Insurance firms are summarily viewed as establishments meant to cancel or minimize the adverse consequences of unforeseen misfortunes. Indeed, insurance companies are risk outcomes underwriters. Because we leave in very unpredictable societies that have an extensive variety of risk trajectories, it is commonly expected that a person at a particular point in time will run into unfriendly situations that will endanger his or her life and property regardless of status, caliber, education level, and class. Industrialized and matured societies depend on insurance. This is an explanation why many companies and industries in developed nations do not liquidate or “go under“ in such societies.
Ordinarily, against this contextual, most people expect that insurance firms will be viable and popular in societies. However, this is not the case since many insurance businesses face difficult challenges that seriously threaten their survivals and existences. This is common in less developed societies where political and socio-economic systems are yet to crystallize. Social, economic, and political systems in such countries present terrible problems to insurance companies. Many of the societies with dangerous conditions to insurance sector are Africa, Asia, Caribbean, and the Latin America.
For sure, if an individual has just started the business of selling insurance, then he or she must understand that having thick skin is an important thing for him or her to survive in the industry. Today, each business changes in some ways and the changes can either be negative or positive. In any industry, there are various problems to be faced. Here are the biggest challenges for insurance companies.
1. Lack of trust
This is a reason why many individuals don`t bother with insurance. Many insurance firms fail to pay claims, and they don`t own up to offering some benefits. Therefore, most people just see insurance as one of the unnecessary expenses. Many insurance firms do shut down because of financial challenges and individuals who are the victims of the loss don`t even think twice about purchasing insurance policies.
2. Competition
Today, there are many insurance firms on the market and therefore there is an intensive challenge for insurers. Each company looks for the best way of selling their insurance products in the best possible way and targets a particular group of individuals. Most insurance businesses, especially the new ones are the most doubted companies. In fact, most people trust some of the existing insurance firms compared to the new businesses since the new enterprises are operated on a thin line between failure and success—and no one will want to take such risks with the little among of money that they have.
3. Mismanagement
As the owner of the insurance business, one is solely responsible for all issues that his or her clients may have regarding the management of the insurance business. All insurance firms that are mismanaged can`t hide their faults for a longer time without the clients noticing. As time move, there will be a constant increase in the number of clients` complaints, and if his or her insurance firm is not transparent, then he or she will lose more customers. Also, incompetent management may cost the company a lot, particularly if they have poor communication with their clients.
In case an individual`s premiums are high, he or she should not advertise. They should look for a market for that policy instead of lying to the general public or even form strategies whereby the clients cut on expenses like providing no-exam life insurance quotes.
4. Economic instability
When the country`s economy is down, all insurance companies will be affected. At such situations, the rates can be affected such that the insurance companies might be forced to increase their rates, just like interest rates on credit facilities provided by financial institutions.
Of course, no client will appreciate this, even if it is stated clearly in the contract that the insurance rates might change from time to time. Therefore, such situations might create a bad image for a company since costumers can spread the information about a service or product they were not happy with very fast.
5. Weak manpower
Non-professionals run many of the insurance companies today. In fact, many people think that what it takes to be an insurance professional is just some knowledge of monetary studies with no specialized training. Indeed, this has majorly affected the dependability and operations of insurance firms in this century.
6. Excessive politicization of the insurance industry
Without a doubt, politics play a significant role in insurance companies` operations depending on the power play & calculations that are dominant in the operating domains of the insurance firms. The premiums to pay, the outcomes of risk investigations, and the damages and benefits to pay depend on political conspiracy sometimes.
These are some of the biggest challenges that are faced by insurance companies. They include mismanagement, economic instability, lack of trust, and competition among others.
Despite all the challenges faced with insurance companies, better insure because not that all challenges existed on ground are there with all companies
IFRS 17 will be the biggest challenge in the insurance industry worldwide. Insurers need to prepared themselves & trained their account ,finance, technical and marketing teams. Think what type of products will be sold to maintain existing profit level.
Good and brief content
I am quite agree with Mr. Chandra Shekhar Das, as IFRS 17 represents the most significant change to insurance accounting requirements in over 20 years.
I could not understand the politicalisation of insurance industry. Some of the examples are likely to be mismanagement of the top level management of the insurance companies. In some countries, insurance companies are established by state and intervention is too much in these organisation. How the insurance pricing is dominated and guided government is great interest of us. Please provide some examples.