How Big is the Insurance Industry Globally?
The insurance industry has experienced dramatic change over the past few years, and today, the insurance sector stands poised for purposeful growth. Despite macroeconomic challenges, fierce competition, and tech-driven disruptions, the industry is well-positioned for purposeful growth. A recent global scandal, COVID-19, reinforced the importance of the insurance industry. As we continue to adapt to change, the decisions we make today will shape our industry’s future.
Health segment dominates the global health insurance market in 2021
The Global Health Insurance Market will reach US$ 1,590 billion in 2021. It is projected to grow at 7.2% CAGR during the period of 2022 to 2027, as per IMARC Group. The report covers major countries such as the U.S., Canada, Mexico, and Europe. In addition, the report covers China, Japan, Egypt, and South Africa. With this information, you will be able to assess the market’s potential.
In terms of coverage type, the Global Health Insurance Market is segmented by end users. Corporates account for over 25% of the market. The rising healthcare expenditure and regulations are driving the growth of the corporate segment. However, the aging population is a challenge. Hence, the Global Health Insurance Market is expected to remain dominated by corporate health insurance. The key players in the global health insurance market are United Healthcare Services, Inc., Centene Corporation, Humana Inc., and WellCare Health Plans, Inc.
The Global Healthcare Insurance Market will be divided into five segments: network providers, preferred provider organizations, point of service, health maintenance organizations, and exclusive provider organizations. The network provider segment will continue to dominate the market in the coming years and will account for the largest share of the market during the forecast period. Preferred provider organizations offer similar benefits and allow patients to select physicians within the network. Health maintenance organizations (HMOs) are one of the most affordable types of health insurance.
The Asia Pacific region is projected to grow at the highest rate during the forecast period. The region is home to the largest population in the world and rapid urbanization are factors fueling the market growth. Growing awareness of chronic diseases, rising disposable income, and increasing access to the internet are some of the key factors driving the market growth in this region. Additionally, the Affordable Care Act is expected to increase enrollment in health plans.
Rising healthcare costs
Healthcare spending is largely a function of prices and utilization. While U.S. healthcare prices increased by 2.5% in 2020, healthcare utilization fell by 8.4%. Much of this decline was due to the COVID-19 pandemic, which forced many people to delay elective surgery or forgo health care altogether. These factors are driving the trend toward higher healthcare costs, and insurers are preparing for them.
The average cost of a family’s health insurance premium is now nearly $20,000. The average premium could be as much as 100 percent of a person’s median household income by 2033. Currently, more than a third of healthcare dollars is spent on care with little or no value, and defining waste has proven difficult. Rising prices and lack of transparency are also driving up costs. But new legislation is offering some hope for lower healthcare spending.
Across the world, rising healthcare costs are putting more stress on the insurance industry. The aging population in the U.S. is the biggest driver of higher costs. In the United States, spending on health care increased by four percent between 1999 and 2009. The cost of health care has almost doubled in the last decade. The number of people aged 65 and older has risen by almost 100 million since 2000.
In addition to the health care sector, the cost of health insurance has a direct effect on labor markets. According to NBER associates, employer-provided health insurance premiums have increased by 59 percent since 2000, significantly outpacing wage growth. For example, between 2003 and 2004, premiums rose 11.2 percent while wages grew by only 2.3 percent. As a result, the rise in healthcare costs is forcing many workers to forgo valuable income and benefits.
Fraudulent claims in the insurance industry cost US consumers upwards of $80 billion a year. In fact, the workers’ compensation segment alone accounts for $30 billion of losses each year. Approximately 8,900 cars will be intentionally set on fire in the US in 2020. Clearly, we all need to do more to combat insurance fraud. Fortunately, insurers are taking steps to combat this problem. Specifically, they have set up a national fraud academy, an initiative between the insurance industry, FBI and International Association of Special Investigating Units.
In the wake of the 9/11 terrorist attacks, there were numerous cases of fake death claims, and other forms of fraud were perpetrated by unsavory doctors and lawyers. In addition to this, insurance companies also intentionally deny legitimate claims so as to confuse consumers. In these cases, it is necessary to file a complaint with the proper authorities. Luckily, the FBI is investigating fraud cases involving these companies, and there are many laws to protect consumers.
While fraud is widespread across the insurance industry, some sectors are more prone than others. Among these sectors, health insurance, workers’ compensation and auto insurance are some of the most susceptible to fraud. Fraud is an ongoing problem, and the costs of preventing it vary widely among law enforcement agencies and insurance bodies. But the costs are massive. So, how do we stop fraud in these industries? One simple step is to educate ourselves about the law.
Fortunately, insurers are taking steps to combat fraud. In fact, many state insurance departments are now investigating cases of fraud and bad faith. While many states do not penalize insurers for these acts, some do. For example, New York recently fined an insurance company $500,000 for intentionally underpaying claims in 2000. It all started with a woman in Oregon who complained about her insurance being denied. The state eventually investigated five thousand similar claims.
The competitive rivalry in the insurance industry is a key driver of pricing and marketing strategies. Insurers compete with government programs, risk retention groups, and self-insured entities. Because insurance prices are highly regulated, the most effective way for insurers to differentiate themselves is to provide better service for their policyholders. Whether or not this competition is healthy for the industry is debatable, but the bottom line is that it is good for consumers.
A study conducted in Zimbabwe evaluated the evolution of competition in the insurance industry over time. The researchers used the Boone indicator, a new empirical industrial organization method that assumes a more competitive industry punishes inefficient firms with lower profits. The study found moderate competition among insurance companies, with no significant difference between the periods studied. Therefore, the researchers recommend that government policymakers adopt policies that foster growth and create an environment that is favorable to business.
The global insurance market is highly fragmented, with many small players serving both the life and non-life insurance sectors. Given this, industry players are increasingly focusing on partnerships to improve their positions and develop new services and offerings. Recently, Heritage Insurance Holdings Inc., a property and casualty insurance company, announced a partnership with Slide, an insurtech P&C carrier. The two companies are expected to leverage each other’s expertise and technology to better serve their clients.
The health segment is expected to dominate the global insurance market by 2021. The use of artificial intelligence and digital platforms will improve the insurer-consumer relationship. Deeper understanding of customer behaviors will help insurers provide personalized insurance cover and lower false claims. Lastly, robotic process automation will take center stage in the insurance industry. Advancements in data sources and AI algorithms will drive the adoption of robotic process automation. Companies such as Lemonade are leveraging AI and behavioral economics to drive their business models.
OECD Global Insurance Statistics provides the most comprehensive and comparable data available on the insurance industry in 59 countries. The report covers 38 OECD countries as well as selected countries in Asia. By volume, it represents more than USD5 trillion in insurance premiums. The region with the highest growth rate was Asia Pacific, followed by developed APAC (28 percent) and North America (27 percent).
With the COVID-19 pandemic continuing to impact businesses and society, insurers have accelerated their efforts to streamline their processes. Additionally, many have begun implementing new mobile applications and online platforms. Companies have also begun to partner with digital solution providers. Duck Creek Technologies is one such company. Its core systems provide the P&C insurance industry with digital solutions. With this newfound vigor, insurers are better positioned than ever to meet customer needs and grow their business.