The insurance marketplace we are about to enter is like a massive storm that comes around once in a lifetime. The aftermath of this turmoil is set to change the landscape of our industry in an unprecedented fashion. Fortunately we have abundance of talent, knowledge, and technology to weather this storm. If the industry as a whole can direct their resources and improve the infrastructure than we can come out ahead! It is time that all insurance professionals enter this new era, if not we will face the same challenges in coming years. Never before have so many moving parts been affected by the current financial crisis. If predicting insurance was anything like forecasting weather, then everyone should be aware of the storm clouds looming.
“Red skies at night, sailors delight. Red skies in morning, sailors take warning!”
It is no secret that there are problems in the financial sector. The stock market was good, money was being made, and for the most part insurance premiums were low. 2008 was set to be another profitable year for financial professionals. As the first quarter came to a close, some of the industry giants began grumbling of problems set to hit their firms. AIG and Berkshire Hathaway both predicted significant decrease in profits in early March. Nine months later we see their forecasts came true and what they had projected was just a small portion of the insurance industry and the related financial products. During this period where large amounts of profit was being lost we also experienced another anomaly, insurance premiums were at an all time low. The barometer started rising fast and the pressure from stockholders for performance was immediate. During this “calm period” companies did their best to write as much premium as possible, in some cases going against sound underwriting and actuary data just to retain business. There is plenty of data to support the fact that premiums have dropped this year. Competition, the driving force of our economy is at an all time high. So the people in the product and distribution chain I.E. carriers, MGA’s, brokers and agents had to work harder just to keep what they had. In some cases taking accounts that were completely unprofitable from a premium and servicing standpoint. Consumer’s dictated this drop in premium and the supply chain had to follow just to stay afloat. This “Red Sky” of low premiums and no profits is a daily lifestyle for the insurance professional. So how do we weather this storm?
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