Compared to many other industries, the insurance market is expected to recover relatively quickly from the coronavirus (COVID-19) pandemic. While there will certainly be major impacts to the industry – especially given most insurance companies generate significant revenue by investing policy holders’ premiums – several factors party mitigate the effects. First, many core insurance products are likely to be unaffected by financial hardship. Products like health, home, and auto insurance are not only considered essential by many consumers but are often compulsory. Second, the lockdown has reduced many risks which can lead to insurance claims (for example by reducing vehicular traffic). And third, the pandemic has led many insurance companies to pursue digitalization projects that are likely to generate medium-term efficiency gains once conditions return to normal. For these reasons, it is expected the insurance industry rebound and will surpass its 2019 market size in 2021.
Insurance is one of the largest industries in the world, with a global market value greater than the gross domestic product (GDP) of many countries. While estimates can vary, most sources put the figure at around six trillion U.S. dollars of insurance premiums written in 2019. For perspective, the only two countries with a higher GDP than this in 2019 were the United States and China – making the global insurance industry larger than the overall economy of countries such as Japan and Germany.
Global insurance industryHistorically life insurance has been the largest segment of the global insurance market, accounting for 55 to 60 percent of the market since at least 2006. This changed in 2017 though, with the non-life segment achieving a market share of about 53 percent. Non-life insurance relates to the protection of material and financial possessions such homes and cars. Conversely, life insurance covers insurances relating to the life and death of a person, including health insurance in many countries.
Non-life insurance worldwideA major trend in the insurance industry is digitalization, which promises to reduce costs through the automation and the use ‘Big Data’ to generate more sophisticated risk profiles of new and existing customers. Accordingly, around half of insurance companies plan to increase expenditure on data analytics. However, increased reliance on data increases risks around the storage and handling of data – making cybersecurity and data storage the biggest tech spending priorities of insurance companies.
Insurtech worldwideBased on revenue, the largest insurance company in the world is U.S.-based Berkshire Hathaway, who recorded an annual revenue of over 250 billion dollars in 2019. This ranking is somewhat misleading though, as Berkshire Hathaway are a holding company with investments across many industries. The next largest insurance companies – whose revenue is tied more directly to the insurance industry – are Chinese company Ping An, French insurer AXA, and China Life Insurance.
Allianz GroupThe largest insurance market in the world is the United States, accounting for around half of the global market. Interestingly, the next-largest markets do not track the overall size of countries’ economies. This trend is due to several factors. It partly reflects consumer need, with some insurances are publicly provided in some countries but not others. However, it also reflects the regulatory environment, with certain countries offering various incentives to attract international providers.
Insurance in the U.S.While often being at the forefront of technological innovation, at its core the insurance industry is almost as old as civilization itself. The two core concepts of insurance – shifting losses from the individual to the group by pooling funds and implementing risk mitigation measures, and the (public or private) investment of these mutualized funds – can be traced back as far as ancient China and Babylon. This should not be surprising as many of the risks central to the insurance are perpetual facts of human existence: sudden injury, illness, death, and damage to property.
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