How is the insurance industry preparing for recovery while still operating in the challenging context of COVID-19? Is it possible? This is not the first time insurers have had to bounce back from a stressed, contracted economy.
The insurance industry is expected to be hard hit by the economic recession expected after the COVID-19 pandemic. This will have a detrimental impact as the sector is an important contributor to Europe’s economic growth and development, as the latest 2019-2020 Annual Report from Insurance Europe finds. A third of all international insurance groups are headquartered in the EU, and Europe is also recognized as a world leader in reinsurance.
Given the ongoing impact of COVID-19 as a global economy and society, it will be important for insurers to develop strategies that will contribute to a smooth recovery. Can you? Leading insurers show the way with innovative solutions.
The COVID-19 effect
Insurers, while historically resilient, have felt the effects of COVID-19. Measures to contain the pandemic have resulted in business interruptions, event and travel cancellations, and mortality, all of which have impacted the claims. Insurers are faced with a decline in company values and a decline in business volume in the wake of the recession. And in the near future, the pressure is expected to continue. The risk dashboard of the European Insurance and Occupational Pensions Authority (OECD) estimates global GDP will decline to 4.5 percent in 2020 (7.9 percent in Europe), with major European economies likely to be even more affected ( Italy: -10.5 percent, Great Britain: -) 10.1 percent, France: -9.5 percent).
As described in the recent Accenture Insurance: Strategic Plays for Recession Recovery Report, the COVID-19 crisis hit insurers’ market capitalization faster than previous financial crises. Certain areas such as trade credit, inland shipping insurance and workers’ compensation are particularly at risk, as are certain segments such as the small and medium-sized enterprise (SME) sector. However, our research also shows that insurers have significant opportunities to employ strategies that will help them overcome uncertainty.
One way forward
Despite the risks the insurance industry faces, there is some hope. A number of leading insurers not only maintained business continuity during the pandemic, but innovated to launch exciting new initiatives.
- The French insurance industry has committed over EUR 3 billion ($ 3.5 billion) of exceptional non-contractual measures to support SMEs, certain businesses and key medical workers affected by the crisis. You have also actively contributed to a global investment program to support the global economic recovery.
- In Spain, over 100 insurers have worked together to provide free life insurance and hospital grants to healthcare workers treating patients with COVID-19.
In Insurance: Strategic Plays for Recession Recovery Report, Accenture analyzed the impact of the recession on the insurance industry and the strategies that insurers have used to outperform the competition in previous recessions. From these patterns we derive insights that can help insurers test the resilience of their strategies, emerge stronger and outperform the competition.
Innovative, sustainable strategies to recover from the economic recession are possible. In fact, these strategies may just be an opportunity to revive and redefine traditional insurance models.
In this series, I’ll examine how insurers can implement smart and sustainable recession recovery strategies.
Contact me to discuss how to build your company’s recession response.
Read the full report on Insurance: Strategic Measures to Restore the Recession.
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