Recent Trendz in Insurance

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vishaldubey

New member
heya fellas its vishal a ty student nd im in real urgent need of sum good information on the recent trends in insrance. post all kinda insurance stuff plz i've got veryless time
 
Re: heeeeelllllllppppp........ plzzzzzzz.(insurance)

search through the service sector forums,,,u will get ample information on insurance...
 
nsurance and risk management make up an immense global industry. According to a survey conducted by a leading global insurance firm, Swiss Re, worldwide insurance premiums totaled $4.270 trillion in 2008 (the latest data available), up about 6.3% from $4.061 trillion in 2007. This was equal to about 6.18% of global GDP. Global life insurance premiums were $2.79 trillion during 2007, while all other types of insurance totaled $1.78 trillion.

In America alone, the insurance business employed about 2.31 million people in 2008, and insurance gross premiums totaled $1.13 trillion, making the U.S. the world’s largest insurance market. For 2009, life, accident (including supplemental health) and annuity premiums in the United States will total an estimated $679 billion. Property and casualty premiums will total about $450 billion for 2009. U.S. life insurance firms held about $4.51 trillion in assets in 2008, according to the Federal Reserve Bank. Approximately 4,500 companies underwrite insurance in America, but the industry is dominated by a handful of major players.

According to Swiss Re, total insurance premium volume for 2008 was $1.75 trillion in Europe; $933.3 billion in Asia; $104.9 billion in Latin America and the Caribbean; $29.2 billion in the Middle East and Central Asia; and $54.7 billion in Africa. Again, these figures are from Swiss Re (Swiss Re - a leading global reinsurer).

Premiums on a per capita basis remain very low in much of the world, pointing to excellent long-term opportunity for expansion of sales of insurance products of all types, including annuities. While it will take many years for underdeveloped nations to begin spending significant amounts on insurance products, much of the world is still clearly a fertile field for expansion of companies that are willing and able to invest time and money in emerging markets.

Per capita premiums worldwide were $646 in 2008, compared to $2,990 in North America. More than 87% of that year’s premiums were earned in industrialized nations, leaving a bit more than 12% earned in emerging markets.

Massive sources of insurance company earnings come from the sale of annuities and other retirement and investment products, along with profits (or losses) that insurance underwriters earn on their own assets and reserves. 2008’s stock market meltdown had a significant effect on profits and assets at life insurance companies in particular, and property & casualty companies to a lesser degree. Insurance companies also hold immense investments in real estate, hedge funds, private equity, venture capital funds and other types of investments. The global financial meltdown hurt all of these asset classes and thus hit the capital base of the insurance industry in a hard way. At the same time, business bankruptcies, unemployment and cost-cutting by both businesses and consumers hurt insurance sales in developed countries. The best growth was in emerging markets, including a 16.3% premiums increase in 2008 in South and East Asia. Europe showed a 6.2% decline while North America showed a 3.1% decline.

In America, insurance is unique in the financial services field because, unlike banking and investments, which are regulated largely (although not entirely) by federal agencies such as the Securities and Exchange Commission, insurance is regulated primarily at the state level. This means that insurance firms must deal with up to 50 different sets of state regulations and 50 different state regulatory agencies. At the same time, they must develop dozens of different premium rate structures that appropriately reflect the costs of meeting local risks and fulfilling state requirements. As a result, few insurance underwriters offer all of their insurance products in all 50 states; many do business only in a limited number of states. It is a regulatory and administrative nightmare that limits consumer choices and drives up overall insurance costs.

underwriting does not earn consistent levels of profits. Property and casualty insurance companies sometimes face a year of losses, rather than profits, due to natural disasters such as hurricanes, floods or an overly active fire season. Occasionally, insurance underwriters go broke, and firms that rate the financial stability of insurance underwriters always list more than a few that are not financially sound. For example, Yamato Life Insurance Company, a leading Japanese firm that had been in business for nearly 100 years, took bankruptcy in October 2008.

American insurance underwriters found their stocks falling sharply in 2008 when investors realized that many of these companies needed to raise new levels of capital due to losses in the firms’ reserves and investment assets. At the same time, markets were reacting to the fact that net profits can fall sharply during tough economic times. Hartford Financial raised $2.5 billion in new capital in October 2008 by selling shares to Allianz, a major German insurance firm. MetLife raised $2 billion in new capital during the same month.

course, the biggest news was the U.S. government’s need to bail out global insurance giant American International Group (AIG) in the fall of 2008. AIG was considered by most analysts to be a reasonably well-managed insurance company with good long-term potential in the global market. Unfortunately, a relatively small division at AIG had taken immense risks by writing credit default swaps (CDS) totaling hundreds of billions of dollars. This is what broke the company’s back. CDS are essentially an unregulated form of insurance, used by investors and financial firms of all types to hedge against potential losses in the value of bonds and debt instruments of all types—such as collateralized debt obligations consisting of pools of mortgages. The American government promised AIG up to $85 billion in loans in exchange for effective control of the firm and a change of top management. That need quickly grew to about $150 billion when AIG found it difficult to find buyers for assets and operating companies that it intends to sell. Over the mid-term, AIG is refocusing, primarily as a U.S. property and casualty company. It will retain some strategic investments in foreign general insurance and life insurance operations, but many of its overseas operations have been sold. The company lost nearly $100 billion in 2008.

2005, Hurricanes Katrina and Rita in the U.S. cost insurance underwriters vast amounts (damages, both insured and non-insured totaled about $58 billion) and created significant controversy over flood insurance in general. Many changes resulted, and insurance underwriters felt compelled to boost rates for many types of insurance, especially in Gulf Coast markets. Despite predictions of damaging hurricane seasons for 2006 and 2007, large losses did not occur, and underwriters earned fat profits. During 2008, hurricanes caused significant and costly damage in Louisiana and Texas. Recently, much of each hurricane season’s risk was sold by primary underwriters to hedge funds and reinsurers who buy portions of large, high-risk insurance policies. This enables property & casualty underwriters to continue to earn reasonable profits while laying-off a significant part of potential losses if there is a devastating hurricane.

The insurance industry includes a wide variety of sectors and services. The most obvious are insurance underwriters that cover the risks and issue the policies, along with the agencies that sell insurance. However, there are also large numbers of consulting firms, claims processing firms, data collection firms and myriad other specialized fields serving the industry.

In addition, there are insurance brokers, which have traditionally posted enviable profits. Normally, insurance brokers—companies that are supposed to represent the interests of major corporate clients while finding these customers the best coverage at the best rates—would be little known to the general public. However, scandal rocked the brokerage sector during 2004, and regulators’ efforts to control this sector created significant changes. Meanwhile, some members of the brokerage industry promoted the idea of important changes from within, including the abolition of “incentive payments” from underwriters to brokers, and a focus on acting as advocates for clients.

Recent regulatory changes have heightened competition within the insurance industry—an area in which competition has always been fierce. Massive mergers and acquisitions have resulted, creating financial services mega-firms, many of which offer a complete range of financial services and products to their customers, from checking accounts to investment products to life insurance. For example, banks are slowly gaining market share in the sale of insurance products, particularly annuities and life insurance. Investment companies like Merrill Lynch (now part of Bank of America) have been eager to sell insurance to their customers as well. At one time, bank holding companies were aggressively acquiring insurance agencies. Competition will only become more intense. While there are tens of thousands of small insurance firms worldwide, the industry tends to be concentrated in a few hundred major companies, many of which enjoy brands that are household names. A handful of these leading firms operate on a truly global scale.

the U.S. and Europe, regulators are considering sweeping changes in the regulation and oversight of financial services firms of all types. The focus will be on making risks held by such firms more transparent and maintaining sufficient levels of capital to cover potential losses. The insurance industry will undergo additional scrutiny and oversight as a result.

Meanwhile, the U.S. health insurance industry may be in for massive changes. America is unique among the world’s most highly-developed economies in that the government does not offer or oversee a universal health coverage system. As a result, health coverage in the United States is provided by a wide variety of providers ranging from firms that operate hospital systems and sell policies that provide care within those hospitals, to companies that only underwrite health insurance. Generally speaking, this is a highly-profitable business that has shown stellar growth over the past few decades. At the same time, the federal government pays for about 35% of all U.S. health costs via Medicare and other systems, while the states pay for 12.6% largely via Medicaid.

As of late October 2009, Congress was battling fiercely over proposed reforms of America’s health system, which may include the extension of coverage to about 25 million currently-uninsured people.

Initially, health care reform may provide positive growth to the earnings of health insurance providers. If Congress enacts a plan that relies primarily on the private sector to cover Americans who are currently uninsured, then insurance industry revenues may rise as a result of increased volume. The problem for the industry is that Congress will undoubtedly attempt to reduce costs and profits throughout the health industry. Insurance providers may eventually suffer, or be forced into consolidation in order to streamline operations and deal with lower profit margins. On the other hand, insurance providers may find that they have to innovate and evolve by offering supplemental policies—that is, policies that provide enhanced coverage above and beyond basic coverage mandated by universal care. Supplemental insurance is typically a much higher profit margin business. A major question is whether the government will create a “public option” insurance provider that will compete with private insurance firms.

universal coverage is highly subsidized by the federal government, then health care reform could result in one of three possible outcomes depending on the so-called public option.

1) If there is a public option, then private insurance companies will eventually suffer as current private sector clientele migrate to the public option for lower premiums.

2) If there are stringent limits on care provided by a public option, then private companies will evolve into something like today’s supplemental companies, providing special coverage somewhat similar to the way that Aflac does today. This supplemental coverage might include special, non-covered, treatments for cancer, like Proton Beam Radiation (PBRT), or might cover expenses of private rooms, certain specialists, or non-covered very expensive pharmaceuticals.

3) If there is no public option but the government sets up a procedure whereby virtually everyone will have insurance, subsidized when necessary, then today’s private insurers might grow substantially in terms of number of people covered. However, in this case, insurers over the long term could eventually face Medicare-like, government-imposed restrictions on what can be covered, how much can be charged, etc. The result could easily turn into a profit squeeze for both insurers and providers. Costs for the government could rise so quickly and so high that it could even impose profit limits. For example, both Massachusetts and Tennessee have been forced to backtrack substantially on their relatively new statewide universal plans because costs ramped up much higher and much faster than they ever thought possible. It is reasonable to assume that pain from a scenario like this would be passed along to insurers.
 
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