The COVID-19 pandemic caught the world by surprise and just three months after the first suspected case, most of the world went into lockdown. This caused a significant impact on the world’s economies as stocks, commodities, and foreign exchange rates all took a hit. The rest of the year was characterized by high volatility across all international markets, and general uncertainty in terms of the pandemic. The insurance industry was not immune to global events. The immediate impact was felt in the form of volatility, a decrease in prospective premium growth, and an increase in asset risks. But there were two particular side effects of COVID-19 that were beneficial to the industry.
Firstly, volatility actually drove more investors to trade and invest in insurance companies, thereby impacting investor confidence and driving up prices. Secondly, the lockdown encouraged insurance companies to take quicker steps towards embracing technologies and furthering digitization.
Increase in traders interested in insurance stocks
During 2020, www.cnbc.com/how-robinhood-and-covid-introduced-millions reported there was a big increase in amateur and beginner traders opening up trading accounts. In fact, some providers noted increases of hundreds of per cent throughout the year. This growth was propelled by market volatility which meant that some stocks could be bought for a low price and had a higher chance of increasing in value. It also meant that those wishing to speculate on fluctuating prices rather than buying the underlying asset had ample opportunity.
By the middle of 2020, many big insurers were down as much as 30% on the previous year and some big names like Berkshire Hathaway hit a 19-year-low. Analysts heralded this moment as “optimum buying time” and predicted that insurers were in for big profits in the coming months and years. Industry experts encouraged investors to “just get money on the table” as insiders were buying up insurance stocks en masse.
For those not familiar with the markets, a popular starting point was https://learnbonds.com/trading-platforms which provided them with information on the best trading platforms of 2021. Information such as bonuses, deposits, methods, different kinds of trading, and other factors are presented in one place and can be easily compared. This makes it easier for beginners to understand how to leverage market movements in favour of themselves.
Increased digitization
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As well as increased interest in stocks and bonds, the pandemic pushed insurers to embrace technology, according to home.kpmg/insights. One leading insurer conducted a survey last year to understand where customers are and where they want to be. A key finding of the report was the desire to be able to process policies completely online. Over half said that they wanted online processing of policies and claims to be completed quickly via a digital medium.
Other reports have suggested that having an app, integrating AI, and automating several processes would be hugely beneficial. Blockchain has also long been considered as having huge potential in the sector, particularly smart contracts. Accenture reported in November that the worldwide market for the interaction of blockchain into insurance could be worth more than $1 billion. This could grow to be more than $1.39 billion by the start of 2024.
Everything from filing claims, storing data, collecting payments, and ensuring confidentiality can be managed by blockchain. And in a world that is moving online more and more and increasingly demanding secure, electronic solutions, this is a positive thing.
The next year is expected to be a positive one for insurers as they will regain stability and enjoy an increase in profits. Greater across-the-board calm as the vaccine rolls out and businesses adapt to the new way of doing things, seems likely to further encourage lower volatility. But that’s no excuse for insurers to rest on their laurels, they need to ensure that digitalisation is prioritised in the coming months and years.
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