The last year has been one of incredible challenges and unplanned adjustments in a roller-coaster economy. The fallout from the COVID-19 pandemic has wreaked havoc on every industry, and trends that had been expected for the year 2020 are shifting to address the upcoming demands for 2021. The commercial insurance industry has seen many things take place over the last 12 months, and as insurance agents enter the new year, there are new concerns and opportunities that will need to be addressed.
Changes for Property-Casualty Insurance
The disarray that the pandemic created in the job market saw workers’ compensation sales tumble during 2020, and continued forecasts of high unemployment rates have the industry failing to see positive growth for another six to eight quarters. There is some hope that a small 3% rebound will occur during 2021 for those dealing in global nonlife premiums, primarily due to demand from emerging countries.
In the 2020 domestic market, the auto insurers took a big hit as many generously issued rebates and reduced their policyholders’ rates. While this move reflected the nationwide impact that shutdowns and shelter in place orders had on road traffic, the coming year may show more profitable, given fewer accident claims that will need to be paid.
Changes in Life and Annuity Premiums
There is a slight projection of recovery during 2021 for those working in life insurance, as there was a global decline of about 6% in 2020. Emerging economies may again be the reason for this shift, though it may only be a marginal 3% growth. Annuity sales also reached disappointing lows during 2020, dropping by double-digits during the second quarter. The new year still holds concerns with annuity sales, as the low interest rates are expected to continue for several years. Securities that are lower-rated with less-liquid securities will be tougher to sell at a profit.
Changes to Operations
Given the expense of transitioning operations to adapt to the impact of the pandemic, many insurers will be looking more closely at expense management efforts. For agents and agencies, cutting costs will be a crucial element of offsetting the financial toll that 2020 took on companies. In addition to the lost revenue from shifts in premium sales and claims related to the pandemic, many incurred significant expenses changing their delivery modes, responding to government mandates and moving staff and services to remote environments. Insurers wanting to remain on firm financial footing need to consider resetting their priorities. This means reducing nonessential expenses and freeing up capital for investment in the areas that need the most help in pandemic recovery.
Over the next year, agents and insurers will continue to experience some shakeup. Whether it be the way premiums are underwritten or marketed, or your work environment, prepare to be flexible to the changes if your services are going to remain relevant.
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