Covid-19 has ushered in a new normal, completely altering the prevalent socio-economic fabric and changing the way businesses and processes are conducted. With the current scenario likely to extend into the foreseeable future, people have accepted the new normal and are adapting to the same. As businesses and individuals navigate the uncertainties and build a futuristic and more resilient business model, there are several new kinds of risks that are likely to emerge on the path ahead. The year 2021 is going to be about identifying emerging and growing risks and accordingly creating products that can effectively mitigate these risks. This presents a big opportunity for insurance companies to optimally leverage technology to pave the path towards a more secure and robust business environment in 2021.
This is not, however, the first transformation witnessed by the insurance and risk management industry. Post the nerve-wracking terror attack on Mumbai, in November 2008, terrorism insurance received newfound importance. While the lives lost could never be regained, the Taj Hotel, an important landmark in Mumbai, was renovated at an estimated cost of Rs. 300 crores paid for (in part) by insurance cover against property damage and business interruption arising out of terrorism.
Coming back to the present year, it is evident that technology is the backbone of the economy, with work, education, healthcare, communication, and entertainment being disseminated through the internet. While technology has opened up an entire vista of opportunities, it has also brought with it some inherent risks and concerns. As the world treads into a new global order, it is imperative to step with caution and identify and mitigate unforeseen risks involved in business continuity, technological advancements, Environment, Health and Safety Measures (EHS), hybrid work, and digital financing. Insuring against inherent threats is the way forward and it is heartening to note that the insurance ecosystem is stepping up to address the risks in the new normal. Albert Einstein famously said, “in the middle of adversity, there is great opportunity”. Insurance companies have an opportunity to recognise these emerging risks and create products that can effectively meet the need of businesses to mitigate them. Some of these opportunities are discussed below:
Business Continuity and Fortitude
Over the course of the year, many businesses have, belatedly, realised the importance of securing their futures with an optimal insurance plan. As companies step into the hybrid new normal, effective risk management strategies are required, coupled with insurance, to ensure that they are prepared to face potential hazards and mitigate the fallout. Insurance affords businesses the confidence required to take defining decisions and navigate around pitfalls that might end up crushing them. A fusion of technology, insurance cover, and analytics is necessary to keep businesses in the black during the new normal. Additionally, a simple business interruption cover is unlikely to offer protection in crisis situations like the pandemic, leading to the need for policies that cover specific risks like capital risk, supply chain disruption risk, profitability risk, data security risks, etc., to ensure that business continuity is not affected adversely. Indeed, insurance provides businesses a foot to stand on even when the ecosystem begins to break down.
Technology Adoption and Cybercrime
With work from home and online education proliferating in the new normal, technology and the internet has become the backbone supporting the socio-economic infrastructure. With everything from classified documents, to transaction data being transmitted online, cybercrime has risen to worrying levels in 2020. India’s national cybersecurity coordinator Lt. Gen (Retd) Rajesh Pant shared recently that around 400,000 malwares are found each day and 375 cyberattacks witnessed on a daily basis. With such alarming magnitudes, it is no wonder that companies are willing to pay handsomely to insure themselves against the fallout. According to a report by P&S Intelligence, global cyber insurance segment revenue is seen touching $70,671.9 million by 2030, rising at a CAGR of 26.3% over the next 10 years.
Protecting the Employees
The pandemic has brought employee safety and wellbeing into sharp focus. Companies resorted to work from home, even before mandatory lockdowns were announced, to safeguard the health of the workforce and their families. Even as the workforce prepares for a gradual return to work, enterprises are keen on investing in Environment Health &Safety measures to protect employees from future disruptions and health scares. The EHS report by Markets and Markets report suggests that the global market is seen growing at a CAGR of 10.2%, between 2019 to 2024, reaching $8.6 billion, presenting a major opportunity for insurance cover in the segment.
Insurance gains added importance in an uncertain ecosystem, and the pandemic has robbed enterprises of the prevailing belief in status quo. As the world opens up into a hybrid landscape, the insurance industry is faced with myriad challenges and opportunities that are set to shape the future model of the risk mitigation segment.
Views expressed in the article are the personal opinion of Dhirendra Mahyavanshi, Co-Founder, Turtlemint (An InsurTech Company).