Measures taken by the governments of the world have taken a collective swipe against the global pandemic caused by COVID-19. In the process of trying to stop the virus, governments have also stopped the economy.

On the front line of the battle against the virus is the NHS, rightly applauded each week by the British public. The other front line that is beginning to appear is the economic one and it’s this that the financial services sector finds itself on.

The insurance sector has had to respond, juggling the importance of keeping shareholders happy whilst maintaining brand goodwill.

Calling out the insurers

It hasn’t taken long for complaints to arrive. Research carried out by the consulting firm, Mactavish has accused insurers of using the pandemic as a means to benefit. The research suggests that at least five insurers have recently removed cover from commercial policies as a result of the pandemic, all the while charging higher premiums to customers.

Speaking about the research, Bruce Hepburn, CEO of Mactavish said, “over the past few weeks, businesses up and down the country would have received insurance offers and accepted them, but at the last minute, just days or even hours before renewal, elements of their cover were removed…whilst insurers and brokers are seeing their financial rewards increase.”

It makes for uncomfortable reading; an inferior insurance product delivered at a higher cost to customers, slipped in under the fog caused by Coronavirus has all the ingredients for the destruction of consumer trust in the sector.

Fighting the good fight

Despite the controversy, not all insurers can be accused of sitting back and watching their reputations take a hit. Consumer insurance firm, Admiral was the first out of the blocks when on 21st April the company announced that it would be issuing motor insurance customers with an automatic refund of £25 per policy, representing a £110m bill for the firm.

A cynic might say the move was simply an effort to get upstream of inevitable complaints from motor insurance holders who throughout the lockdown were unable to use the roads, but still required to pay for cover. Regardless, the move came across well with customers with over 20K tweets within hours of the news breaking.

Other insurers have made similar moves. Direct Line will also be issuing refunds to motor insurance customers, the rub here, however, is that customers will need to actively seek out the refund by readjusting their cover to reduce mileage and foreign travel requirements.

In addition to this intervention, Direct Line expects to spend £70m in support measures resulting from insurance refunds (see above), the waiving of cancellation fees for customers in dire straits and deferring premium payments for customers requiring financial assistance.

Protect the NHS

The sector has also been quick to support the NHS. Direct Line is covering all NHS workers with free roadside assistance, provided by Green Flag. In addition, the firm is providing its NHS employed customers with free home emergencies and personal protection cover.

Likewise, Admiral is waiving motoring claim excess fees for NHS and emergency services workers. The insurer is also offering free courtesy cars to NHS and emergency service workers when their vehicle is stolen or damaged. Admiral has also provided financial support closer to home by setting up a £4m support fund in South Wales, where the firm is based.

The cost of the pandemic

Direct Line is expecting to feel the burn of a £44m hit to its travel business, should Foreign Office travel advice (read: ‘restrictions’) remain in place to September. Add to that the already mentioned £70m fee the firm faces from its interventions and it’s facing a big bill.

Commercial and personal insurance provider, Hiscox has estimated that it will have to pay out up to £142m in insurance claims resulting from travel restrictions should the measures stay in place through to September. The firm has, however, said that its core commercial products do not cover business interruption as a result of the pandemic response.

RSA, the firm behind the More Than brand has fared a bit better, estimating a bill of around £25m, the result of claims coming predominantly from travel restrictions and event cancellations, including weddings.

Surviving the pandemic

It’s clear that the insurance sector is fighting a battle on two fronts: pleasing shareholders and protecting brand image. Admiral, so far, seems to have succeeded at both. On the day it announced its £110m refund, its share price rose by three percent.

Chief executive of Direct Line, Penny James has said, “Acknowledging the importance of dividends to shareholders we will review our dividend position alongside our half-year results and on an ongoing basis once it is possible to have a better understanding of the impact of Covid-19”. Hargreaves Lansdown analyst William Ryder expects the pandemic to have “little impact” on Direct Line’s profits.

Firms’ financial positions may hold up, how about their brand positions? The insurance industry will have to tread carefully. Offering positive interventions is welcome news to customers, which then is welcome news to shareholders. However, if the research from Mactavish signals a trend of inferior cover combined with rising prices, the sector will have an image problem to contend with.

Marketers in the space will have to be alert to this risk, working closely with product teams to provide customers with clarity on cover and ease of access to information and support. As we have seen with the banking sector creaking under the stress of increased demand for financial support, the insurance sector too must be in full alert-mode, ready to provide digital-first solutions to their customers’ insurance needs.