Undoubtedly, the year 2020 was seen as a period of transition for the property and casualty (P&C) insurance business. Against a background of seemingly impossible conditions – and there is no need to list them, starting with COVID-19 and ending with the constant changes in the regulatory environment – the industry remained stable and flexible. This paper aims to review the analysis of the main trends, risks, and opportunities in the P&C insurance industry in the calendar year of 2020.
Economic Effectiveness and Business Success
There were large economic shocks in the global P&C insurance market in 2020. The outbreak of COVID-19 in the world impacted the insurance market through the disruptions of the supply and demand sides. Commerce and related industries saw many offices shut down or working limited operations and therefore maintained low commercial insurance rates. At the same time, the pandemic raised the claims under a specific type of insurance, which is business interruption insurance and event cancellation insurance.
Thus, the fluctuation of stock prices and other challenges had no significant impact on the P&C insurance industry, which continued to be quite stable. The industry’s non-erosion of capital adequacy solvency levels amid extensive losses caused by natural disasters and the current pandemic also pointed to its financial resilience. For example, the industry was able to cope with an insured loss of $45 billion resulting from the terrorist attack on September 11, 2001, not to mention recent natural calamities.
Technological change and digitalization.
It is found that the pandemic boosted the use of digital technologies among the P&C insurance players. There is also a general expansion of insurer utilization of digital channels to work and provide service even during these times. Specialty areas like artificial intelligence (AI), machine learning (ML), and big data analytics helped in underwriting sciences to get accurate, identifying fraud cases, and also enhancing the customer service aspects.
Telematics and IoT (Internet of Things) devices established themselves, especially within the fields of auto and home insurance. These technologies gave actual-time details on the driving pattern and the property status to offer insurers detailed and differentiated rates. Further, there was a continued focus towards beginning to explore how the technology of blockchain could help process claims faster and also be more transparent.
Regulatory and Legal Challenges
The three aspects of the changes in P&C insurance were not stabilizing in 2020. Making changes to the patterns of insurance, the new opportunities of the market and the risks associated with them appeared, therefore, the governments and the regulatory authorities prepared new policy measures for the consumers. For instance, there was a concentration on business interruption insurance policies as the discourses of the pandemic’s losses were being made.
This paper showed that preparing a balance sheet for decision-making also portrayed insurers to newer regulations in data protection and cybersecurity. The significance of proper data management practices was realized in the year in relation to various rules like the General Data Protection Regulation (GDPR) governing the European Union and the California Consumer Privacy Act (CCPA) governing the United States of America.
A note on CLIMATE CHANGE & NATURAL DISASTER
As for the subject of climate change, it continued to be in the year’s limelight as a critical area of interest for the P&C insurance business. This year one could witness several severe natural calamities including hurricanes, fire, and floods which caused estimable losses and were camouflaged by insurance. Occurring more frequently and growing more intense, any event became a wake-up call to insurers and signals them to reconsider the relative risk and, therefore, the premiums.
It entered insurance organizations’ undertakings proceeding in the form of climate risk appraisal to forecast and mitigate the risk of climate change. There was also a change in emphasis on the policyholder’s part in identifying self-protection and risk control. For example, to promote this type of construction, insurance companies had incentives for the use of disaster-resistant construction methods and materials.
In this phase, the discussed aspects include Innovation and New Product Development.
In the year 2020, the industry that dominates the P&C insurance industry was the theme of innovation. They include the invention of the products being offered by the insurers to include new emerging risks as well as cope with the new requirements of the consumers. Over the years nonlife insurance operating model was changed by the incorporation of parametric insurance contracts that envisage payment in relation to the intensity of the natural calamity as a better option than the post-loss assessment for faster, efficient, and predictable claims clearing.
Similar to cyber insurance which was a popular product in this period as organizations were experiencing a new level of risk in terms of cyber incidences. Insurers introduced more elaborate forms of cyber insurance policies that aim at providing mitigation for various types of cyber risks from cyber criminals. Also, an emphasis was placed on delivering risk management services for cyber threat prevention and management for businesses.
Conclusion
There is one must add that the state of P&C insurance in the year 2020 can be described in terms of the guidance of resilience, innovation as well as adaptability. Nonetheless, the COVID-19 pandemic, natural disasters, and regulatory changes severely affected the industry, whereas, the industry proved its efficiency in managing complex risks and ensuring policyholders’ access to needed services. The shift toward embedding digital technologies and world climate construction, developing new insurance products proved that the industry has the potential to adapt to the changing world.
Insurers will have to maintain the progress towards the approaches, improving their approaches to risk management, and focusing on enhanced cooperation with the other parties in response to the complex nature of climate change, cyber threats, and other emerging risks. As has been witnessed in 2020, new lessons shall continue to influence the P&C insurance industry to the path of dynamism and sustenance.
