For the most part the insurance industry, in the UK at least, is a robust sector and is set up, in part, to deal with such global issues as Covid 19, however, there are many facets to which the industry must respond, and this article looks at some of those in greater detail. It’s key that the industry recovers and responds to this worldwide interruption as it affects not only the industry but of course, by definition, everybody else.
High Net Worth Insurance
The epidemic has not only hit businesses hard but also assets have been targeted due to the lack of confidence that this virus has caused in the future of the planet and the search for a return to normality as soon as possible.
A client with a high-net-worth insurance policy will be, understandably, concerned that items such as investments, artwork, motor vehicle collections, jewellery, furs, and more may well be negatively affected in terms of value. With portfolios of luxury depreciating, or at least temporarily either going down in value.
High value jewellery insurance as a policy has not been affected as such it is that people are now less likely to buy luxurious watches, jewellery and other times that were previously seen as not just high-value items but also purchased for investment purposes.
Covid 19 could in fact create liquidity strains on high-net-worth insurance clients. Investments may stop as cash becomes harder to use in a volatile marketplace and business revenue, in some cases, completely stops. It could also affect insurers who expect business interruption pay outs to easily top £1 billion in 2020.
Annuities and retirement funds are starting to pay out early with no penalties attached cutting investment revenue in the future.
What has covid meant for investments?
With investments, we could start to see drastically reduced returns as the world continues with ultra-low interest rates. Although this means that it’s a great time to borrow it also means that lenders are under pressure and as such have started to look more closely at applications and in some cases, such as mortgage borrowing, look for more collateral before making positive decisions.
A tighter approach to cash management will be vital for insurance companies looking to weather this storm of all storms and a focus on liquidity is looking like the vital cog in the wheel, particularly in the short to medium term.
Other factors affecting the insurance industry
Some other challenges in the industry sector remain such as remote working and the productivity issue that brings when departments need to work together. The increased risk of fraudulent claims may slip through the net due to time constraints.
Business insurance declines within office insurance as more clients work from home. A reduction also in motor mileage will reduce premiums over the next few years.
High-net-worth insurance policies, both residential and commercial carry the highest risk of decline if we cannot show a path out of the pandemic and it is these clients that insurers must focus on providing clarity and decision.
As stated at the start of this article the insurance industry in the UK is robust and after the 2008 crisis has been made more so. Insurers just have to work and understand their clients whilst providing a timetable of not only recovery but a timetable of growth.
I hope you have enjoyed reading this short snippet of how high net worth insured clients can be helped through and beyond the effects of the current Covid 19 pandemic.