Impact of the pandemic on insurance

CHANGES IN INSURANCE DUE TO THE COVID-19 CRISIS

In all economic sectors around the world, the impact of the pandemic on insurance has seen us go through both positive and negative changes. Like never before, we realized how interconnected we are socially and economically.  

Playing different roles but in the end members of the same global societywe have faced and survived the health crisis until today. And as 2020 draws to a close, it’s time to take stock of the damage to better plan ahead.

Looking ahead to 2021, we know there are consequences to come and a long way to go. We want you to have the clearest picture possible, to make better decisions for the future.

That is why we recommend you read this article, hoping that you will learn valuable lessons and that we can turn the contingency experiences into something positive for your own well-being, that of your family, and that of your assets.

Policyholder response to the pandemic

How do we policyholders react? The issue is a little more complex than we think because in Mexico there are those who place great value on insurance and there are those who do not find it meaningful.  

On the one hand, the closure of businesses and premises reduced the risks of having an accident or loss. The decision of Mexicans to pay for damage insurance, car insurance, or any other type of policy became slow.

Low mobility had the same effect: one would think that with fewer people on the street, there are fewer risks. However, auto insurance is still necessary at all times. Another factor that made us hesitate was lower revenues to cover the funds (premiums) that could pay to protect against those risks. 

The impact of the pandemic on insurance strengthens the culture of prevention.

On the other hand, wouldn’t now be the time to assess your protection against unforeseen events? In times of crisis, our biggest question is how much value do we see in having insurance? But not everyone necessarily thinks the same.

For example, if before a driver did not value his car insurance, this crisis presented the perfect scenario to ask himself, why pay for insurance for something that he does not use? 

Many, then, decided to stop paying for something that they “don’t even use”. Thinking: “why pay car insurance if I’m going to be stuck in my house?” Unfortunately this is a common mistake.

Remember that, in addition to the fact that car theft did not decrease during confinement, it is necessary to have your car insurance always valid so that the coverage applies when you go out again.

So we all react depending on our point of view on prevention. That is why it is worth reviewing how the industry was affected, the acquisition of insurance, and what follows from now on. 

Here we give you all the context.

DIFFERENCE BETWEEN THE CORONAVIRUS CRISIS AND OTHERS 

While the proportion of this crisis has been compared to others in the past, it is important to understand that not all economic downturns are equally bad. But, for those of us who are not economists, how can we understand the differences?

What the experts explained to us was that in 2008 ( the only reference to a crisis that we know well ), what collapsed was the financial system. The institutions stopped issuing credits, which reduced the liquidity of the general public to be able to acquire patrimonial assets, such as houses and cars. 

Instead, in 2020 everything happened the other way around. The shortage stemmed from lack of demand, as well as production halted by restrictions on mobility. Many intermediate services were affected.

Among these intermediate services was the marketing and distribution of insurance , which we explain later. 

In general, the data indicates that we are beginning to recover, since credit liquidity will be available to climb the January slope. Despite a slight public debt, people and companies will be able to gradually return to a point of equilibrium with the expected growth “cushion” as every year, at the beginning of 2021.

In other words, in the first semester of the following year we would have to draw a draw. 

The pandemic crisis had encouraging trends in the industry but also augurs new opportunities.

What about auto insurance and other branches?

In insurance, the auto line has remained the most stable compared to life, health and other property lines.

Although the growth trend for medical insurance is positive, due to concerns about health care expenses, the trend for life and savings products has been declining throughout the contingency.

Why? We have all had to pay for more immediate expenses and tighten our belts. Fewer families have enough funds to set aside for savings . In the midst of uncertainty, the most common is to resolve the most urgent and necessary.

Another notable impact on insurance was due to the debts that we had to acquire during the pandemic and the high interest rates, which has made it difficult for us to be able to pay for retirement and savings insurance at this time.

So what changes were seen in the insurance sector and what can we expect in the new normal?

THE COST OF THE CORONAVIRUS IN MEXICO

Knowing and understanding the aftermath of the COVID-19 crisis will help you better plan your finances for the coming year. 

According to the Mexican Association of Insurance Institutions (AMIS), a 5.35% drop in insurance revenue is expected due to the global economic depression.

Speaking of the Mexican economy, it is said that a drop of -10.5% is expected due to low demand and the closure of production channels.

Additionally, in the field of medical expenses, it is estimated that the consequences and expenses of the crisis will cost our country around 300 million dollars in compensation . Why so much?

Consider the savings you get between expenses in a crisis and investment in your insurance.

It turns out that pandemics are expensive. Our little culture of prevention means that sometimes we are not so clear about the consequences of claims.

But going through the coronavirus, especially for people with pre-existing conditions, showed us that you have to be prepared for everything. The treatment of COVID-19 can cost up to a total average expense of 429,515 pesos, depending on the complications of each case. 

And who has saved in the bank about half a million pesos to recover health? Hence the importance of preventing and being well insured . 

In short, with a little more perspective, insurance did not fare as badly as others. The most affected industries were the automotive sector, the construction sector and tourism .

However, most agree that recovery times will be slow and improvements will only begin to be noticed after years of getting our act together.

TRANSFORMATION IN THE INSURANCE SECTOR DUE TO THE PANDEMIC

Without a doubt , digitization has been the most visible factor in the operation of insurance. 

For both policyholders and insurers, the transition from operating with paper, copies and cardboard folders to files, emails and WhatsApp messages is the biggest watershed.

On this subject, we got good information thanks to a detailed study by Deloitte and other sources that applied interesting surveys and research.

When asked members of the sector about the impact and changes in organizations due to the pandemic, 83% responded that they believe it is necessary to increase the budget for digital transformation since it has become very clear that business continuity plans will have many modifications. #work at home ?

Although the amount of written premiums was not as expected, there is a broad sense of optimism among executives in the insurance sector. More than 90% expect that there will be new and better opportunities for growth and economic recovery in 2021.

The pandemic in insurance brought a huge leap forward in digital transformation.

Towards a contagious digital insurance experience

Another quantum change in the industry has been the distribution model . ? 

Insurers that relied more on intermediaries suffered more economic losses than those that used digital channels . (We give you the figures below.) 

As now the consumption of any product or service requires maintaining the greatest possible healthy distance , online commerce has rapidly escalated in users of all ages and regions. 

And buying your auto insurance will not be the exception . Now you can compare , quote and hire in a few clicks. But that’s another story .

The commercialization of insurance in all branches will be increasingly digitized: from the exchange of important documents without paper to the purchase 100% online .

On the other hand, 70% of those surveyed think that the crisis will lead to mergers between insurers , since the competitiveness of many was already strong before the pandemic.

We can’t tell you much about that. What is clear to us are the factors that were most affected by the crisis : interest rates on investments, solvency, cybersecurity, distribution of services, among others.

However, the industry has not stopped for a second and the outlook of all members of the sector is positive if we consider all sources. 

As for the job, more than 80% assure that the projects within their companies continued , while only 1% of the projects were cancelled. Good news considering the unemployment figures in other industries worldwide, which this time was worse. 

In 2008, for example, an average unemployment rate of 8% was reached (in all industries), while this year an average rate of 14% was reached , according to an analysis of the situation in the United States and Europe.

By contrast, 60% of insurers said there were no staff changes during the crisis , with fewer than 10% or none of their employees leaving their regular duties.

If you are currently actively looking for a job, we recommend you visit the Jooble Mexico site with more than 85,000 job offers.

Finally, as firm believers in technology, the following data did not surprise us at all. 98% of people consider that the area of ‚Äč‚Äčtheir organization that contributed most positively to the business was the Systems area . (Engineers, never leave us. ?)

Engineers were other heroes who rescued the insurance industry during the crisis.

Finally, 73% said that from now on we should find the offer of insurance for epidemics and pandemics . All agree!

THE SUPER POWER OF PREVENTION

How many times have you heard about the heroes and heroines that we applaud throughout the year? 

There is much to be thankful for in the clarity with which we see the priorities of our lives thanks to the impact of the pandemic on insurance. We learned to value health and our material possessions in a whole new way.

Although many have experienced this crisis as a catastrophe that has affected both their physical well-being and their finances, within insurance the impact was manageable and the lessons are many. 

Although in no way does one expect to lose a loved one or pay for the damage that taking care of ourselves during and after this crisis may cause, it is worth stopping to think about the culture of prevention .

Investing in your insurance from now on is one of the best lessons the pandemic has taught us.

What is more valuable to you? What are you willing to protect starting today? How can you prepare for tomorrow’s surprises?

During the last few months, we had to learn that better planning is necessary. Thinking about how to avoid economic losses or how to protect ourselves, the family, in situations beyond our control is essential.

Buying insurance is the smartest investment you can make . Do not leave for another moment what you can solve in less than 15 seconds. 

In less than what comes out of the toaster you can compare and take out the car insurance you need in our online comparator .

For the rest of your insurance, we help you manage it in the event of an accident and we remind you of the expiration days so that you do not worry . 

In addition, in our wallet you can customize reminders about verification, fines, and other procedures , totally free. 

Just load your policy, regardless of which insurance company it is from, and see all the benefits so that your post-pandemic life will be much easier from now on.