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Transcript Blog- The Global Impact of the Coronavirus Pandemic on Insurance Industry

Josephine Monberg interviews Toni Tomic, Global Head of Insurance at SAP, on this episode of Industry Insights by SAP. Toni discusses how the insurance industry has managed during the coronavirus pandemic and how technology will play a role in the recovery and transformation of insurance.

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Josie: (00:04)
Welcome to the industry insights by SAP podcast series. My name is Josephine Monberg and I am your host. You are now listening to the COVID 19 special edition of our show. Welcome to our podcast. Hi everyone and welcome to this episode of our podcast. Today we are taking a closer look at the insurance industry and to do this I have with me in his virtual home studio, Toni Tomic. So Tony, thank you so much for being with us today.

Toni: (00:35)
Thanks for having me.

Josie: (00:38)
We are super excited because I’m sure that insurance is an industry that’s seeing huge impacts. But before we talk more about that, Tony, tell us a little bit more about what it means to be the global head of insurance at SAP.

Toni: (00:53)
As a global head of insurance at SAP. Basically you take care about industry strategy, solution management, um, what is on our agendas as well as strategic customer engagements and our global go to market and sales.

Josie: (01:07)
And I always kind of like that our listeners know where in the world my guests can be found. So where in the world are you right now? Apart from obviously being at home.

Toni: (01:19)
Yeah, I’m in Düsseldorf right now, so I’m in Germany right now, so the weather actually outside is pretty nice, so it has a little bit weird that we are locked down.

Josie: (01:32)
Yes. I, I agree with that. I’m stuck in a, in Denmark right now and it’s been, I don’t think we’ve ever had better weather, um, in terms of the season right now in Denmark during COVID 19. So that’s an interesting time to have really great weather since you can’t really enjoy it as much as you typically would. Um, okay, well so good to know where we both are and now I think we can just dive into it. I’d like to first ask you what you’re seeing in terms of the impacts on insurance.

Toni: (02:04)
I think I’m, if you look into insurance, um, I think that COVID 19 has had a major impact on basically all, um, economic sectors. Um, which, um, yeah, why is insurance is not, it’s not an exception, right? As an, as an industry, I believe that governments, um, are limiting the damage right now, um, by stepping in, let’s say the insurer offer of last resort. But in general, I think that the global insurance market valuations have suffered. I mean, in line with, the broader markets and obviously since life and health insurance has impacted, it has an impact on, on the insurance industry. I would say in general, uh, three phases through which the industry’s going. I’m in the first phase, I strongly believe, I mean, that’s kind of already visible. We are seeing a reduction in demand. Um, most lines of businesses, it’s uh, property and casualty life health, um, are actually seeing a, seeing a decline reduction in demand because I mean, there’s uncertainty.

Toni: (03:17)
Customers, I are losing income and I hit bye by obvious financial difficulties. Um, I think the second phase is going to be a phase where I believe that after first phase, we are now starting to get into, it’s really about claims. Um, claims will increase following kind of, for example, insurable events. Will increase in terms of business interruption will increase in terms of life insurance. Um, um, and on the other hand we will see that for personal lines, for example, um, if you look into the motor insurance space, we will see even a reduction in claims, right? So, um, I think that’s kind of the second phase. Uh, and the third phase to me is, is the face in which, um, from my perspective, we are going to see an increased demands. Usually after crisis, customers get more risk averse, they get more risk averse in terms of the future. Right. And I think that especially we are going to see, uh, an increase in demand once as well. And we are opening up, the agents are again on the street, um, but as well, customers are going to be concerned very much about life and to develops about health. And I believe that even in some countries, the governments are starting programs to, um, help people take better care of their, uh, of their health and their life in general. So I believe that we will see in phase three, actually a rising demand insurance.

Josie: (04:53)
So insurance is really an industry that obviously has to step in. Right. And kind of also follow up, um, when we are moving out of this crisis. So you mentioned some different lines of business. Could you tell us a little bit more about how they’re going to be impacted?

Toni: (05:13)
Yeah, I think, um, if you look into lines of businesses in less distributed between commercial lines, personal lines and life and health insurance on the commercial lines side, if you look into the different, let’s say the different insurance types of policies like event cancellations, I mean the cancellation postponement of numerous events that we see that we saw, um, uh, let’s say talk to the Tokyo Olympics or the Grand Prix, uh, for formula one outside or even Wimbledon. Um, basically, um, yeah, it is, it’s usually a case by case case decision because in not all events, I mean the smaller ones are unsure. On the other hand, some policies carry to pandemic exclusions. If you look into Wimbledon, for example, Wimbledon has adjusted policy with their insurers, uh, after the Cyrus, uh, um, let’s say the SARS crisis. Um, so it means that, um, yeah, likely to, um, to get, I think run about a hundred million pounds, um, from the insurer.

Toni: (06:22)
So I think, um, that’s, that’s an aspect of events and then a very important aspect I believe is business interruption. Um, usually business interruption policies, um, do not cover extraordinary events. Uh, false business closures due to some authorities, governments or infectious diseases. Um, when what we saw with the SARS crisis, that usually is, I mean companies look at this on a case by case level and they look basically into the contracts and what is insured and whatnot. Um, but I think there’s going to be an evaluation from a case by case perspective from the insurer and then obviously into worker’s injury. I mean, um, companies have employees infected by the virus. Mmm. And, um, think about kind of the entire medical space. Think about the aviation space, think about utilities and, um, I mean, companies are going to issue claims to cover the loss of income and medical medical expenses, right.

Toni: (07:22)
So they might file workers worker’s injury in that, in that case. So that’s all commercial sides. On the personal line side actually. Mmm. It is expected that we have significant lower, um, lower claims due to the lock down. In the United States, I think 10 of the largest motor insurance companies, which own more than 70% of the market are paying us, uh, more than 7 billion us dollars to their customers. Um, because to take care about the customers giving back, there’s no claims. People are, there are less people on the roads. Um, and I think kind of, um, that’s, that’s as well I think a strong a message from the insurers to say, well, we are here for you consumers. Why we want to kind of get in contact to you. We want to reengage with you. I think I found this, this is very positive. Uh, on the other hand, I mean with regards to travel, insurance insurance have been been a pretty quick in terms of excluding COVID 19 from, uh, um, from kind of the coverage, um, coverages.

Toni: (08:29)
Right. Um, and that’s kind of, um, yeah, I think it makes picture, right? If you, if you look into event cancellations, if you have on the commercial side, if you look into first Alliance where we give money back and then on the other is insurance, but on the other hand as well kind of looking into a case by case decision. So, um, finally I believe at as stated in the beginning, uh, that life and health obviously, uh, hits, uh, very much, um, especially if you look into kind of the mortality right, which, which, which is basically driving, um, claims in the live space. But I strongly believe that especially life and health are going to be area, um, that on the, on the mid and long term are going to recover significantly because I’m in that environment, but people simply need more care.

Toni: (09:19)
Um, and people simply need, um, better their service in terms of, in terms of their health. And I think that health is such, um, is going to have the tremendous value for the people, uh, more than ever before I would say.

Josie: (09:35)
And if we look more long term, what do you see in terms of the impact on the industry?

Toni: (09:42)
I think in general insurers, I mean nobody was, was thinking about, um, about this crisis, right? But I think that, um, I’m considering a range of scenarios for insurers. Um, doing the simulations type of for these type of cases is on one hand going to be a very important aspect. Is quite a difficult area to, uh, to manage properly. But I think having multiple scenarios in place and counting on those scenarios, evaluating them is going to be going to be a pretty, pretty significant environment.

Toni: (10:17)
That’s first, second I believe that um, increasing, uh, client outreach being close to customer, um, is a key aspect. Right? So insurance business was a very offline business. Um, I mean even in, I mean we are here in Germany, right? Even in those markets, like in Germany, I mean, um, for, for the very big insurance, 80% of their revenues have gone through an agent channel, which was pretty offline, was, I mean the mobile phone was, was basically all communication was, was how they engaged. But it was about physical meetings. It was about going to an agency, going to branch. I think this is going to change. And I think kind of increasing those digital distribution channels is going to Mmm. To be very much in, in the focus for the insurance. And third, I think, um, accelerating on their digital transformation. Um, I strongly believe that there’s a pre COVID 19 and a post COVID 19, um, um, face especially for the insurance.

Toni: (11:24)
The insurance industry traditionally was like very much into digital transformation. So you had some light houses that are kind of, uh, you have a lot of InsureTechs especially in the, in the recent years coming up. But, um, I think that for those insurers that have done back when digital journey covert 19 is, um, the proof point. And for those insurers that have not done it, it’s a kind of starting point. And based on my recent conversations with the CEO of big, what would be an insurance carrier, um, he said, well, the postcode with the only investment budget I’m running after is digital digital, digital, digital transformation.

Josie: (12:05)
Yeah. Yeah. And, and it’s interesting cause I think this is just a common theme for all industries at least so far for the guests that I’ve had on the show, talking about kind of how digital transformation is being accelerated by COVID 19 and that industries now really have to start seriously thinking about their digital transformation. So of course in this case technology plays a huge role. So how do you see that technology will play a role in both the recovery but also the transformation of insurance after COVID 19?

Toni: (12:41)
So I strongly believe that, I mean those companies that basically are proactive with their customers and that, uh, empathetic with the customers are going to be those companies that now [inaudible] are going to retain their customers better. Um, and there are simple things, right? You can have coverage applicability, you can have self service portals, um, round the clock availability for an insurance company. It was not a traditional traditional model that they’ve been looking after having a fleet frictionless claims process, having a swell in outreach to the customers through various channels and explaining what is covered with your policy and whatnot. I think that’s, these are simple things that you can consider. The bigger things to be considered is actually working with digital ecosystem. So what I mean by that is I think insurance as a business that’s just risk averse, providing insurance against a risk that potentially can occur.

Toni: (13:46)
I think those times are over. I think kind of the orchestration within an ecosystem, meaning an insurance company that’s operating health insurance, having a strong network, two hospitals, a strong network to doctors and ecosystem platform with which you can manage not only an insurance policy but even related to services. How to bring a customer from home to the hospital, right? All of those organizing those services. I think managing digital ecosystems is going to be very keen. And then, um, let’s say the entire aspect of um, how to provide a better customer experience. If you can imagine now for those smaller businesses that uh, basically get a denial on their coverage, I mean this is, uh, this is a big impact. Impact for them. How to structure a new product, how to get back to those two, those to those business owners of these small, medium, medium businesses and offer a way of a policy forwards.

Toni: (14:52)
Right? Got the experiences in the different conversations. I think that’s going to be, I’m going to be a very important aspect. And um, that set in a nutshell, I think digital transformation covers all of that, right? So I believe it’s kind of a short term impact on some, let’s say function, some features you provide. It’s about the digital ecosystem and it’s about the experience you provide to build better products and services for customers as well in a better way. And actually, um, that’s why we from an SAP point of view are kind of writing this and kind of three phases. When we speak about COVID 19 to our customers, it’s really about responding, helping customers to respond immediately. We offer a couple of free products with regards with regards to that out of our Qualtrics portfolio, especially when it gets down to customer satisfaction, but as well to protecting your workforce. On the other hand, it’s about truly as well a recovering right supporting customers to recover. Um, and in the end reimagined the business model because I believe that the business model, the insurance had a such before that is going to change significantly based on the crisis.

Josie: (16:06)
Mm. And do you see so far, any examples of insurance companies that are kind of taken advantage of tech in, um, coping with the coping in the current situation?

Toni: (16:19)
Yeah, I think very interesting point. Um, which uh, which we are working on currently is um, I mean some part of ours is um, discovery. Mmm. And in fact, by the middle of this year we are launching a new health engagement and health benefits platform too, which is, which will be connected as well based on our technology to our platforms and what discovery is doing. I mean, discovery is using, for example, one of our tools called SAP jam to stay in contact with, with their, um, with w with, with their people, right. To, to have groups formed where they can raise concerns with regards to their health with the ongoing situation and work. That’s just one example. The second example could be picking up a thing on, I would say is currently one of the innovative financial services firms globally out of China. And they have a, um, one of the unicorns is called good doctor.

Toni: (17:17)
So you as an insured person or somebody who is registered on the platform can get health advice first by, um, by getting some insights into the disease you might have. And then second, by being connected to doctors that take care about that. If you can imagine, are 300 million Chinese people are connected to this platform, can you mention which amount of data, which amount of, um, which amount of, of support the company can provide or the insurer that case and provides to those customers? Terms of advising. I think those are the things that I believe going forward in the future. Um, very much, um, very much, very much being seen by us.

Josie: (17:59)
Hmm. And speaking of the future, we’ve touched on this and you’ve touched on this, but if you could on the finishing line, give your advice to insurance companies listening right now about what you think they should be doing to future proof themselves. What would you say?

Toni: (18:17)
So from a SAP point of view, I mean, what, when we’ve made up our mind, we sat down our five priorities, um, companies should, should look at a program, number one, it’s too close to the customer, um, and respond to me to teach you to this. Parenting. Number two is protecting the workforce. Um, so watching the, your, your people are healthy, happy and, uh, and, and as well, I mean, the healthy doesn’t mean just physically, but kind of as well mentally, right? It’s a second point. Um, then safeguard financial performance, I believe. Having an overview of what is your spent waste setting, what is the impact of your priority simulating scenarios and business planning going forward. These are the top three. And then, uh, in terms of thinking about the future post COVID 19, um, thinking about how to increase flexibility, how to increase time to market, um, how to launch an insurance policy within a week instead of working on, on it for three months, half year or a year.

Toni: (19:24)
Right. Which is, I mean, it’s not unusual that a company needs a year to launch a new insurance, insurance product and new insurance and then managing, um, disease risk exposure. And that’s kind of why we partner up with discovery to come up with what’s the new health engagement and benefits platform, um, to show, to, to, um, to health insurance. What’s aspect, for example, um, how you eat, how you work, uh, how you exercise has on insurance. And to cover this with, uh, with, with, with uh, great, uh, great health benefits spectrum. I think that these are kind of the five priorities that we are seeing for insurance going forward.

Josie: (20:07)
Hmm. Thank you for outlining those. And thank you so much for coming on the show and talking about how insurance is being impacted by our current global pandemic.

Toni: (20:18)
Yeah. Thank you so much. And thank you for the great conversation

Josie: (20:21)
and to those who listened to this episode. Thank you so much for listening in. Hopefully I’ll see you on the next episode and hopefully we can continue to have these great conversations around how companies should be responding to this cyclone current global pandemic, but also maybe at a later point we talk about the other faces of how to recover and reimagine. So thanks for listening in and see you on the next episode. Thank you, buddy. Thank you for listening to this episode of our podcast. Please subscribe to our channel industry insights by SAP at open SAP, Apple, Spotify, or Google podcasts. To learn more about what SAP is doing to help you cope in covert 19 you can go to sap.com about global health safety and find free access to select SAP software tools to support your business and much more. Stay safe. Everyone.

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