What are the major challenges facing the insurance industry in 2020? What are the best strategies for tackling these problems faced by insurance companies, brokers and agents in 2020?
It’s a general notion that insurance firms are companies set up to cancel the ripple effect of unforeseen circumstances.
Insurance companies are ever ready to bear your risk because we live in a very unpredictable society with varieties of daily risks; it is believed that a person at a particular point in life will run into a situation that may endanger his or her life and property.
Any industrialized society today has the backbone of the insurance industry which is an explanation of why many companies and industries in developed nations do not liquidate.
Against many odds, most people still believe that insurance firms will be viable and popular in societies. However, this is not the case as we still have many insurance businesses facing difficult challenges that deeply threaten their survival and existence.
These common challenges faced by insurance companies, agents and brokers are so rampant in less developed societies where political and socio-economic systems are yet to be stabilized.
Every social, economic, and political systems in these developing countries present terrible problems for insurance companies. Some of the societies with dangerous conditions to the insurance sector are Africa, Asia, the Caribbean, and Latin America.
It is obvious than for an individual who just started the business of selling insurance; this individual will have to double his or her effort as it is not easy and very difficult to survive in this insurance terrain.
Today, every business changes in some ways and the changes can either be negative or positive. It is a fact that in every industry, there are various problems to be faced.
Improving cyber security and reducing cyber risk is still a top priority of every insurance company. As we all know that cyber risk is not only pertaining to the insurance industry alone, but the industry is considered as “behind” when compared to the banking or some other financial sector.
Below Are the 7 Key Challenges Facing the Insurance Industry in 2020
1. Cyber Risk
The cost of defending your enterprise network is not a child’s play. Insurers have to do diligent research and study on cyber criminality and also have to reinforce their own systems to remain resilient.
Insurance companies need to understand that doing business using legacy systems that have varying levels of security is tantamount to their business.
Cyber risk is something that cannot be fully mitigated but can be prevented as hackers are always moving and adapting much quicker than the defenses on the ground.
2. The High Level of Insurance Technology
There are several business challenges that established insurers are facing as they try to meet new customer needs while improving core insurance functions. Some of the issues are the cost of maintaining a high level of insurance technology which has now become a norm in the insurance industry and causing fierce competition among players.
Every insurance company is now looking for ways to leverage and incorporate technology into their business growth strategy. There is more emphasis now on the use of artificial intelligence in the insurance business processes, as this helps to improve efficiency and automating all business processes like customer-facing, underwriting and claims processes.
3. Trust Issues
This is one big reason why many individuals still find it difficult to drop their hard earned money for insurance companies. Many corrupt insurance firms fail to pay claims to their customers, and they don`t usually disclose or offer some benefits to them.
Some people even classify insurance companies as another means of financial burden. Many insurance firms have shut down because of financial challenges and individuals who are the victims of the loss now think twice about purchasing insurance policies again in their life as a result of the financial constraint the loss has brought on them.
4. Market Competition
Today, there are many insurance firms in the market and therefore there is an ongoing stiff competition among the insurance players. Every insurance company looks for the best way of selling their insurance products in the best possible way.
Most insurance businesses, especially the new ones are the ones that suffer the most because a lot of people still doubt their ability to take up risk for an individual. In fact, most people trust the established and existing insurance firms compared to the new ones since the new insurance companies are operated on a thin line between failure and success and no one would want to take such risks with the little cash they have to survive.
5. Poor Management
When an insurance company does not have a well-structured team, those that have the sole responsibility of managing the finance and strategizing for the company development, then the company is diving into bankruptcy very speedily.
As time goes on, there will be a constant increase in the number of clients` complaints, and if his or her insurance firm is not transparent enough, then he or she will lose more customers. Incompetent management may cost the company a lot, especially in the area poor communication with their clients.
There is need for good collaboration between the insurance company, agent or broker and their clients by always updating them with details of unfolding events.
6. Economic Instability
When the country`s economy is not stable this will have negative effects on all insurance companies. This may bring about increase in premiums paid by customers, just like interest rates on credit facilities provided by financial institutions. This could one of the factors that influence insurance rates in the United States, United Kingdom and even Canada.
There’s no customer that would like to pay an exorbitant insurance plan, even if it is stated clearly in the contract form that the insurance rates might change from time to time. This will not go well with the insurance companies in this zone as people will start spreading information about a service or product they were not happy with very fast.
7. Unskilled Worker
We have some non-professionals running many of the insurance companies today. Some people believe that you only need some minor knowledge of monetary studies with no specialized training to establish an insurance firm. This is a huge misconception about insurance industry.
There is more to just some basic monetary knowledge, you must be a full-fledged financial practitioner before you can start such a business with so much at risk. When quacks operate an insurance company the result you get cannot be dependable and reliable.
Challenges facing insurance companies in developing countries are worse now due to the coronavirus pandemic compared to what you will notice in countries like the United States, Canada and Australia.