Impact of Covid-19 on Banking and Insurance
Updated: Apr 6
Europe, the new epicenter of the COVID-19 epidemiological crisis, is going through some tough economic times. For industries like banking and insurance, the consequences of the crisis are uncertain. Although governments are fighting to find solutions and mitigate the effects, the question is: what will happen when it’s all over? Instead of answers, more questions abound.
Should the people fear that premiums in insurance will go up, and will insurers come up with better services to retain customers? Will banks become more customer-centric as they learned in the crisis that service means positive brand building, or will they fall back to old patterns and refuse to accept that customization is the key to everything? The need to monetize post-COVID-19 will remain acute, and although some traditional banks are becoming “agencies for channeling state aid” now, according to Euromoney.com, sooner or later they will be compelled to offer better support.
The ability of a financial organization to make the most of digitalization in order to provide better services will most likely divide the sector in two: those that acknowledge that customers are truly at the core of every business’s success (the customer-centric) and those that will continue to do things the old-fashion way (the product-led).
Although we can’t know for sure what will happen post-COVID-19, chances are that the impact might lead to:
A tipping point for accelerated digital transformation
Business leaders are faced with disrupted supply chains coupled with an immediate need to set up a “work from home” policy; a policy that was never part of a bank or insurer’s company culture. However, the measures that must be implemented could actually lead to accelerated digital transformation. Whether we’re talking about video-conferencing, online banking, or P2P payments, financial organizations cannot run from digital technologies anymore. The reduced dependency of so many physical branches could change the banking landscapes in the long term following the pandemic. In Italy and China, the digital engagement of the customer increased by 10-20% in four weeks, clearly showing that the demand for positive online experience is booming.
As banking and insurance companies get a taste of the digital, the crisis will eventually accelerate digital transformation by factor 10. The importance of having an online presence paired with value-adding services that cater to the needs of the customer can no longer be denied. The use of digital banking tools will most likely increase as well, changing the way banks interact with customers and vice-versa.
Digital strategies reimagined
Amid the outbreak, increasingly more companies are compelled to go digital and set up a digital-first market proposition. A recent IDC survey conducted on several CXOs across 10 industries in China concluded that the impact of COVID-19 led to significant sales drops and the inability to meet with customers face to face. On the bright side, the pandemic triggered improved collaboration among teams, wider recognition of the value of digital transformation, and positive effects of online marketing on business development.
Following the pandemic, the same survey concluded that accelerated digital transformation measures involve creating new enterprise collaboration systems, exploring new business models, and developing competitive digital cultures. In Europe, 2020 was supposed to be “The Big Tech regulation” year. Because of COVID-19, digital strategies and startup collaborations might be put on hold. Leaving aside delayed legislation, for banks and insurers it might be an opportunity to rethink their business models.
Addressing the emotional needs of the modern customer paves the way to business excellence. In insurance, the recipe for success in a post-pandemic era depends on leveraging new tools to analyze and aggregate customer data to gain insights in real-time. Although technology has proven useful in times of crisis, reimagining the digital strategy truly depends on reimagining the company culture and shifting toward a more digital customer-centric business approach.
Could the COVID-19 outbreak propel the insurance industry into the digital realm? For starters, it will certainly test the existing digital capabilities of every insurance company. The demand for self-service interaction is booming, both from a service and from a sales perspective. Furthermore, now it’s the best time for insurers to assess their internal operations and dig deeper into the implications for both employees and customers.
Although a lot has been done to digitize documents and provide better ways for claimants, policyholders, and prospects to streamline digital interaction, the insurance industry is broadly still behind digital transformation. It is estimated that COVID-19 will not only instill a sense of urgency to provide better digital capabilities, but it will most likely reinforce the value of digitalization.
The outset of more customer-centric services
Will the impact of COVID-19 lead to more customer-centric services? Let’s hope so. Some banks are fighting back, offering support to the people, like allowing them to defer mortgage payments. But with most physical branches closing down, the relationship between banking officials and customers are weakening. To keep them around, they need more than a banking app and a chatbot; they need to develop a strategy involving value-added services providing customers with everyday freedom.
A prompt strategy is to ditch the “robots” that handle numerous marketing-related aspects, from programmatic ads all the way to paid ads on social media and automated emails driven by pre-scheduled software and website registrations. It’s time for banks to make the most of human oversight and direct intervention. Communication has to be more proactive and honest, with a deep emphasis on relevant services and products that cater to the needs of the customer.
Value-added services will enable banks to focus more on providing outstanding experiences. In light of the COVID-19 pandemic, behavioral changes are accelerating the shift from branch concept to high-value operations powered by individualized customer offerings; aka value-added services. Business leaders are finally given the opportunity to put their data to good use and fine-tune the customer journey, pricing, and product strategy to exceed expectations.
Better insurance policies
In insurance, COVID-19 is impacting multiple sectors of the industry - from client service considerations all the way to business continuity issues and other financial endeavors. Although an immediate concern is to protect the safety of its employees and preserve continuity, many are neglecting that the needs of the customer are not properly met. For a heavily-regulated industry used to having employees work in physical offices, switching mindsets and relocating to an online environment is challenging to say the least.
Conducting business remotely in a business sector ruled by paper files, physical signatures, and multiple rounds of approval from top managers seems almost impossible to do successfully. The lack of customer-centricity has never been more acute. With for example paid holidays being canceled and travel insurance policies not covering COVID-19 infections, insurers cannot provide support because they were never prepared for such a scenario. The question is: Will the COVID-19 outbreak act as a wake-up call to convince insurance companies that it’s time to rethink their business models? Digitalization and the adoption of new technologies is a must.
In the absence of digital resources, some insurance companies are realizing how impersonal they have been throughout the years. But then again, becoming a “life coach” to their customers cannot be done overnight. The same thing goes for extra services that bring added value to an insurer such as Generali, which recently pointed out that “you could be covered if you are diagnosed with Coronavirus, but foreseeable events such as becoming quarantined due to the Coronavirus will not be covered.”
Leaving aside policies, the key to adding improvements from this point on is to embrace the importance of extra service. ETVAS can help insurers bridge the technology gap with a data-driven umbrella marketplace from where these can be picked and integrated in less than a month, not a year. Improving customer loyalty and strengthening relationships is more important than ever; although it cannot be done if insurers are resistant to technological change.
It’s time to hook customers emotionally with one-on-one service offers that match life events. By building targeted, group-oriented ecosystems, both banks and insurance companies can become a key player for their end consumers in good and bad times. Accelerate the digital transformation of your organization with ETVAS - the marketplace for extra services!