Insurance Quotes & Advice

The World Health Organization has already raised it’s alert level in response to a swine flu outbreak in Mexico and which already has cases popping up around the world.  Fear of a pandemic is the latest worry for an insurance sector that has already been battered during the current financial crisis.

Depending on the scope of the outbreak, the insurance industry could see significant losses mount up across many different sectors.  The more obvious are the life and health care sectors but depending on how much the health scare disrupts economic activity, other insurers could be affected as well.

Health alerts are not new, the most recent public health scares being SARS and the avian flu.  The big difference however was that the other two didn’t occur while the world was going through the worst recession in decades.

Obviously this isn’t something the industry needs right now, with many companies just struggling to survive.  Although if it does turn out to be a major outbreak, the federal government will likely offer some financial assistance, something that isn’t exactly forthcoming at the moment for those companies not named AIG.

We’ve already seen the state of Texas shut down high school sporting events for the next week until the scope of the outbreak can be fully realized.  If there are severe business disruptions to follow, many insurers could be severely impacted as well.  Hopefully though, the outbreak will be contained and economic impacts will be minimal but it will likely be a few weeks until we know for sure.

Despite the massive government spending that has already taken place in an effort to fix the ailing economy, the new administration is still moving forward with it’s plans to revamp the nation’s healthcare system.

A top Obama administration official predicts that comprehensive health care reform legislation could reach the Senate floor by this summer.

Since shortly after President Obama took office in January, administration officials, members of Congress and congressional staffers have been meeting on health care reform legislation, said Nancy-Ann DeParle, the director of the White House Office of Health Reform.

There is no question it is going to be a tough fight in Congress because of the expected cost.  The country is probably going to run trillion dollar deficit for at least the next three years just to fix the broken financial system.

However, there is no question that something needs to change in this country as far as healthcare is concerned.  The clock is ticking on the insolvency of Medicare.

For the amount of money this country already spends on healthcare it’s ridiculous how many people are uninsured.  We spend more than any other country in the world per capita on healthcare, yet approximately a sixth of the population is still uninsured.

Any meaningful reform will need to make a concerted effort at controlling costs up and down the healthcare chain, otherwise it will just be smoke and mirrors and spreading the costs to taxpayers.

There may be a number of insurers lined up for government money, if and when they gain access to TARP funds.  There has been a renewed drive recently to include insurance companies and reports claim that a decision to include insurers may come shortly.

Still there is the question, is there enough remaining in TARP to solve the problems of the banking system, let alone help out the struggling insurance industry?  With the Treasury still conducting it’s stress test for the nation’s largest banks, it is still unclear how much more capital they will need.

To date the only insurer that has received government funds is AIG, in a massive bailout that has soured many Americans’ support for subsidizing financial institutions in danger of collapse.  The executive compensation scandal has probably done the most harm in preventing insurers from gaining access to TARP thus far.

Gaining access to that capital would likely prevent credit downgrades for a number of insurers and further erosion of their access to said credit.  The government is also likely to take equity stakes in these companies like they have for many of the banks that have already received TARP funds.

Are we likely to see the gradual nationalization of the insurance industry like what has already started to happen in the banking system?  For now it seems unlikely, for the most part the problems in the insurance industry don’t seem as widespread as is the case for the banking system, for another there just isn’t that much money left in TARP any ways.

Only a few select insurers are likely to gain approval for TARP considering that banks will get most of what’s remaining.  It is also likely that the government will have to tap into the $250 billion placeholder in this year’s budget that has been set aside for additional financial support.

For the some insurers it could mean the difference between insolvency and staying in business and they can’t wait to get in line for their handouts.