PRELIMINARY REMARKS

Reply leverages Data and Analytics to gain insights into the development of the Coronavirus pandemic and how it impacts society, consumers and industries. Using the Quentin Search Data tool developed by TD Reply, which aggregates data from Google Trends and Google Ads, this report provides an Industry Impact Analysis on the Financial Services sector (including investments, loans, mortgages and equities) and on the Insurance sector (car, commercial, health, house and property, life and travel insurances).

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This report is in no way intended to distract from the fact that the outbreak of the novel Coronavirus is primarily a human tragedy affecting hundreds of thousands of people.

As the situation evolves rapidly, please note that this page reflects the data collected until 18 May 2020.

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To what extent can an industry be prepared?

The European Financial Services and Insurance sectors have been spared from serious losses since the beginning of the Coronavirus crisis. However, some risky trends are emerging as consumer interest in loans and insurance has declined (in some cases significantly) and insurance companies are not progressing their digitalization as they should.

FINANCIAL SERVICES

The current crisis echoes memories of 2008. This time, financial institutions were able to react faster, as they had learned the importance of introducing crisis management protocols. However, credit defaults and the decline in consumer purchasing power still represent an imminent threat.

INSURANCE

Insurers also learned from previous SARS epidemics. Most had already brought pandemic exclusion clauses into their policies, which limited COVID-19 related pay-outs and managed liquidity issues. This is not the case for health insurers, that have struggled with demand for medical services and testing.

AN EARLY PUSH FOR FINANCIAL SERVICES

Data shows that Financial Services experienced a gain of +18% in consumer interest during the Coronavirus peak when compared to the same period last year (CW13-19 2019 vs 2020). This was due to an initial interest in stocks that has now started to normalise.

EU-5 CONSUMER INTEREST IN FINANCIAL SERVICES

08/03 Lockdown implemented in Northern Italy

11/03 COVID-19 officially declared a pandemic

Data retrieved from Quentin, TD Reply’s Search Data tool across 5 EU markets (DE, ES, IT, FR and UK). CW13-19 2019 vs CW13-19 2020.

SHORT-TERM VS LONG-TERM INVESTMENTS

With the fall of worldwide markets in March, we’ve noticed a sharp increase in the interest in stocks. This investment was gradually replaced by bonds, as investors tend to rely on more stable instruments during a crisis. At the same time, we can see there hasn’t been much change for long-term investments, such as pension funds.

INTEREST IN STOCKS

(SHORT TO MID-TERM INVESTMENTS)

INTEREST IN ETF’S AND BONDS

(MID-TERM INVESTMENTS)

INTEREST IN PENSIONS

(LONG-TERM INVESTMENTS)

Data retrieved from Quentin, TD Reply’s Search Data tool across 5 EU markets (DE, ES, IT, FR and UK). CW13-19 2019 vs CW13-19 2020.

LEARNING FROM PAST CRISES

The 2008/2009 global financial crisis weakened consumer confidence in traditional financial services and led to the rise of digitally-driven financial start-ups – evidencing the need of consumer-centricity, low costs and transparency. Another example of evolution in the sector is the 2018 Financial Markets Regulation, that modernised European financial markets and created open banking rules to allow easier access to banking and financial information.

FINTECH TREND DEVELOPMENT

Europe’s largest FinTech Accelerator opens in London

Many countries draft regulations for the FinTech industry

China’s central bank sets up a FinTech committee

Berkshire Hathaway invests in 2 FinTech companies

Visa acquires a stake in Nigerian FinTech “unicorn” Interswitch

Trade Republic (Germany) is a commission-free stock trading app. It achieved immediate success by allowing consumers to invest small amounts of money. As COVID-19 tightens consumer budgets, this application could become a no-brainer when it comes to investment.

While global economies reboot, some small businesses and start-ups can’t recover from their financial losses. They could be making use of equity-based crowdfunding like BacktoWork24 (Italy) – a platform that connects lenders and borrowers, offering equally beneficial opportunities.

GOING COMPLETELY DIGITAL

Previous crises have driven the digitalisation of Financial Services on the consumer side. COVID-19 seems to have accelerated this process and extended it end-to-end.

TODAY

  • The majority of financial firms seek to consolidate remote working as a permanent option.
  • Most office layouts are not suitable for post lockdown regulations.
  • Financial Services typically rely on hardcopies, making remote working more difficult.

TOMORROW

  • Permanent move to cloud servers and computing, enabling faster, cheaper and more flexible remote working.
  • Implementation of smaller, cross-functional teams, to quickly address changes in regulations and consumer requirements.
  • Streamlined workflows and automation to reduce paperwork.

DAMPENED INTEREST IN INSURANCE

Due to the Coronavirus crisis, consumer interest in insurance has decreased by -36% when compared to the same period last year (CW13-19 2019 vs 2020).

EU-5 CONSUMER INTEREST IN INSURANCE

08/03 Lockdown implemented in Northern Italy

11/03 COVID-19 officially declared a pandemic

Data retrieved from Quentin, TD Reply’s Search Data tool across 5 EU markets (DE, ES, IT, FR and UK). CW13-19 2019 vs CW13-19 2020.

CONSUMER INTEREST ACROSS INSURANCE TYPES

Insurance policies that involve a particular case or have to be frequently renewed were affected the most (car and travel). Mid to long-term insurance that is closely linked to the purchasing power of the consumer was also significantly affected (house & property and commercial). Long-term policies like life and health insurance have suffered the smallest impact.

CAR

-39%

TRAVEL

-64%

HOME

-21%

COMMERCIAL

-27%

LIFE

-5%

HEALTH

-17%

Data retrieved from Quentin, TD Reply’s Search Data tool across 5 EU markets (DE, ES, IT, FR and UK). CW13-19 2019 vs CW13-19 2020.

THE RISE OF INSURTECH

The shadow of a possible recession makes consumers look for cheaper, digital, alternatives, giving Insurtech start-ups an edge over traditional insurance companies. This becomes evident when comparing the 1% loss in consumer interest for Insurtechs, against the 36% lost for the traditional business, over the same period (CW 13-19 2019 vs 2020).

EU-5 CONSUMER INTEREST IN INSURTECH FIRMS

Friday is a digital car insurance provider that offers consumers the option of paying per kilometre. As social distancing is likely to continue for the time being, this insurance model will be attractive to many who work from home.

Dinghy offers a “charged by the second” insurance policy, focusing on freelancers and self-employed professionals. Users can digitally toggle on and off their policies or adjust their terms on the fly. Reduced workload caused by the pandemic has made this kind of insurance even more relevant.

LOOKING INTO THE FUTURE

What does the disruption posed by COVID-19 mean for the future of financial services and insurance companies?

MORE GRANULAR INSURANCE PRODUCTS

More people working from home, or even furloughed, has made room for new insurance products that cover, for instance, home offices or freelancers and self-employed professionals working in the gig economy.

COMMUNITY FINANCE & INSURANCE PRODUCTS

Peer-to-peer insurance was already gaining ground before COVID-19. Companies can use the increased sense of community to grow community insurance and finance options as part of their policy offerings.

CROSS-FUNCTIONAL WORKFORCE

Taking a page from start-ups, Finance and Insurance sectors are expected to expand the development of consumer-oriented products. That will require smarter cross-functional teams.