The insurance industry has been affected by covid-19, just like every other industry around the world. As changes are made throughout society to compensate for the pandemic, insurance needs are changing to ensure coverage. The International Journal of Environmental Research has authored numerous papers on the topic, and they state that in some areas of the industry they have seen a decrease in premiums, with continued reductions expected to offer coverage to their consumers. They also claim that the cost to the insurers for claims is costing more than the cost of the premiums that they have coming in.
There is currently a huge strain on the investment portfolios of the insurance companies. They rely on these to keep money built up to pay the claims off. There must be a fund set up for every insurance company that allows them to pay for claims that are filed. It is a requirement by law.
As the funds from investments decrease, due to the market failing and people selling out, the profits of the company decrease. As most of you know, if a company does not make a profit, they will not stay in business long. It is hard for smaller companies to stay afloat since the covid-19 pandemic began. Since the changes that have been made is going to be the new way of life, the insurers need to find better ways to increase their incomes, without having to raise the cost of the premiums for the consumers that are already struggling.
As consumers continue to struggle paying bills, insurance companies are seeing an increase in late premium payments. The carriers are pushing for agents to accept them, without any late fees or penalties being added on. This causes an even bigger strain on the insurer because it affects their cash flow.
Cash flow is a combination of money earned, money spend, and money going to profits. Past due payments means that the business must cover extra costs from funds that should be going to other areas of the business. A negative impact on the cash flow decreases the profits of the company and causes an industry wide panic of trying to keep their doors open for business.
As mentioned earlier, premiums have been decreasing for insurance agents to keep customers. As lockdowns occur, jobs are lost, and incomes decrease, the need for insurance has dramatically decreased. For instance, pregnancy insurance may no longer be needed because people with less income can get help from state programs to pay for the bills.
Even though insurance is extremely important, people are choosing to decrease their coverage due to costs that they cannot afford anymore. As the income from premiums decrease insurance companies struggle even more to keep up with their bills, and the claims that they are still required to pay.
Coverage disputes are happening throughout the world daily. Covid-19 was not included in most policies, so people that are dealing with the virus also must deal with their insurance carriers. They have been finding that claims filed under coronavirus are being turned down. Many policies have clauses stating that they do not cover world events that are out of the control of the public, or private, sectors.
Even though the pandemic has affected all of us in separate ways, the insurance sectors are stepping up and making changes to ensure that their consumers are getting the coverage they need. Needed riders are added onto existing policies, and new plans include covid-19 issues. The future of insurance companies may look bleak now, but the agents that stick it out will get back to business as normal soon.