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Insurance of the future

The insurance industry is undergoing dramatic evolution during the COVID-19 crisis, but it is an evolution that began years ago, writes ARTHUR GOLDSTUCK

Sometimes, technology innovators make predictions that turn out to be remarkably accurate because they understood how needs and capabilities would advance. At other times, innovators turn out to be right for the entirely wrong reasons.

The COVID-19 crisis has highlighted the accuracy of many forecasts of the growth of areas like e-commerce, remote working and learning, and medical services – but not because anyone predicted that a pandemic would spark the change.

The insurance sector is the latest to provide examples of great foresight resulting in exactly the right kind of service for many consumers. A South Africa insurance startup called Naked, which provides quick cover and claims via an app, has for some time offered a “CoverPause” feature. This allows customers who do not plan to use their cars for a period to pause the accident element of their cover, and downgrade it to stationary cover.

It was never designed for lockdown conditions, but was perfect for lockdown. According to Naked, its policyholders did not drive for more than 27 days of the first 35 days of lockdown.

This insurance “pause button” was not available to most of the car-owning public, despite accident numbers and car usage plummeting during lockdown.

According to towing and roadside assistance provider Global Choices, South Africa’s rate of car accidents fell by around 75% in April as people stayed home. The figure is based on incidents for which tow trucks had to be dispatched dropping to a quarter of the usual levels.

“This indicates that South African drivers adhered to the call to stay at home, only using their cars for essential trips as defined under the lockdown regulations,” says Naked co-founder Ernest North. “It supports our decision to reduce premiums so that clients pay just roughly 10% of the normal comprehensive premium when they enable CoverPause.”

TransUnion, which collects, aggregates and provides credit data, sees even more of a knock-on effect as many people delay car purchases.

“We are expecting work-from-home to be a reality for many people for at least a year, meaning traffic won’t be back to usual levels for a while,” says Kriben Reddy, TransUnion head of auto information solutions. “Even after the pandemic, many enterprises will continue to support remote working because they have invested in the infrastructure and might see benefits in downsizing office space.

“Another trend that we’ll see is vehicle purchases moving online as people continue to follow physical distancing protocols.”

This is bad news for most insurance companies as consumers look for options that address their new reality, but good news for those that have introduced flexible approaches. As North puts it, Increased numbers of people working from home could mean fewer car accidents and thefts in the future, resulting in lower claims, but increased pressure to pass those savings back to consumers.

“The rate of digital disruption in the car insurance industry has certainly accelerated as technology-driven startups offer customers more transparent and flexible insurance solutions. Using artificial intelligence and digital channels allow us to bring costs down for the end-user and to make it easy for people to manage their own insurance coverage digitally.

“Given that people are becoming used to the convenience, low costs and control they get from digital tools they are using to manage their lives at this time, it’s difficult to imagine them going back to the old ways of doing things. Industries and companies that have not embraced digital will need to catch up – fast.”

Read more about how life insurance has transformed in the face of lockdown and social distancing.

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