Since the start of the COVID-19 pandemic, SAS has formed dedicated global teams to predict and monitor the pandemic’s course and identify the likely impact for customers. In Turkey, we have identified three main risk areas for insurers and have set out some strategies to help our clients respond, recover and reimagine the new normal.
Rise in external and internal fraud
We expect both external and internal fraud cases to rise. This is for several reasons. First, the downturn in the economy means that fewer people have jobs. It simply makes fraud more attractive. Second, the Turkish regulator has published a new process for remote claims handling, allowing claims adjusters to make an assessment from a photo. This means that fraud is easier. Third, increased working from home means that it is harder for managers to oversee work. Payments that are normally signed off in hard copy by managers are now being approved digitally – and busy managers usually delegate this to team members for ease. Again, this reduces the checks in the system and makes fraud easier.
Loss of customers
There is likely to be an increase in financial risks, including loss of customers and increased costs. We expect to see lower revenue because of reduced contact between direct sales channels and customers. Customers may also let their policies lapse because of the economic downturn. At the same time, costs will rise because of fraud. Claims will also increase, especially in the health insurance market. Regional and national regulations may also tighten to reduce the risk to the economy of insurance companies failing.
Changing scope of customer relationships
The accelerated digitalisation of insurance will affect relationships with customers. In Turkey, most insurance companies have already started the digital transformation of systems and tools. However, it was still common to visit clients or collect hard copy evidence of claims. The COVID-19 pandemic has enforced a rapid move online. Even the regulator has made positive steps by starting to use online signature tools for signing off payments to banks and governmental institutions. Clients now expect paperless transactions, and also want better digital experiences. This has cost implications for insurers, not least because there is already evidence that revenue has declined with the decrease in direct contact.
Designing a response
How should insurers respond to these risks? In the first place, they need to update their fraud rules and scoring models, and perhaps start to use new approaches like social network analysis. Image and voice analytics can be used to calculate the fraud score for motor and health claims, and analytics can also be used to reduce internal fraud.
To address financial risk, insurers can do some scenario modelling to improve risk modelling and also support revenue optimization. Other options include the use of dynamic pricing for pay-per-use modelled policies and products, IFRS packages, actuarial transformation solutions and use cases to enhance sales through digital channels.
Insurers should not underestimate the work required to digitalise rapidly.
Above all, there is an urgent need to accelerate digitalisation among insurers. This includes giving agents access to social network analysis and customer intelligence tools to enable them to use "next best lead" and "next best offer" in their customer network. This will also help them to identify the best time to contact particular customers.
Other useful tools include analysis of churn and follow-up, dynamic pricing to push the best price for customers, claims optimisation tools, paperless processes using image and voice analytics, auto-decision making and routing transactions to the most appropriate employee for review, virtual diagnosis of patients for health claims, and repair time and loss prediction for motor claims.
A significant challenge
These challenges are significant. Insurers should not underestimate the work required to digitalise rapidly. However, by taking these steps to harness digital tools including analytics, they can make the first steps towards emerging unscathed from the COVID-19 pandemic and becoming part of the "new normal."
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