Table of Contents
Insurance industry is a branch of business that provides financial protection of property, health, life, etc. Admittedly, the insurance industry manages risk of losses. The basics of insurance are simple: an insurance company offers a guaranteed further payment for contracted event to insured company. The goal of the insurance industry is to assume all financial responsibilities associated with the insured losses. The industry has either public or private boundaries. These boundaries appear and change for two major reasons. The first, the public sector faces constantly increasing financial pressure. It mainly depends on its link with social services (healthcare and life insurance) and retirement income. The second, in the insurance industry new risks often emerge. In order to prevent these risks, the government provides new public and private boundaries.
Product, Size, Growth and Life Cycle of Insurance Industry
The products provided and distributed by the insurance industry are different kinds of insurance programs. There are several major types of insurance: health, life and liability insurance. This industry provides equitable transfer of losses in exchange for payment. It is the most widespread form of managerial risk. The products must be driven by customer insight, satisfying the current demand with the best price.
It is almost impossible to determine the size of the insurance industry. It embraces all the sectors of modern life. It is possible to ensure all predictable and unpredictable cases. Mainly, people try to protect their financial interests and guarantee the safety of their lives. Admittedly, they invest their funds in these two sectors of the insurance industry. As it was mentioned above, the insurance business obtains either private or public sectors that display the scale of industry’s activity.
The growth of insurance market is often limited by capital management challenges, insurance risks, and increased regulations. Furthermore, certain insurance trends such as social media and the rapid growth of big data set additional barriers for the industry growth into the future. The twenty first century’s insurance industry introduces the best innovation and agility policies.
The life cycle in insurance business is the time between profitable and unprofitable periods. The life cycle starts when insurer tightens his underwriting standards and raises premiums. It happens after the period of severe losses or negative stock in order to prevent even bigger losses. Life cycle in insurance market is divided into growth and decline cycles. They play a great part in the insurance and re-insurance industry because they are the most unpredictable elements of this business.
Environment and Boundaries
Insurance industry consists of industry environment and industry boundary. The insurance industry environment includes customers, suppliers and competitors. Customers are people who contribute services of the insurance industry. Their preferences, attitudes, and buying behavior change worldwide. Customers in the USA differ from the consumers in other countries. The USA customers ask for more information about the product, improved service, and involvement into purchasing decisions. Moreover, they insist on the rewarded loyalty provided by either discounts or better value.
Suppliers are parties that supply goods or services. In the insurance industry suppliers are the most significant reinsurers of the primary insurance companies. Suppliers need access to reinsurance in order to write business plan in a profitable way. In hard market, suppliers can control capacities they provide and prices they charge in the market.
The competitive environment leads to beneficial industry’s development. Competitive pressures provide the need to manage business efficiently and economically, providing existing and new regulations. The greatest competitive pressure on the insurance suppliers is the competitor’s advantages and development. Competitive conditions provide improvement of actuarial functions, risk management functions, and finance modernizing.
The insurance industry boundary includes product and demand perspectives. The essential elements of the insurance industry are qualitative goods and services that are well sold. New products and services require distribution force to understand and appreciate the value of the definite product or service. In order to get this goal, the manufacturing insurance company must provide training and high quality marketing materials. The insurance product perspective must be oriented on the particular audience and properly provided to it.
Admittedly, demand determines an amount of productivity. However, the insurers provide new services and techniques to attract new clients and consumers. It is evident that insurance demand perspective directly depends on suppliers’ marketing ingenuity, innovation, and well-organized management programs. Moreover, foreign insurance programs are the other way to develop the insurance industry. Insurance market must change according to the demand of the consumers. Nowadays, the industry provides services for a new generation of ‘digital native’ clients.
General Analysis of the USA Insurance Industry
The insurance market is not incompatible with modern social goals. According to the USA insurance market report 2014, it is seen that the prices for commercial property insurance are stable for many organizations. It turned out to be a significant surplus of funds among insurers, reinsurers and suppliers. Up to date, the competition is getting higher while catastrophe losses are getting lower. Moreover, some particular lines of coverage and liability continue to strengthen. The rate of strengthen is forecasted in the employment insurance liability market in 2014.
In short, the concentrated nature of the insurance industry tends to work for insurers, reinsurers, and suppliers if they experience non-veritable losses. As the matter of fact, this rate exception is a highly concentrated market structure that works in favor of consumers rather than suppliers.
Any type of insurance is a managing risk. In the USA insurance industry either investors or consumers should concern about the insurer’s financial ability to meet ongoing obligations. However, the industry has been developing for many years. Therefore, modern insurance industry offers more types of investment products for its consumers. This approach made the insurance industry competitive towards other financial services companies. Despite all the benefits that the industry offers, it continues to develop and create new advanced approaches and strategies to run this business.