The coronavirus pandemic is changing the way people do business and even choose their products and services. It then begs the question, how will it affect the insurance industry? Will people now spend more on life and health insurance?
Is There a Demand for Insurance?
According to IBISWorld, the US market size for health and medical insurance grew by less than 3% from 2015 to 2020. For 2020, the growth will be a measly 0.3%.
However, it’s likely that this data became available before COVID. From McKinsey’s standpoint, the demand is way higher for insurance coverage this year.
Google Trends revealed that search volume for life insurance increased by 50% compared to the previous years. It suggests that more people are either looking for such a product or wanting to know more about it.
Further, the conversion rate is doing well too. It means that people searching for life insurance ends up buying it.
Note, though, that based on this data, it seems consumers are more interested in term life insurance. It could be because:
- This plan is more likely cheaper than other life insurance policies, such as variable unit-linked.
- They might not intend to keep their insurance policy for a longer period.
- They don’t qualify for other types of life insurance.
Besides life insurance, the data also showed an increased demand for disability insurance and homeowners’ insurance.
Will COVID-19 Increase Insurance Premiums?
In reality, insurers and employers are struggling to identify medical cost trends by 2021, according to a CNBC report. Employers already reported up to 4.5% hike in insurance premiums.
However, Americans are also reining in their healthcare spending. For example, they are skipping elective medical procedures, such as routine screenings and surgeries. The Google Trends data by McKinsey also revealed a higher-than-normal search for “how to save money on insurance.”
Insurers can forecast better when they have the latest data available anytime. Tools like Smart Agent might then be beneficial for agencies at this period.
What Is the Impact of the Pandemic to the Insurance Industry?
1. It Can Affect General Insurers to a Certain Degree
According to KPMG, the pandemic will impact general insurers, but the results can be more manageable. However, they still need to watch out for a few things:
- Because interest rates are low these days, it might hurt their ability to remain profitable and solvent.
- Insurance that covers business interruptions could face disputes later if companies cannot claim it this pandemic.
- Workers’ compensation claims can also increase.
- Travel insurance can increase their revenues by offering coverage on travelers and medical costs if they get infected. The pandemic, though, is hurting reinsurers with travelers canceling events and asking for refunds.
2. The Pandemic Will Have the Biggest Impact on Life and Health Insurance
As expected, the pandemic will affect life and health insurance the most at varying degrees. For health insurance, it’s a mixed bag. While premiums and claims could increase, new healthcare services such as telemedicine could pay off in the long-term.
It’s the life insurers that could face the biggest challenges because of the pandemic. Many factors can affect their solvency, such as the mortality rate, lower interest rate, lower yield from investments like bonds, and higher liabilities.
This year and perhaps 2021 will be difficult for insurers, but customizing their plans to address the changing needs of their clients and analyzing up-to-date market data can help them survive.