Risk & Business Magazine JGS Insurance Summer 2021 - Page 13

INSURANCE CHALLENGES

5 Huge Challenges

Insurance Companies Face

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he core idea of an insurance company is an establishment which is meant to help either cancel or minimize the negative consequences of risks that others ( be they individuals or companies ) face . They are the underwriters of risk outcomes . Each year , in each industry , new and unpredictable risks pop up , and those risks can have a huge variety of outcomes and potential trajectories to follow . Without some way to mitigate the costs of those risks , it could be devastating to the people or companies involved . In this context , it seems as though insurance firms are both viable and popular by providing an essential service to society . Unfortunately , that is not always the case , and in fact , many of these companies face their own challenges which threaten their existence .
There are five huge challenges that insurance companies face which can lead to business problems :
1 . COMPETITION
The fact that insurance companies face competition in the marketplace should come as no surprise . Competition is one of the basic costs of doing business . Every insurance company is trying to find the best way to sell its products by targeting specific markets . In pursuit of that goal , they are competing against other insurance companies to reach the same people . Not to mention , the traditional insurance industry is being disrupted by innovative insurtech ’ s that use digital solutions to enhance the customer experience and fundamentally change how insurance is delivered . This issue leads to the incumbent industry players to keep up with or even leapfrog the competition .
2 . A LACK OF TRUST
This may be the biggest issue that insurance companies have to face simply because it ’ s the reason why many people don ’ t choose to get insurance in the first place . It ’ s extremely likely that you have heard a story , either from the news or from someone you know , about an insurance company not paying claims or not owning up to what they are promising in their policies . One bad apple , as they say , spoils the bunch . These stories lead to many people seeing insurance as an unnecessary risk in and of itself . After all , why pay insurers for risk mitigation if you think they won ’ t actually mitigate that risk ? Unfortunately , this isn ’ t the case for many companies . Even so , the struggle to gain that trust can lead many companies to shut down .
3 . LACK OF ECONOMIC STABILITY
When the economy takes a downturn , insurance companies are negatively affected . Rates that they are able to offer often swing dramatically in the same way that interest rates from credit card companies and financial institutions change . Unfortunately , this is usually lost on clients even if it is clearly outlined in the contract . This is an issue that helps lead to the lack of trust mentioned earlier . A customer gets upset by a changing rate , and that changing rate leads to the customer telling family and friends about how unfair company XYZ is . And so on and so forth .
A second way that insurance companies are affected by an economic downturn is easier to understand . When money gets tight , insurance often gets left by the wayside . Further , if companies fold , they obviously won ’ t be utilizing insurance anymore . Both of these lead to issues with the bottom line for insurance firms .
4 . POOR MANAGEMENT
The owner of an insurance business is the one who is responsible for all of the issues that clients may bring to the table with regard to the management of the insurance business . When an insurance firm is mismanaged , they cannot hide the faults they have for very long without someone taking notice . Time moves on , the complaints from clients will see a constant increase , and without transparency from management , customers will be lost . Incompetent management costs a lot , for any company , but combined with poor client communication , it is akin to a death rattle for a business .
BY : GWENYTH P . LUU , CLCS DIRECTOR - COMMERCIAL LINES JGS INSURANCE
Gwenyth Luu helps organizations improve their bottom line and lower their total cost of risk by implementing the JGS Proactive Service Platform . The JGS Proactive Service Platform is an inclusive strategy that focuses on primary cost drivers of a risk management program . Gwenyth helps businesses understand all of their potential and actual costs and liabilities , execute an actionable strategy , and deliver superior client service and support . The JGS Proactive Service Platform is driven by continuous strategy and service delivered on a daily basis throughout the year . The service platform includes risk control strategies , claims advocacy and management , contract reviews and insurance program design reviews .
5 . POLITICS OF THE INSURANCE INDUSTRY
The insurance industry as a whole has become more political over the years . Politics has begun to play a very significant role in the operation of insurance companies and can hold a great deal of sway over the calculations that are dominant in the operating domains of these companies . How premiums are paid , outcomes of risk investigations , damages , and benefits often depend largely on the political climate surrounding them .
Insurance companies are unique in many ways . They provide an essential service that businesses and individuals need to safely get through their day to day without a constant worry about risk . Even so , they have challenges that they face . Some of those challenges are similar to those of other industries , some are unique to risk management . Often , though , the challenges they face are seen through the lens of the insurance industry , which makes them more difficult to explain to clients when things go south . +
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