Re-thinking The Insurance Industry In Real-Time To Cope With Pandemic-scale Disruption

The Insurance industry is in uncharted waters and COVID-19 has taken us where no algorithm has gone before. Today’s models, norms, and averages are being re-written on the fly, with insurers forced to cope with the inevitable conflict between old standards and the new normal.   

Take the restaurants of New York City suing their insurers for hundreds of millions of dollars. The restaurants argue that they sustained income losses and direct physical losses from the pandemic, which forced them to reconstruct their properties to adapt to restrictive reopening rules. The insurance companies disagree on potential coverage under the commercial property policies, citing that coverage definitions put in place before the pandemic, or its implications, were widely understood. 

Insurance companies, like most, were taken by surprise by COVID-19. Their models, data, and systems, curated for decades or centuries and fiercely protected, simply did not and could not factor in how a global pandemic would affect their customers. Now, they face a world with restrictions they did not expect. The COVID-19 pandemic has upended expectations and is pushing the normally slow-and-steady insurance industry towards accelerated digital transformation. Along the way, tried and tested models and processes are proving unreliable, triggering an evolution in the insurance industry.

COVID-19 COMPLICATIONS AND MORE

2020 may go down in history as the most complex year in Insurable history, thanks in part to the multiple, conflating disasters making their presence felt across the globe. Let’s go deeper on that claim by New York’s restaurants.  

Damages caused by COVID-19 on its own are not physical. The pandemic alone was not the cause of broken equipment, fixtures, or fittings, for example, as might be the case in a hurricane. Instead, the government forced businesses to close, causing financial damage. When they were allowed to reopen, restaurants had to invest in revamping their spaces to meet new codes and regulations. The restaurants view this as damage. To their insurance company, it’s outside the scope of what they meant by damages when the policies were written and signed. 

But then, the civil unrest, protests, and demonstrations of summer 2020 hit. Restaurants sustained more familiar damage — broken windows, stolen inventory. Is that covered? Now the insurer has to figure out which part of the lost revenue and expenses to fix the property should be attributable to broken windows compared to COVID lockdown.

Another example can be found in health insurance, when evaluating the long-term health effects of COVID-19, based on limited, changing data. 

If you’re in the hospital and COVID-19 causes lung damage, heart damage, or any of the other long term health issues that are still being discovered, insurers have to figure out what is associated with COVID-19, as opposed to pre-existing, or entirely separate, conditions.

Insurers are thinking on their feet. New processes, research, and data analytics are under pressure to help identify what should be paid, and what should not.  In the middle of a pandemic, the insurance industry, traditionally slow to evolve, is moving at breakneck speed.  

But, there’s another complicating catch. 

A lot of the traditional methods for gathering data in insurance, visits by a claims adjuster to inspect damages, and in-person doctor appointments, are impossible in a pandemic. The historical data that was the basis for so many decisions could now be irreconcilably out of date. No one knows if things will go back to pre-COVID patterns or if there will be a new normal. Insurance companies are dealing with a more complicated landscape that is simultaneously evolving, and rife with uncertainty. 

REIMAGINING INSURANCE DURING A CRISIS

These challenges have opened up a world of possibilities to reimagine insurance. After all, at its core, insurance is a data business. The entire business boils down to the accurate assessment of risk through data. Health data. Financial data. Environmental data. COVID-19 has taken away the traditional ways of gathering that data, but digital transformation offers insurance companies new ways to fill the void and even improve on previous models. 

Instead of in-person appointments or walkthroughs, insurance companies may now rely on drone footage, satellite imagery, social media posts, and mobile apps that gather data on customers.  Using these forms of structured and unstructured data can unlock new insights, both in isolation and in combination with each other.  It offers another set of information to round out the historical information about an individual customer or business.  

For example, an estimated 200 million physicians, scientists, and technologists are currently using massive amounts of data to work on solutions in the fight against COVID-19. AI and advanced algorithms are being used to derive insights from all sorts of new data sources to identify at-risk populations, control the spread, and deliver a vaccine. And the approach extends to insurers. Those debates about which conditions are included in a COVID-19 diagnosis are aided by large-scale analysis of aggregated medical records, streamlining billing processes to cut costs and improve reliability.

If we look at the NYC restaurant example, the drone footage, satellite imagery, and social media information can help to supply further information to assess claims related to civil unrest protests. 

It’s much easier said than done to utilize this new data. For traditional on-premises data management systems, the more types of data that need be analyzed, the more expensive and slower the system can become. With new types of data being added all the time, that quickly becomes cost-prohibitive and cumbersome.  

CLOUD-ENABLED EVOLUTION 

The evolution of cloud technology can help insurers as well.  The cloud can store structured and unstructured data, flexing to allow new types of data, processes, and models based on real-time analytics to be spun up and scaled faster than ever before.

Unrestricted by storage or processing power, the cloud is agile enough to support new business models. Should an insurer offer discounted monthly rates to commuters now working from home? Or increase home insurance premiums for the same work from home folks? Offering such real-time insurance means juggling the processing and coordination of data from multiple sources, live, but the benefits are palpable. With new streams of data, being gathered and analyzed in near real-time, insurers can offer more personalized, timely, and relevant services than ever before.

Aside from providing speed and agility, the solutions built for cloud deployments provide the security and safety required to protect data. In a heavily regulated industry like insurance, the ability to adjust to new and evolving laws, like GDPR, CCPA or HIPAA, with a full chain of custody for all data, supported by consistent permissions and protections. Cloudera’s SDX solution provides transparency into data lineage from third parties, giving insurers the ability to trace who, what, where, when, and why every piece of data was used across their systems. 

And while employees may have had to relocate their physical workplaces during the COVID-19 pandemic, insurers can reap the benefits of cloud storage and computing in combination with their on-premise systems for day-to-day use. For a risk-averse industry, this should be appealing. 

As we look ahead to a world that has learned from COVID-19, rather than simply coping with it, many things are still uncertain. Perhaps the least uncertain of those is the transformative role the cloud is playing in facilitating the evolution of Insurance. While the waters may still be uncharted, they’re less daunting during COVID-19 than at any other time, as an entire industry makes giant leaps toward digital transformation.  What started out as a forced evolution may actually become the driving force in the insurance revolution.  

Learn more about Cloudera in Insurance here.

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