Without a doubt, one of the fastest-growing industries in today’s modern world is the insurance industry. Rising interest rates, high investment income, and all that on top with sustained economic growth were the highlights of the past few years. However, COVID-19 has put a new spin on things.
Now is the perfect time to focus on what the next few years are going to bring us. That is why today we are going to dive deeper into the foundation of the insurance industry, find out how it works, study the details, and hopefully come up with some clear expectations.
The insurance industry consists of several sectors, and the most common are:
- Health insurance
- Life insurance
- Property insurance
- Car insurance
- Retirement insurance
- Travel insurance
There is insurance for almost every type of conceivable risk, but since these six insurances are the most commonly practiced, they are at the top of the list.
There are more than 5,000 active insurance companies just in the US, according to information revealed by the National Association of Insurance Commissioners, employing more than 2.7 million people. This makes it not only one of the most famous, but also one of the largest industries in the world.
It is worth mentioning that despite being first on the list above, health insurance is different from other types of insurance because it is a separate branch. It is a separate sector that has incredible potential, with total direct written premiums reaching up to $867.5 billion back in 2017.
Now let’s focus on the industry’s future.
The Big Question – What Impact Will COVID-19 Have?
When you think about the impact of a disease, your first thought is health insurance. That’s natural with the health systems in a big country like America becoming overwhelmed. According to the latest statistics, most people will survive the disease without needing to be hospitalized.
We’ll cautiously state that at present, because the virus is not the immediate risk to health insurers as we think. Governments are rolling out and paying for testing and, in many cases, for treatment as well. Combine that with the fact that most sufferers will recover at home, and health insurers are not as hard hit as we might imagine.
The real damage, at present, is the financial implication of the stock markets being in flux. If your retirement insurance is tied into the stock market, don’t expect outstanding returns this year.
A more serious issue for insurance companies, though, are the financial implications of lockdown. With a large percentage of the world in lockdown, day-to-day operations have scaled down. Insurers aren’t able to sell as many products as they normally would.
Worse yet, with the world in financial crisis, many people have lost their income. As a result, they can no longer pay their insurance premiums. This issue, more than any other we’ve mentioned so far, could have a lasting impact on the insurance industry as a whole.
According to some experts, short lockdowns aren’t the answer. In Wuhan, we saw a lockdown of 59 days. Regulations were then relaxed slightly. The rest of the world may not be as lucky. Citizens in Wuhan were subject to far stricter regulations than in many other countries.
The United Kingdom’s chief medical officer said that lockdown restrictions could extend to six months. The UK is just one country where such stringent measures have been recommended. Many other countries globally are considering longer lockdown periods.
This stringent measure may contain the spread of the virus but will prove deadly for many companies. More employees will be left without an income in the coming months. Insurers will become even more hard-pressed to ensure that their businesses survive.
In short, while we started the year with the industry on a high note, we’re likely to see it end at its lowest point ever.