Many insurance companies are facing these six lists challenges below?
Experience showed that Reporting accounts based on IFRS 17 is not always easy as it seems to be having several IT-systems in their portfolio, is a big challenge, in my opinion, the insurance companies have to connect all of the systems to get the right data and consequently the right report.
Excessive politicization of the insurance industry as it regards to recapitalization or not among others. For instances from public points of view, insurance firms are summarily viewed as businesses meant to cancel or minimize the adverse consequences of unforeseen misfortunes. Indeed, insurance companies are risk outcomes underwriters. Because we leave in very unpredictable societies that have an extensive variety of risk trajectories, it is commonly expected that a person at a particular point in time will run into unfriendly situations that will endanger his or her life and property regardless of status, caliber, education level, and class. Industrialized and matured societies depend on insurance. That is among why many companies and industries in that developed nations do not liquidate or “go under” in such societies.
Ordinarily, against this background, most people expect that insurance firms will be viable and popular in societies. However, this is not the case of developing nation like Nigeria since many insurance businesses face difficult challenges that seriously threaten their survivals and existences. This is common in less developed societies where political and socio-economic systems are yet to crystallize. Social, Economic, and Political Systems in such developing countries present terrible problems to insurance companies. Many of the developing societies with dangerous conditions to insurance sector are Africa, Asia, Caribbean, and the Latin America.
For sure, if an individual has just started the business of selling insurance, then he or she must understand that having thick skin is an important thing for him or her to survive in the industry. Today, each business changes in some ways and the changes can either be negative or positive. In any industry, there are various problems to be faced. Here are the 6 major challenges for insurance companies.
- Lack of Public trust
This is a country where religious has given reason why many individuals don`t bother with insurance policy. And many insurance firms fail to pay claims as at when due or dragged the matter to court, and they don`t own up to offering some benefits. Therefore, most people just see insurance as one of the unnecessary expenses or of no value. Though many insurance firms do not shut down because of financial challenges and individuals who are the victims of the loss don`t even think twice about purchasing insurance policies which is causing low penetration rate in the sector. Perhaps this are the factor that pushed some banks to entered into the sector with new brand portfolio of recent.
Today, there are many insurance firms in the market which is channel of struggling small businesses available, therefore there is an intensive challenge among insurers. Each company looks for the best way of selling their insurance products in the best possible way and targets a particular group of individuals without marketing professional. For instance, most insurance businesses are into almost the same products or services, no creative enough among themselves, especially the new ones are the most doubted companies.
In fact, most people trust some of the old existing insurance firms to the new businesses since the new enterprises are not well known in operation and may be they have a thin line between failure and success, couple with hardship in the country —and no one will want to take such risks with the little among of money that they have.
As the owner of the insurance business, one is solely responsible for all issues that his or her clients may have regarding the management of the insurance business. All insurance firms that are mismanaged can`t hide their faults for a longer time without the clients noticing. As time move, there will be a constant increase in the number of clients` complaints, and if his or her insurance firm is not transparent, it will term to bad reputation for the whole industry but thank God Nigerian Insurance Association (NIA) has started with membership suspension due to failure to pay claims to the policy holders as at when due. Though it is a matter of customer to company but at the end the insurer (he or she) will lose more customers. Also, incompetent management may cost the company a lot, particularly if they have poor communication with their clients.
In case an individual`s premiums are high, he or she should not advertise. They should look for a market for that policy instead of lying to the general public or even form strategies whereby the clients cut on expenses like providing no-exam life insurance quotes.
- Economic instability
When the country`s economy is not stable, all insurance companies will be affected. At such situations, the rates can be affected such that the insurance companies might be forced to increase their rates, just like interest rates on credit facilities provided by financial institutions.
Of course, no client will appreciate this, even if it is stated clearly in the contract that the insurance rates might change from time to time. Therefore, such situations might create a bad image for a company and entire industry since costumers can spread the information about a service or product, they were not happy with very fast.
- Excessive politicization of the insurance industry
Without a doubt, politics play a significant role in insurance companies` operations depending on the power play and calculations that are dominant in the operating domains of the insurance firms. The premiums to pay, the outcomes of risk investigations, and the damages and benefits to pay depend on political conspiracy sometimes.
- Weak manpower
Non-professionals run many of the insurance companies today. In fact, many people think that what it takes to be an insurance professional is just some knowledge of monetary studies with no specialized training. Indeed, this has majorly affected the dependability and operations of insurance firms in this century of digitalsiation. Insurers must adopt aggressive marketing and advertising to push selling to the targets group like high social or religious body. Works with government through the sector regulator to develop more policy frameworks that attracts more investors.
These are major challenges that are faced by insurance companies. They include mismanagement, economic instability, lack of trust, and competition among others.