It’s no surprise that COVID-19 has dramatically impacted overall business results across many industries, and it’s no different for insurers in the U.S.  

 

To gauge the level of impact, ZS is tracking the volume of quotes received for a consortium of insurers, which serves as a leading indicator of sales. We’ve found that overall quoting activity for an average insurance carrier is down more than 15% year-to-date across all employee segments compared to 2019, with the under-100 employee segment experiencing weekly declines of greater than 30% since the COVID-19 outbreak. Construction, manufacturing and retail (down 19%, 22% and 25%, respectively) were the hardest-hit industries.

With substantial declines in quoting activity in some segments and industries more than others, and no signs of recovery in the near term, which is especially concerning as the January 1 business season starts to become relevant, what should you be thinking about?

 

Here are a few levers carriers can pull to recover some of the production they’ve lost due to COVID-19:

  1. Shift focus to products and segments that are more resonant: We estimate that insurers can recover 2-3% of lost opportunity by shifting their customer focus and targeting to segments and industries less impacted by COVID-19. For example, the less than 1,000-employee segment has been less impacted compared to other segments with voluntary products (accident and hospital indemnity) actually experiencing moderate growth year-over-year.

    Further, evidence suggests that consumers spend more immediately after a disaster, not during it (a tendency often attributed to the availability bias). Shifting resources to the right segment and most relevant product categories now will help insurers catch this opportunity when the economy rebounds. Refocusing your teams is a considerable undertaking. Segmenting customers by size or industry, adjusting coverage and operating models, implementing new ways to engage weak and strong relationships and offering stronger incentives for brokers with a high concentration of customers in target segments are just a few things carriers we’ve spoken to are doing. Carriers who can shift their teams to focus on the more than 1,000-employee segment stand to realize the most gains. 
  2. Align sales and underwriting to recover revenue and profitability: By aligning sales and underwriting toward the same goals, insurers can yield another 5-7% in sales and get the most out of their pipeline. Sharing a common goal such as capturing greater share in the less than 1,000-employee segment and becoming more aggressive with pricing in certain scenarios can help maximize wins in the most important areas and with the most important brokers. In addition, better leveraging underwriting throughout the deal cycle can increase the impact of each customer interaction and help to advance sales faster. 

    More insurers are starting to accurately value opportunities and have the sales and underwriting teams communicate openly about them. This allows both parties to see in real time how valuable a broker, segment or case is and then make a rational choice about whether to be aggressive about pricing. Perhaps more importantly, insurers can use data to better guide their renewal strategies, identifying where insurers should hold prices and where they can get more aggressive. Further, carriers can better align incentives to ensure both teams are rewarded for making the right choices (or at least not decentivized from working together).

    How can your organization identify the right opportunities and situations in which sales and underwriting should make a concerted effort to win business? Although sales might be down about 20% for some insurers, deploying these smart moves can help to claw back about 7-10% of this lost opportunity. How effectively can your sales team shift focus as trends evolve? Changing a sales team’s focus and engaging other business units within your firm to make these changes a reality is no small task. It requires substantial coordinated efforts.  
 
Carriers should consider developing strategies for the “new normal” today so they’ll be well positioned to make headway on the remaining gaps, and then take on other initiatives such as broker-level discounting, churn reduction and cross-sell/up-sell – topics we’ll cover over the coming weeks. 
 
 
To receive insights and participate in our quoting activity tracker, please email COVIDActivityTracker@zs.com.