The entire world is struggling with the COVID – 19 looming over. Over 17 million cases have been reported so far along with 673, 169 deaths. The largest number of cases in the world is recorded by the United States surpassing the 4 million mark.
The concern about life and health with the pandemic in the offing with the menace of surging expenses is so obvious. The US economy has suffered a historic slowdown amid pandemic. The Bureau of Economic Analysis published preliminary estimates and it stated that the real GDP has declined by a historic 32.9% at an annualized rate in the 3 months ended June 30.
Even the insurance sector is facing a great impact of the regressing economy due to corona outbreak. The insurance industry is usually foresighted for major loss events, which includes pandemics too. However, the fiscal impacts will take a little time to play-out and be insurance provider specific.
Different insurance companies are responding to the spreading of COVID-19 outbreak on different fronts – as employers, investment managers, and claim payers. Each company has its own set of challenges, not only for the insurance industry but also for the society and global economy at large. Life insurance, term insurance and annuity carriers are some of the hardest hits due to lower rates of interest.
Any country cannot save its economy and tackle the health crisis at the same time. There are researches to prove it. It is an ugly truth as an economic downward spiral brings about unemployment compromising people’s welfare.
Nevertheless, there’s always light at the end of the tunnel. Don’t you agree?
The major concern of the US insurance sector is safeguarding the health and protection of the employees along with the distribution partners in the broker/agent community as they pull out all the stops in maintaining business continuity.
One of the major challenges could be authorizing alternative work arrangements for the employees of the insurance companies if needed to safeguard staff and adapt to potential office access limits, all while making sure of the business continuity.
The pandemic has also disrupted insurance companies’ client service along with the distributors. Financial advisors, brokers, and agents are probably facing various logistical challenges and risk management as those being tackled by the carriers, especially since a lot of employees also have to work from home. In the meantime, face-to-face meetings with clients and prospects have been avoided until the risk and peril of exposure goes away.
Under such circumstances, insurance companies that have made investments in advancing and improving digital capabilities are probably in a better position in the short run to maintain connectivity with their distribution partners.
Insurers have also enhanced the training and planning in expectation of a potentially longer period of social distancing. This means the intermediaries will get to know how they can stay in contact with the clients, how to serve their clientele facing financial strain, and how they view their referrals.
With an advanced set of digital tools, this can be a time of productive planning, training, and outreaching the companies, client stakeholder groups, and intermediaries. In such times of financial stress and uncertainty, the broader financial services industry and the insurance sector needs to maintain connections and be well-prepared to serve its clients in the best possible way.
The insurance companies must consider the impending impact of COVID-19 on their long-term and short-term financial outlooks. The costs of claims will probably be specific to the categories of business an insurance company writes and the policy wordings/fine prints.
Nevertheless, the bigger-picture concern is how the global outbreak is affecting the entire economic environment of the US – precisely, prospects of profitability and growth in insurers’ investment and underwriting portfolios.
The 1st quarter – Global Macro Outlook by the Insurance Information Institute reports that the impact of COVID-19 on global growth and the insurance sector is likely wider and deeper than the existing consensus and last well into 3rd quarter and beyond.
This report further added a slowdown in the global GDP growth in 2020 from 3.3 percent to 2.3 percent, i.e. by 1 percent.
Coronavirus: The World Economy at Risk – a report by the Organization for Economic Cooperation and Development (OECD) stated, more intensive and a longer-lasting outbreak could reduce worldwide growth to only 1.5 percent in the year 2020.
In this time of global uncertainty, it is easy for one to lose sight of the bigger picture. This is specifically true when the last recession’s memories are still fresh relatively. The financial system of the US is far more pliable, many consumers are well-prepared, and the damage is probably more contained.
Eventually, the COVID-19 crisis may have even presented some better opportunities for the insurance sector to transform and excel:
Whether you’re trying to safeguard the integrity of your business, empower your manpower, make faster and better decisions, or excel through technology, it aids in the long run.
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