Insurance is a major financial industry in modern times and particularly in the developed countries of the West. It is a flourishing financial sector with lots of potential and opportunities. The Insurance companies around the world are a major stakeholder in the financial strength of the country and world economy.
Insurance companies around the world are now more focused and cover a wide range of risks that can affect the financial position of individuals and businesses.In their quest to acquire more market share and be a dominant player , they have introduced many new types of policies and reached to diverse segment of the customers.
The insurance industry is a key component of the world economy today owing to its premiums, its investment and, above all, the social and economic role it plays in covering personal and business risks.
There is still a lot of opportunities that the insurance companies can use for their own advantage :
With the size of world’s population reaching gigantic proportions, global insurance is also gaining in stature. Private as well government insurance agencies around the world are running for insuring lives of millions (and in the process insuring their own businesses more). SO Life insurance and child care and health oriented insurance still has the potential to grow particularly in the developing nations.
The developed nations/economies account for the bulk of the affluence in global insurance industry. North America (with two of the major developed countries in the world, viz., Canada and the USA) has been one of the most important regions, followed by the EU and Japan as far as the global insurance industry goes. The United States and Japan alone account for a half of world insurance, which is much higher than their share of the global population. So It can be speculated that in coming decades the insurance industry will grow in the the developing Nations. There are wide range of Non life insurance that can be properly implemented to ensure that a sizable number of market can be accquired.
• Growing environmental problems can be a problem to the insurance industry as it raises the risk of financial protection to a wider audience.
• There is also a growing inequality of wealth that may adversely affect the insurance market.
• spread of disease , social inequality and lack of infrastructure, poor health care facility in the developing nations will adversely affect the insurance companies operating in these countries .
Financial viability of insurance companies
However, although the insurance industry is a flourishing in world economy today, one need to keep in mind that financial viability/stability of the insurance company is a major consideration at the time of purchasing insurance contract. The viability factor is important because many a times, an insurance premium paid currently provides coverage for losses in distant future and there are instances where a number of insurance companies have gone insolvent, thus leaving their policyholders with little helpful or no coverage. Therefore, even if the global industry is strengthening more and more, the weak links are also co-existent and blind faith can lead to a severe downfall. There are also independent rating agenciesfor insurance companies which could be helpful in providing sound information on financial viability of various insurance companies.
The Insurance rating institutions work is of considerable praise here as they ensured a safe playing field for the insurance companies and the customers and made sure that efficient and work reporting of the financial statements are done.
Last Updated on : 26th August 2013