July 21, 2020 by Adam Malik
Insurers are going to need to show maximal flexibility when it comes to selling insurance policies, since a record amount of people are out of work due to the COVID-19 pandemic and won’t have a lot of extra cash to pay for insurance coverage, according to data and analytics company GlobalData.
Nearly 2-million jobs were lost in April in Canada, according to Statistics Canada. In May, the unemployment rate hit 13.7%. About 2.5 million had their hours slashed. So it will be a struggle for insurance companies to convince their customers to keep their policies, according to GlobalData.
So who do you segment in your marketing lists? The key takeway may be obvious, but look for your customers who have full-time work.
“While some economies will begin to open up again, high unemployment levels and reductions in disposable income will be a big issue for insurers,” said Yasha Kuruvilla, insurance analyst at GlobalData. “Individuals who are employed full-time are more likely to hold insurance products than those who are part-time employed, self-employed, or unemployed, as per GlobalData’s 2019 Banking & Payments Survey.”
The federal government unveiled the Canada Emergency Response Benefit (CERB) in response to the massive layoffs due to the novel coronavirus being declared a global pandemic by the World Health Organization on Mar. 11. Many businesses shut their doors and laid off or furloughed staff as a result. The CERB is available to those who lost their sources of income due to the pandemic — either because they lost their jobs, they have to stay home to care for dependents, or they must self-isolate. The benefit is one of several programs unveiled to combat the economic fallout from COVID-19.
By the end of April, more than 7-million people applied for the CERB, which provides $2,000 a month to eligible applicants. It was recently extended for eight more weeks, until the end of August.
Though businesses are starting to re-open across the country as restrictions lift, the economic wounds may be felt for some time “since economic activity will still not be back to regular levels and businesses will struggle to mitigate costs,” Kuruvilla said.
Those who have been and continue to be employed full-time are likely to have a higher income and able to afford greater insurance coverage. “However, uptake of these products will fall as unemployment rates increase across the world and individuals can no longer afford some insurance products,” Kuruvilla said.
“Insurers need to be flexible with their customers in order to reduce the impact of rising unemployment. Payment holidays can help for a limited time period,” he added. “Insurers should also be flexible and allow their customers to adjust their level of cover to one that is more affordable for them. The development of usage-based policies and short-term, on-demand policies with lower premiums will also help insurers retain some of their customers during difficult times.”
Feature image by iStock.com/Sitthiphong