Insurance Quotes & Advice

A report from the accounting firm Ernst & Young states the biggest risk facing the insurance industry is still the financial crisis.  Deep investment losses have affected many major carriers and those portfolio values won’t recover overnight.

“As a result of the current economic conditions, there have been significant changes in the risks since the release of our 2008 report,” says Peter R. Porrino, Global Director of Insurance in Ernst & Young’s Global Insurance Center. “As insurance companies continue to navigate their way through this downturn, they should be focusing on changing their approach to risk management, regulatory analysis and the communication of risk information.”

Financial market crisis: the crisis has severely battered the financial services industry. Even if systemic risk abates, the consequences have been so profound that they are likely to shape the industry for the next decade.

To their detriment a number of insurance companies have been active participant in derivatives markets, the most famous case being AIG, whose spectacular downfall shocked the industry.  Another sector that has faced difficulties has been the life and casualty market, where falling investment values have crippled capital levels needed to pay out for guaranteed annuities.

The industry as whole will need to reassess their risk management practices and their reputation for weathering difficult financial times has suffered over the past year.  The general employment picture isn’t helping matters and demand for insurance has declined as a result.  A number of companies have been forced to cut expenses and have had to cut their workforce.

The general focus right now is to shore up capital levels as the financial system remains fragile and is expected to be for some time.  The industry still faces a difficult time ahead and must work to limit any possible downside risks.

The ongoing recession has forced many consumers and businesses to find ways to cut corners in order to save money.  One thing happening more and more frequently is cutting back on insurance, which has left many people and entities under insured and in some cases without coverage at all.

This is the summer of the new frugality. Americans everywhere are clipping coupons, searching for freebies and finding all sorts of creative ways to save money. Saving money is chic; another way to impress the neighbors. But others are making far tougher choices that threaten to cost them far more than they save.

Reducing insurance coverage, whether it’s a consumer or a small business making the cuts, does mean instant cost savings. But it’s proving to be problematic for some people, leaving homes and businesses underinsured and their owners facing huge monetary losses should disaster or illness strike. It’s also making families vulnerable to financial hardship because some are giving up their life insurance.

The role of insurance in society can’t be overstated, it serves as an effective way to mitigate the risks of a smaller party by pooling that risk through a large number of parties.  Unfortunately it has become a popular choice for many people trying to save money but in essence they are gambling with their future by leaving themselves open to potential uninsured losses.

We can see this clearly with the current state of health insurance coverage, where over 50 million people are currently uninsured and a number more are under insured.  This is the reason the government is pushing so hard for healthcare reform even though the current financial crisis has pretty much left the till empty.

The strain of uninsured medical coverage on emergency rooms has placed much of the burden on local government which in turn has to turn to the federal government for financial support in many cases.  The fact that Medicare will go bankrupt in the next decade also plays a large role in the current administration’s drive to revamp healthcare.

So while for some it may be a difficult choice to cut back on insurance, for many others they have no choice at all, where that money could make the difference in putting food on the table.  Unfortunately cases like this will likely grow as unemployment is expected to rise through the end of the year.

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.