Tough Time For Insurers And Their Customers
The Insurance industry is expected to be financial rocks during difficult economic periods but it’s been different this time around. It’s been a very rough patch for many insurance companies, the main reason being deregulation in the financial services industry earlier in the decade that allowed them to seek higher profits in other areas but increased their risk profiles significantly.
AIG has been the poster child of financial mismanagement during this economic crisis, going from the world’s largest insurer to pretty much a government subsidized entity funded with hundreds of billions of taxpayer money. Although they have been the highest profile casualty, they aren’t the only ones who are struggling, deep investment losses in many profiles have left many companies with their lowest capital reserves in decades.
On the bright side of things it looks like the bottom is in sight, we’ve seen renewed confidence in markets in the last month as investors slowly return to the fold. However, things may take a little longer for things to get better for their customers.
Their are many people who simply can’t afford insurance anymore and that number is expected to rise over the next year. Unemployment has risen significantly over the past year and a half, even more so over the last six months and is expected to hit double digits before all is said and done.
Stimulus payments will provide a partial boost but that won’t last long and until the economy can’t start producing new jobs once again, there will be large portions of the population who can’t make ends meet and will have to make sacrifices just to put food on the table.
Whether it’s life, health, auto or home insurance, many insurance sectors have seen their customer base shrink during the recession. With employment one of the last things to recover after a economic downturn, it could be at least a year before things get better for their customers and a rise in policy subscriptions.
