GrowthCast Episode 29: Emerging Strong: Crisis Management Principles for the Insurance Industry

DHG’s Matt Church explores the impacts of COVID-19 on the insurance industry and discusses what companies can do now to be emerging strong with business agility.

Transcript

Introduction

[00:00:09] JL: Welcome to today's edition of DHG’s GrowthCast. I'm your host, John Locke. At DHG, our strength lies in our technical knowledge, our industry intelligence, and our future focus. We understand business needs and are laser-focused on company goals. In this ever-changing world, DHG's GrowthCast provides insights and thought-provoking conversations on topics and trends that address growth opportunities and challenges in the current and future marketplace. Thanks for joining us as we discuss tomorrow's needs today.

[00:00:42] ANNOUNCER: The views and concepts expressed by today's panelists are their own and not those of Dixon Hughes Goodman LLP. Always consult the advice of your legal and financial professional before taking any action.

Interview

[00:00:58] JL: Our guest today is Matt Church and our topic is crisis management for the insurance industry. Matt serves as the managing partner of DHG Insurance, the national insurance industry practice of Dixon Hughes Goodman. Matt is based in Charlotte and has nearly 20 years of public accounting experience focused on the insurance industry. Matt provides internal and external audit services under both the US GAAP and Statutory Accounting to a broad range of clients operating within the insurance industry.

Matt, welcome to GrowthCast.

[00:01:31] MC: Thanks, John. Really excited to be here. Appreciate the opportunity.

[00:01:36] JL: Matt, share with us how the insurance industry handle the COVID-19 pandemic and the current state of things for the industry.

[00:01:45] MC: John, that is a great place to start this conversation. Unlike many industries we see struggling today on the news and social, industries such as hospitality, travel, retail among others, insurance was one that was considered essential, which in a very, very basic view this designation of essential allows consumers to continue purchasing new and renewal insurance policies while also allowing incoming claims to be paid or reimbursed to policyholders or beneficiaries. Insurance companies have continued to operate with little to no restrictions. Therefore, really, while the economy was shut down, insurance transactions were not. As a result, the ultimate impact to the insurance industry is still developing. We likely won't know the real impact for some time. Things like capital markets, interest rates, federal and state legislation will all have an impact on the industry that is yet to bear out.

Think of the impact stay-at-home measures have had. Nonessential business closures due to the economic shutdown in the safer-at-home measures will have a lasting impact on commercial lines business due to a reduction of premiums as many of these companies may not reopen, whereas personal lines such as auto on the other hand have seen a decrease in claims due to less cars on the road as a result of the same safer-at-home measures, which in many cases has prompted some insurers to even issue premium rebates due to less time commuting and traveling or the risk related to the policy of their customer base.

Then when you consider the risks to life and health insurers who are likely going to be hit the hardest, it really is hard to tell how long it'll take to see the true impact of this global pandemic. Ultimately, the impact of COVID-19 to the insurance industry will be measurable. For individual companies, crisis management could have the biggest impact on not just their results today, John, but really how they emerge.

[00:03:50] JL: Interesting. Well, Matt, tell us a little more about how crisis management comes into play here.

[00:03:55] MC: Certainly. Companies who have approached crisis management from a holistic standpoint have really been the ones most prepared, and one key piece of effective crisis management is having a business continuity plan which many companies do. However, in many cases, probably most cases, maybe almost all cases, the operational effectiveness and depth of most business continuity plans had not been tested to meet the needs of a global pandemic. Most companies have been forced into triage mode such as having to bridge the gap from a limited or nonexistent remote workforce to an organization-wide work-from-home model.

[00:04:38] JL: Matt, what are some considerations for insurance companies to make this holistic approach to stay prepared?

[00:04:44] MC: A holistic approach, John, in my opinion starts by taking a step back to look at the entirety of the organization. To have effective crisis management, you must understand the critical success factors to running the business and the risks or barriers to each of these factors. Many of these barriers can be overcome by technology adaptation in the industry. While, John, you don't operate or spend much time in the insurance industry, let’s just say that that industry does not have the best reputation for rapid deployment of technology.

For example, most companies have closed their campuses or offices and went to a work-from-home model for the safety and well-being of their employees. We are blessed at DHG to have the right technologies as so many of us routinely work on site, and therefore this seems like a simple transition. But we keep hearing stories of challenges related to work-from-home arrangements not just in insurance but broadly. But particularly with our clients, we have these conversations. In some cases, certain employees are still working on a desktop rather than a laptop. Limited access to travel or extra monitors that could easily be used to increase efficiency in a remote environment, a lack of VPN license to cover all employees, and so critical software and systems are inaccessible to everybody when they need them. Then ultimately, a lack of communication tools to provide employees with real-time information such as Yammer, Microsoft teams, and other available tools.

Then personally, my favorite is hearing stories where companies don't have Zoom or other videoconferencing software. I think some days I really wish we didn't have that technology either. I can imagine a world without Zoom at this point.

[00:06:24] JL: Well, I’ll tell you what. Our world has become Zoom, hasn’t it?

[00:06:29] MC: All too much.

[00:06:29] JL: It really is one of them. It’s hard to imagine that anybody can function without some level of videoconferencing capability, but I guess there are still some out there. Matt, what else should insurance companies be thinking about as they seek to really emerge strong for this next phase of our economy?

[00:06:48] MC: Well, John, there’s a thousand micro decisions a company can make that would really have a profound impact on how they emerge. But at the macro level, this is how I view our practice is to focus on these three principles really on a daily basis. That’s communication, collaboration, and action. If you do that, it feels like your organization should be well-positioned to emerge strong. When I think about communication, your company should have a broad strategy in communicating with key stakeholders, customers, external distribution channels such as agents or others, employees, the board of directors, and then many, many others not named.

Each day as you know, we’re making new decisions based on new information, and the results of these decisions impact many, and so it’s critical to keep your stakeholders not only up-to-date but also engaged as we’ve seen that the customer experience, the employee experience when folks are engaged is much, much stronger. Then when I think about collaboration, it really is to create that active dialogue between company leadership, the crisis management team in place, your regulators if applicable, external legal counsel, you internal public relations really to ensure that you’ve considered all external factors when making some of your decisions.

Then lastly is action. It really comes down to understanding your business and the impact that this virus or the next one can have on the critical success factors that we discussed before and then your ability to develop a response to limit those risks. As this virus changes daily, it is important to move forward with agility and optimism. As this pandemic was unprecedented and preparation was a broad issue, the time to respond to the next level crisis will have to be faster and much more streamlined.

[00:08:44] JL: Well, you mentioned early in your comments how this industry is not known for its agility and impromptu nature for response, so it's a time to rethink in this industry exactly what is it going to take to be more agile as we move forward. This is kind of a wake-up call, right?

[00:09:06] MC: Absolutely. It really is. We’re seeing it. I mean, our clients, we joked earlier about the lack of Zoom or videoconferencing capability. That’s clearly those folks and those companies have responded and now they’ve got those measures in place. Whether it's a lack of VPN license on day one when we went to work from home to making sure you’ve got enough of those secured today so that folks have the appropriate access. A lot of that happen, but those were sort of need-based in the moment. As technology emerges, how insurance companies and other companies and other industries really respond to that emerging technology adopt it. This has really been, again and you just said it, it is a wake-up call for the industry. It’s going to be interesting to see how it plays out.

[00:09:56] JL: Yup. So over communicate, collaborate, and what was the third? Take action?

[00:10:00] MC: Action.

[00:10:00] JL: Take action, yeah. Wonderful insights. Great advice. Matt, thanks so much for sharing this today with our listeners, and I look forward to having you back hopefully soon on another edition of our DHG GrowthCast.

[00:10:15] MC: Appreciate the opportunity, John. It’s good to talk.

End of Interview

[00:10:19] JL: You’ve been listening to DHG GrowthCast with Matt church, managing partner of DHG’s insurance practice. We hope that you have a better understanding of how our current healthcare crisis is impacting the insurance industry, as well as a few tips on how the industry can position themselves to emerge strong.

I'm your host, John Locke, and I look forward to reconnecting with you soon on another episode of DHG GrowthCast.

About DHG's GrowthCast

At DHG, our strength lies in our technical knowledge, our industry intelligence and our future focus. We understand business needs and are laser focused on company goals. In this ever-changing world, DHG’s Growthcast, provides insights and thought -provoking conversations on topics and trends that address growth opportunities and challenges in the current and future marketplace. Join us in discussing tomorrow’s needs today.

Disclaimer: The views and concepts expressed by today’s guests are their own and not those of Dixon Hughes Goodman LLP. Always consult with your legal and financial professional before taking any action.

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