Other parts of this series:
How does the insurance industry gear for recovery while still operating in the challenging context of COVID-19? Is it possible? This is not the first time that insurers have had to recover from a pressurised, contracted economy.
The insurance industry stands to be heavily impacted by the economic recession that is expected to follow the COVID-19 pandemic. This will have a ripple effect because, as the recent Insurance Europe Annual Report 2019-2020 notes, the sector makes a major contribution to Europe’s economic growth and development. A third of all internationally active insurance groups are headquartered in the EU and Europe is also considered the global leader in reinsurance.
As we face the ongoing impacts of COVID-19 as a global economy, and society, it will be important for insurers to put strategies in place that will help ensure a smooth recovery. Can they? Leading insurers are showing the way with innovative solutions.
The COVID-19 effect
Insurers, while historically resilient, have felt the impacts of COVID-19. Measures taken to contain the pandemic have resulted in business interruptions, event and travel cancellations, and mortality—all of which have impacted claims. Insurers are also facing a decrease in business asset values and a fall in business volumes as the recession hits. And, in the near future, the pressure is expected to continue. The European Insurance and Occupational Pensions Authority Risk Dashboard (OECD) estimates a reduction of global GDP to 4.5 percent in 2020 (7.9 percent in Europe), with major European economies expected to be hit even worse (Italy: -10.5 percent, UK: -10.1 percent, France: -9.5 percent).
As described in the recent Accenture Insurance: Strategic Plays for Recession Recovery Report, the COVID-19 crisis has pummeled the market capitalization of insurers faster than previous financial crises. Specific lines, such as trade credit, inland marine insurance, and workers’ compensation, are particularly at risk, as are specific segments, such as the small- and medium-sized enterprise (SME) sector. However, our research also indicates there is considerable opportunity for insurers to apply strategies that will help them outmaneuver uncertainty.
A path forward
Despite the risks faced by the insurance industry, there is some hope. A number of leading insurers have not only maintained business continuity during the pandemic, but innovated to launch exciting new initiatives.
- The French insurance industry has pledged over €3 billion ($3.5 billion) in exceptional, non-contractual measures to support SMEs, specific business sectors and essential medical employees who have been affected by the crisis. They have also actively contributed to a global investment program to support global economic recovery.
- In Spain, over 100 insurers collaborated to give medical staff treating patients with COVID-19 complimentary life insurance and hospitalization subsidies.
In Insurance: Strategic Plays for Recession Recovery Report, Accenture analyzed recessionary impacts on the insurance industry and the strategies insurers used to outperform competitors in previous recessions. From these patterns, we uncover insights that can help insurers test the resiliency of their strategies, emerge stronger and outperform competitors.
Innovative, sustainable strategies to recover from the economic recession are possible. In fact, these strategies may just be an opportunity to revitalize and reimagine traditional insurance models.
In this series, I will explore how insurers can implement wise, sustainable recession recovery strategies.
Contact me to discuss how to build your business’s recession response.