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.
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