses navigate what is set to be a tumultuous time in the aftermath of the pandemic.

To help businesses, and customers alike, insurers need to improve their value proposition, which can be achieved by leveraging insights from enhanced data analytics in order become more customer centric. However, first-party data alone is no longer enough. If insurers and banks want to truly help their customers, mirroring internal data and external data will be key.

This high-resolution approach can also breed operational efficiencies across the value chain – enabling a faster onboarding process, fully understanding customer requirements and implementing products and services to meet them. This level of customer service will also help mitigate the chance of reputational risks occurring and, instead, assist in devising parametric solutions for customers.

There’s no question that January’s Supreme Court ruling has been a catalyst for long awaited change in the insurance industry. Looking forward, it is vital that insurance firms sharpen their data-driven practices to align with the needs of the modern customer, along with reflecting on the challenges presented by the pandemic and preparing robust strategies to weather future turbulence. Only then can insurers learn from previous failings and start to put their customers first.

Related:

• Initial Reactions to UK Supreme Court’s Ruling on Business Interruption Claims
• UK Supreme Court Rules Businesses Should Be Insured for COVID-19 Claims

Topics Carriers Legislation