Insurance Market Outlook

Insurance industry is expected to show a strong rebound in 2022, propelled by the increase in risk averseness and an increase in premium prices particularly in health, life, and liability insurance. Motor insurance premium prices are expected to register a decline, it will carry forward the trends seen in 2020 and the first half of 2021. Rental insurance prices are also expected to see a declining trend; however, they may quickly recover in the latter part of 2022 as we see offices, and rental properties open up again. Let’s discuss each in some detail

Property

Construction sector has seen tremendous disruptions owing to COIVD-19. Work on construction sites either slowed down or was altogether shut down in the initial phase of COVID-19. As a result of the lockdown, the demand for new offices and commercial properties also plunged. The sector is still facing a shortage of materials and manpower. This is expected to persist for the coming few months as well. The work on commercial properties may have started again but the demand dynamics have altered. Globally companies are expected to adopt hybrid work models for the coming few years, and this will greatly reduce the demand for office spaces.

This expectedly had a negative impact on insurance premiums coming in from the commercial property. The commercial real estate industry may renegotiate contracts with insurance companies to include COVID-19 cover as well.

However, demand for retail property insurance may increase. The demand for houses has seen a substantial increase in the United States. Also, impacting the sector would be the pent-up demand which is expected to give a boost to the construction. Retail house price has also seen an increase in prices across the United States, and this will surely increase the premium prices.

Motor

Motor insurance premium prices have come down significantly due to a decline in the movement of people. Companies have been seen offering discounts on premiums to undercut the competition. Car sales during the Covid resultant lockdown severely impacted the sales of new and old automobiles. However, the situation is not as simple as it looks. Let’s have a look at some of the important factors at play:

Motor insurers have seen a reduction in claims due to the reduced movement of people impacting hull as well as bodily injury claims. This has given some cushion to insurers to wait out the pandemic. However, fatigue-related claims from commercial vehicle drivers have increased during this period.

As car sales went down, so did the manufacturing of auto parts. As countries started opening up and the pent-up demand for automobiles services will substantially increase, the claims will increase in tandem. This may reduce the cost saved on reduced claims.

The world is witnessing an acute chip shortage and the sector is not untouched. Car manufacturers have started to reduce vehicle production. Insurance written premiums may be reduced as impacts become more pronounced in the future.

Liability

The impact may vary by industry and business. Businesses (supermarkets and shops) may see an increase in COVID-19 infection claims. While the impact on hotels, bars, and restaurants may be less severe owing to low footfall.

Business interruption insurance is expected to see a protracted legal battle and the claim settlement will mostly depend on the policy wording. Although insurers are suggesting that there are exclusions for epidemics and only physical damages are covered under the said insurance, however, there are bound to be counter cases filed by businesses.

Worker’s compensation has seen a decline in premium income since companies have reduced their workforce. This trend is expected to continue for the next few fiscals. There are bound to be complexities going forward as the industry has experienced varied impacts of the pandemic.

Cyber insurance losses have increased owing to an increase in remote work. Cyber attacks are on the rise. However, businesses are keener to adopt insurance to offset losses arising out of these attacks. This will increase premiums, but in retrospect may also increase the claims ratio going forward.

Financial Services

Economy has taken a severe beating owing to covid. Businesses have suffered huge losses, so have the countries around the globe. Countries are expected to raise money in the form of bond issues, this is expected to give a boost to bond insurance premiums. Companies may also raise money in the form of loans and bond issues, resulting in an uptick in the bond and credit insurance sector.

Travel insurance

Travel insurance premiums saw a massive drop due to a decline in tourist movement. The sector may also see a change in policy drafts to include foreseen events like a pandemic cover to travelers.