The insurance industry had to cautiously manage the process of claims management in consonance with the phases of the Covid lockdown. As the industry leveraged technology to bring in hassle-free services, it also brought greater transparency and efficiency. Let us take a look at some of the common challenges the insurance industry faced and the solutions it adopted during the pandemic.
Since the only evidence of protection was policy documents, there were some initial, yet critical apprehensions. These included the continuity of cover, the relevance of certain conditions in policies, and incumbency to substantiate the loss due to operation of the insured peril.
The General Insurance Corporation of India and, later, individual companies resolved these issues. Firstly, the policies would continue without any let up. However, if stoppages were inevitable due to the lockdown, the shutdown needed due diligence exercised in line with OEM/technical specifications to maintain the currency. Secondly, the applicability of certain policy conditions were decided on a case-to-case basis. Finally, proving losses that gave rise to claim entailed the operation of the insured peril, or not fall in exclusions.
Insurers of Marine and Liability policy faced peculiar challenges during the pandemic. These were insured in view of the conditions and circumstances of the loss. Under Fire Policy, unoccupancy of business premises for 30 days consecutively renders policy voidable. Hence, during the pandemic, insurers took a pragmatic approach of treating claims payable if otherwise admissible. Similarly, as manufacturing activities were stopped, claims on the account of the start-up industries were put under strict scrutiny. This is expected to be complied with the risk management philosophy involving earlier shutdown and start-up methods.
In cargo policies, transit and duration clauses were interpreted giving the benefit of doubt to the insured under various circumstances. These included cases where the movement of transport froze, leaving conveyances standstill enroute. As loading and unloading was stopped due to the closure of airports, there were delays in intimation and completion of transits, posing challenges to insurers. The special warranties of project materials’ storage and safe positioning of machinery under construction policies were not enforced strictly but anticipated basic due diligence.
There was a spurt in claims under liability policies. As bookkeeping and monitoring of employee honesty proved to be a challenge, fidelity and crime policies witnessed an increase in claims. The commercial and service industry faced several data breaches and compromises during the pandemic times. This increased the claims as well. The industry had declared that infectious diseases are not covered as risks under any policy. The insured, thus, had to bank upon the other risks provided under the policy and the situation was not treated as force majeure.
To deal with the challenges, the insurance industry adopted several measures. Employees willingly adopted for work from home with the help of robust connectivity and gadgets. Both insurers and the insured had to ensure that they enhanced their respective technological support to manage their operations. This also helped insurers collaborate effectively despite faceless service operations.
Digitisation of insurance claims
One of the most crucial changes was the digitisation of the entire process of claims management and data storage.. This helped to marginalise certain shortcomings. Players in the claims market were compelled to be proactive as their activities were captured digitally. As travel time and search time for key functionaries reduced, meetings were more structured and purposeful. There was also a greater participation of decision-makers and regulation was transparent.
However, the digitisation process also came with some pain points. The area of negotiation which occupies a greater space in processes in complex claims requires human interaction. Moreover, the absence of a responsive system from any of the service providers and stakeholders created a disconnect in rendering obligated services. A threat to data privacy and cybercrimes loomed large creating hesitancy in the mind of the insured in sharing sensitive data. Digital and programmed communication was also found inadequate as they required top-up mails from service providers.
Through the pandemic, the insurance industry has enhanced processes and managed bugs effectively. In retrospect, the industry has adapted to changes with utmost coordination and best governance practices.
K. Rajendran is Executive Vice President, Claims Management, Global Insurance Brokers