The outbreak of COVID-19 has put every industry in a state of shock. We’ve seen towns and cities shut down, schools close and businesses struggle to stay afloat.

The crisis has also put significant pressure on the insurance industry. Stock markets and bond yields have fallen, and insurers expect payouts for some policies to increase as a result of the pandemic.

Challenges facing insurers in the current environment

We have came to a conclusion after speaking to insurers, a difficulty that all insurance companies faced in the beginning as they went through this crisis was employee access to critical systems and applications while working remotely. Like many businesses, insurers were not set up to work entirely outside the office and now employees — from actuaries and underwriters to claims managers — are working offsite, most likely from home.
While not much could be predicted with this pandemic, one thing that hadn’t really been considered before is a situation where everyone is using more data on their internet connections, and all at the same time. There has been an unprecedented reliance on local home internet services, which have held up remarkably well.

However, it’s been a particular challenge to access the systems that process and payout claims. Can employees get access to the systems they need? Are there firewalls that need to be considered? And often when they can get access, they are generally going through VPNs, which weren’t sized for the kind of load now being placed on them. So, prioritizing business-critical systems, such as policy administration, financial, claims and risk management systems, has been key.

The crisis could also be a driver to look at moving more systems and applications to the cloud. With more people working remotely, a cloud-based operating model offers many advantages and greater flexibility and agility.

How insurers are responding

In response to COVID-19, we’re seeing insurers take some actions to ease the financial burden on policyholders during this time. Health insurers are waiving fees associated with COVID-19 testing and we’re seeing car insurers issue premium returns to policyholders, as claims for motor insurance reduce to almost zero during the lockdown. Insurers are being more flexible, treating customers fairly and ensuring that they are there for customers.

But the COVID-19 outbreak is also forcing insurers to think differently about the valuation of their policies and investments. And while the industry is well-capitalized and insurers may be starting from a position of strength, the falls in stock markets and bond yields together with higher levels of expected claims for sickness and mortality will reduce many firms’ solvency ratios.

As insurers determine the effect COVID-19 will have on their industry, they must specifically address the growth and profitability prospects of their portfolios, as well as the products they sell in the future. In all of these cases, actuarial risk modeling platforms will play a key role in formulating the right response.

As stock markets have fallen, it’s important to remember that insurance companies back their underwriting commitments with significant holdings in investment assets. A sophisticated actuarial risk modeling platform can help firms not only make the right regulatory calculations but also – and perhaps more importantly – navigate through the crisis, while providing critical tools for data and process management.

While business continuity is critical, having the right solutions to adapt, manage, rebound and rebuild is just as important.