The Insurance Industry is facing many problems along with other sectors of the economy. Although Insurance has become one of the basic need of Corporate Sector as well as Consumer Sector with the passage of time, but due to immense business crisis and downfall, Insurance industry’s profits have fallen to a great extent. This is due to increased loss ratios and decreased premium rates. Therefore the rates of return of the Insurance Companies owners have decreased. But still smart owners are leading the market with good business strategies such as:
Ø They are increasing any particular class of business such as some are concentrating on Auto Insurance, some are on Bonds and Engineering etc. In this way they are earning huge amount of premiums from these classes and the factor of losses in these sectors is negligible.
Ø Some companies have extended the period of claim settlement which in the short run increase their cash flows but in the long run cause them disadvantages such as lower client satisfaction, lack of credit facilities (Workshops, Hospitals etc.).
Ø Also some are doing very limited business but their profits are quite satisfying. This is due to their good investment’s returns.
Ø The performance of some Insurance companies is also affected because they are much concentrating on business development only, while neglecting the factor of effective Human Resource and infrastructure. As this will increase the profits in the short run but in the long run this result in issuance of policies which are too risky for that enterprise because the human resource working is not well equipped to analyze the risk factors of any particular risk.
Ø Some top level companies are too much equipped with Human Resources, Business, and Capital that they are only affected up to a little extent from this crisis. As they have good ratings and market repute.
Ø Consumer policies are quite popular nowadays such as Health Insurance, Auto Insurance, Household Insurance and Travel Insurance etc. Companies specialized in these services are also very much stable.
Ø Companies that are offering built in products to Institutions such as Credit Card Insurance, Loan Insurance, Agri Insurance, Life Insurance (Bancassurance), and Auto insurance are also enjoying profits with not much pain.
Ø Although the overall volume of Insurance business in the market has increased with the passage of time but in the same time competition has also increased. Insurance companies are offering lowest rates in order to fetch business as a result of which the rates have been fallen to a greater extent thus affecting profitability.
On the whole only those owners are successful which use mix of all the above strategies otherwise their profits will be short term.
Hope I am able to explain problems pertaining in the Insurance market. Please post your comments / suggestions.