Current Trends in the Insurance Industry
Since the start of 2021, the global insurance industry has experienced noticeable changes as a result of economic and political drivers. Many insurance and financial institutions are altering their business operations as the U.S. Presidency is handed off to President Biden from Trump. Further development in the COVID-19 pandemic also continues to drive up rates and reduce the ability for insurance companies to offer a competitive edge to their clients. Below are four key insights that depict changes in how major insurance agencies are doing business since the new year has begun in relation to these events, followed by two global trends that are currently being seen in the market. Each of the trends is followed by insights that provide examples of which insurance agencies are following suit, and how.
Insurance Insights & News: January 2021
- Haven Healthcare — a joint venture between Amazon, Berkshire Hathaway, and JPMorgan Chase announced plans to shut down operations for the foreseeable future by the end of February 2021, offering traditional health insurance providers relief as the partners opt to approach their work in healthcare separately. Amazon is still expected to make major strides in delivering their own healthcare coverage to remote workers in 2021 via a partnership with Crossover Health. This news resulted in a +2% increase in shares of other health insurance providers, including UnitedHealth Group, Humana, and CVS Health.
- Both the U.S. Supreme Court and the British Court ruled last week that insurance companies would be required to pay businesses for their lost earnings as a result of COVID-19 lockdowns. Some insurance agencies, including Argenta, Hiscox Action Group, and MS Amlin are acting as part of a test group for this process, through which they will begin to make payouts to some of their policy holders for lost earnings.
- The increasing prevalence of natural disasters resulted in a worldwide loss of $210 billion in 2020, up by 26.5% in 2019. Reinsurance agencies including Munich Re and Reinsurers experienced notable drops in share prices throughout the year as wildfires, hurricanes, and floods created billions in damage and took the lives of more than 8,000 people.
- According to the World Economic Forum, the global GDP growth has become stagnant in recent years and is expected to continue in the following years as technological innovations slow down, manufacturing rates are reduced, and consumer spending decreases. According to the Goldman Sachs Asset Management insurance survey, nearly 41% of insurers believe that there could be a recession by the end of 2021.
Insurance Trends: January 2021
Insurance agencies and financial institutions are opting out of current and future business ventures with the Trump Organization, Republican Congress, and supporters of extreme Republican beliefs as a result of their reactions to the 2020 Presidential Election, as well as the Trump administration's handling of the riots at the U.S. Capitol building last week.
- Aon PLC — Trump's prior insurance broker — reported to Business Insurance magazine that they would be closing their accounts with President Trump.
- Chubb Ltd., Traveler's Cos. Inc., and the American Property Casualty Insurance Association were among other insurance firms that publicly frowned upon Trump's handling of the riots and U.S. presidential election results.
- Signature Bank, which previously held accounts for President Trump totaling approximately $5.3 million, also said that they would be closing out the accounts this week because doing so is "in the best interests of our nation and the American people."
- Curt Schilling, a former player for the Boston Red Sox, also reported on the 14th that his policy with AIG Insurance was canceled following the U.S. Capitol riot, despite being a member since 2004. Schilling had publicly displayed his loyalty for Trump via social media in the past, in addition to posting content that called for further action following the riots on the Capitol.
- Many other organizations — including American Express, BlueCross BlueShield, Goldman Sachs — also reported that they would be suspending their donations to the Republican Congress, particularly in relation to members that objected the Electoral College's votes in the 2020 Presidential Election.
Insurance liability rates are rising as the COVID-19 pandemic continues and agencies experienced reduced capacities, transforming the industry into a "hard market."
- Larger insurance agencies experienced an average rate increase of 11% for their auto liability policies since January 1, while general liability rates increase by an average of 6%.
- The median excess liability rate of insurance firms has increased by 52% since the year's start, although some policies have increased by upwards of 160%.
- Estimates by Lexington Insurance Co. estimate that insurance capacity rates are at a third of what they were two years, ago, which was between $1.2-$1.3 billion.
- Globally, business insurance policies experienced a 16% increase in 2020. Howden Broking Group Ltd. in London reported that businesses that were already experiencing financial pressures prior to the COVID-19 pandemic were seeing the greatest increases.
- Reinsurance rates of property and casualty insurance policies increased by 6% within the first day of 2021, which industry professionals attribute primarily to the increase in natural disasters and the COVID-19 pandemic.