The COVID Diaries – Day 9 – „Like many other industries, insurance will be affected by COVID-19, but to what degree?“
The current COVID-19 situation is likely to squeeze the already not perfect American and European Health systems to its worst not only impacting hospitals and their workers but most importantly insurance companies and their premiums. The insurance industry as a whole is an almost $5 trillion global industry.
It is anticipated that insurance premiums could rise between 4% up until 40% (Source: www.modernhealthcare.com) in 2021 to make up for increased medical claims and treatments. It is not a confidential information that a lot of small and medium-sized businesses will regrettably go bankrupt as a result of the pandemic and increased insurance premiums and/ or lowered access to healthcare will just be the cherry on the top for not only the companies themselves but their employees.
One of the most important and most immediate concerns when it comes to worldwide viruses is to protect the health and safety of the people. And who protects them? The state governments and the insurance companies.
Similar to banks, insurance companies are facing difficult challenges to review and update their crisis management plans and to figure out how to best tackle their every day business operations with the least disruption to their clients.
At the same time, a decline in interest rates may weigh heavily on the entire insurance industry, but will most especially hit operations in the life insurance and annuity sectors.
What is more concerning is that similarly to that of what happened ca. a decade ago, it is expected that reducing overall healthcare benefits and / or reduce overall access to treatments, drugs etc. could potentially dig a big whole in the countries‘ health systems.
Last week Fitch ratings agency has revised its outlook for the Health Insurance industry from ‚Stable‘ to ‚Negative‘ given current market conditions incl. weakening of profitability and higher number of claims for coronavirus testing and treatment.
It is now clear that we are not looking at 6 months down the road, but we are probably looking at an economy that needs to get back up again in the ring after a major K.O. But the question is, how serious the injuries may be and how soon it may recover?
However, the fact is, these insurance and healthcare costs will have to be paid, the question is how and who is going to pay for them. The government? The insurance companies? or the people?
Nevertheless, as this situation evolves, insurance companies are expected to continue to serve as shock absorbers for the economy and society.
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The views, information, or opinions expressed in this blog series are solely those of the individuals involved and do not necessarily represent those of PwC Austria and its employees. PwC Austria does not give any representation or warranty of any kind (whether expressed or implied) as to the accuracy or completeness of the information contained in this blog series. It has been prepared solely for general informational purposes. Nothing in this document should be construed as advice to proceed or not to proceed with transactions or any other type of decisions.
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