Insurance market uninsured against pandemic
Economy01 May 2020, 15:53 432
After quarantine, there will be some changes in the activities of insurance companies, expert says
For almost two months now, we have been writing about the various areas affected by the pandemic and getting acquainted with the forecasts for the post-pandemic period. Now, we will examine the impact of the current situation on the insurance market. Since insurance is one of the main parts of the economy, especially in the financial sector, events happening here are of great interest.
The Azerbaijan Insurers Association has presented forecasts on the impact of the pandemic on the world economy and the insurance sector. According to the forecasts, the closure of international borders, the severance of trade and tourism ties, resulted in the loss of large sums of money. Of course, the pandemic did not pass unnoticed in the insurance market, which is an integral part of the financial market. Insurance companies have indeed taken various measures to maintain financial stability in the current situation and to end this period with minimal losses. However, different dynamics were observed for different types of insurance policies. While sales of some insurance policies declined at a rapid pace, there was little change in the sale of other policies. The novel coronavirus has forced experts to change their forecasts on the insurance market in 2020. If experts previously expected the world insurance market to grow by 6-7% this year (excluding life insurance), in the current situation, there may be a decline not only in the insurance market but also in the world market. This decline may be more pronounced in countries with large economies and large populations. At the same time, if we look at the global insurance market and the analysis of experts, we can see that the COVID-19 pandemic may have had a more negative impact on the market of voluntary insurance coverage than on compulsory insurance coverage.
As part of preventive measures against the spread of coronavirus pandemic, various steps are being taken to keep people at home and help them continue their work at home. In such a situation, the insurance employees working from home and the closure of central offices will lead to the electronification of the activities of insurance companies and a relative reduction of face-to-face contact with citizens. Companies continuing their activities from home will increase the demand for Cyber Security Insurance, which is widely used by corporate customers around the world, said Atilla Benli, head of the Insurance Association of Turkey (TSB) during an interview. At the same time, the slowdown in the economy and lower consumer spending may increase the demand for credit insurance. As a result, the impact of growing demand will have an even greater impact on companies.
Insurance expert Ilkin Ibrahimov noted that the pandemic had a very serious impact on the insurance market, which, in addition to manifesting itself in insurance payments, revealed the problem of sales and new products in this area. "Insurance companies have realized that they need to constantly introduce new policies, pay attention to customers, and launch new campaigns. The Central Bank has submitted a report for the last three months - January, February, and March. It is clear from the report that there has been a decrease in insurance premiums. These figures are expected to be even lower in April. Because insurance premiums are low this month, especially travel insurance premiums are down to zero. This is primarily because insurance companies have not set up their online systems properly. The significance of the pandemic period for insurance companies is that companies have realized that they are weak on online platforms and have begun to improve themselves in this area. After the quarantine period, there will probably be changes in the activities of insurance companies, primarily downsizing. On the other hand, I think that insurance companies will be more involved in online applications. State support is also provided to insurance companies during pandemics. The main support of the Central Bank's pandemic action plan is aimed at insurance companies. This is both to do with the easing of liquidity requirements and granting the right to delay the payment of certain types of commissions and taxes,” said the expert.
According to Kamran Babayev, Chairman of the Executive Board of Standard Insurance, the largest losses were observed in the field of travel insurance. "There were no serious problems with the services provided by the companies. Insurance firms were allowed to operate during the quarantine days. That is, companies were able to adapt to the current situation. Some of the workers worked from home, others from the office. We also held online meetings with our regional offices. However, it must be acknowledged that during this period there was a decline in insurance sales because the citizens were not able to leave their homes to even begin to think about insurance. For example, if someone did not drive, he thought that there was no need for insurance. However, the situation in the insurance market has recently begun to recover after the easing of the quarantine regime. The activities of insurance companies will remain the same in the post-pandemic period. The biggest loss during this period was in travel insurance. I think that with the opening of borders, travel insurance will be revived,” he said.