A new era in the insurance sector
We hear a lot about the negative impact of the Covid-19 pandemic on market trends, but the pandemic has also triggered many improvements and created solutions to some problems. We have witnessed exciting developments in many markets in terms of digitalization, which either accelerated due to the pandemic or were even introduced for the very first time. Digitalisation of business, in particular in rapports with customers, seems to be a key strategic step in the field of insurance markets as well, with Croatia being no exception. However, other than obvious benefits of digitalisation, one should remain very cautious in terms of possible problems it might create, not the least of which being cyber-attacks.
Image: http://www.digitalsolutions.milano.it/
It is a common fact that demand for insurance increases under adverse circumstances. It would therefore not be surprising to see numbers of contracted premiums in the life insurance increase as well. In Croatia, however, the need to insure the risk of natural disasters is more pressing than ever since last year’s earthquakes in the Northern Croatia have made significant damage to both private and public property. Insuring property in Croatia is still often more of an exemption than a rule, at least when it comes to private individual owners, but not only. Digitization in the insurance contracting process is certainly a step that could contribute to increasing property insurance by simplifying and facilitating access to insurance products. According to a survey, more than half Croatian citizens have used digital solutions more often during the pandemic than before, with most planning to continue using such services. When it comes to regular use of digital financial services, research has shown that citizens use digital banking solutions five times more often than they do insurance services. Therefore, there is definitely room for introducing even more digital innovation in the insurance market. Certain insurance companies in Croatia have enabled their clients to use new mobile applications which integrate their services. Simply by scanning your ID or entering only few personal information, the application recognizes a set of services contracted by the client and provides insight into all important information about the insurance policy (premium, start and end date of insurance, possible debt and payment terms, etc.). The application also enables easy reporting of damage in just a few clicks, policy renewal and other services. Additionally, many insurance companies in cooperation with their partners enable the use of various discounts at the partners’ points of sale by scanning the code available in the mobile application.
The possibility to conclude distance insurance contracts greatly facilitates the negotiation of new insurance policies. However, just as it is easier to conclude distance insurance contract, the law also prescribes simple termination procedure precisely due to the contract being concluded without the presence of both contracting parties. Thus, the customer is not obliged to specify the reasons for termination and, as a rule, the contract may be terminated within 14 days of its conclusion. In the event of termination, the insurance company is obliged to repay the premiums paid which creates greater uncertainty in the business of the insurance companies. While the core of digitalisation is greater focus and adaptation to the needs of customers who intensively use technology, there are certain challenges related to digitalization and application of technology which show that technologies are not perfect. There is an increased need to protect against cyber risks, leading to the investment in technology and cyber security being one of the main subjects of interest of many insurance companies throughout the world. Insurance fraud is a global phenomenon which has a significant impact and causes damage not only to insurers, but also to companies in other business fields and even to states, whereas digitalisation is making the problem of cyber-attacks in insurance ever more frequent. According to some research, companies today are increasingly successful in predicting sophisticated cyber-attacks and are generally able to fight them, but they neither invest enough resources in this field, nor do they systematically plan on how to recover from such attacks. As some of the biggest cyber threats, such as malicious software, identity theft and cyber-attacks, are intended to steal financial data, minimising, preventing and detecting fraud should be one of the top strategic priorities of all digitalised companies in the insurance business, and wider.
To summarise, the tremendously increased speed of digitalization brought about by Covid-19 (but not only) is bound to bring positive effects both to individuals in terms of greater choice and more accessible services and to companies in terms of possibility of reaching a higher number of customers. However, on the other side, the companies need more than ever to take precautions to ensure their business and data are safe from cyber-attacks. How this can be done in the most effective way is yet to be seen.
Marina Kovač Krka, Partner
Tea Misbrener, Associate
Divjak Topić Bahtijarević & Krka, Zagreb, Croatia
