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  • Hi, I'm Jack Plunkett. Today we're going to talk about the global insurance industry.

  • Now this is a really giant industry. On a global basis, it accounts for about six and

  • a half percent of G-D-P, or gross domestic product. In developed nations like the United States,

  • many countries in Europe, Japan, where insurance is very mature industry, it accounts for a

  • much higher portion of the economy than that. Now, there are many different, very important segments

  • to the insurance industry you should consider when you're trying to get an overview of the

  • entire sector. Those include health insurance, life insurance, property and casualty insurance,

  • specialty insurance, reinsurance, and investments and annuities. All part of the insurance industry

  • and all underwriting risk to either a small or very large extent. But, all very unique,

  • very different business models. Casualty insurance is the sector that would underwrite your car

  • insurance or your house insurance, or big building risks, or big risks at industrial

  • factories, things like that. It's a huge, varied industry. But it's all based on trying to

  • control mitigate risks. Profitability, however, is always an issue for P and C, or property and casualty

  • insurance, because they can't always make a profit in that industry. Big, natural disasters

  • or other things occur every once in a while that wipe out a year's profits and take a

  • lot of the company's reserves. Something like a major hurricane. A really bad hurricane

  • season can be just devastating to the P and C industry. Now, life insurance. It's

  • pretty obvious. It insures lives, expecting them to live a certain number of years. Making

  • sure that all of the underwriting parameters have been determined carefully and then offering

  • a set premium to an individual to cover his or her life. But, what a lot of people don't

  • think about, is that the life insurance industry is very focused on selling investments. A

  • big piece of the life industry is what's called annuities, where your get the

  • customer to give you a fixed amount of money or give you a certain amount of money every

  • year. It's invested for the customer, and then paid back over a period of time upon

  • retirement. Annuities are an immense, very popular, very profitable global business.

  • How about health insurance? Health insurance has gone through so many changes. It's such

  • a difficult situation. We're really talking about the United States of America when we

  • talk about health insurance because most other developed economies have what we call a national

  • health. For instance, if you go to the UK, if you're a resident there, your health needs

  • are going to be covered by a government program, not by traditional health insurance. But in

  • the United States, health insurance is an immense industry that has just been tipped

  • on its ear and completely revamped because of the Affordable Care Act, that is the so-called

  • Obamacare regulations that dramatically changed all the underwriting rules, all of the pay

  • out rules, all of the operating rules for the health insurance industry. As a result,

  • it's become more and more complex and more complicated, and more difficult to be a health

  • insurance underwriter. And consequently, we're seeing health insurance companies merge. And

  • it's getting to the point where very soon the entire health insurance industry is going

  • to be run by a very small number of companies as they continue to merge and merge,

  • becoming more and more powerful, especially in certain markets where they tend to dominate.

  • What about reinsurance? Most consumers don't know about reinsurance, but it's a very unique

  • segment of the insurance industry where insurance underwriters can lay off part of their risk

  • to a reinsurance company that says, well I'll take 10 percent of your approval risk for

  • this year, for instance, and you give me a fee of so much. So, an insurance company can

  • hedge its bets by paying a fee to a reinsurance company, but knowing that its losses will be limited

  • if something catastrophic happens. Big important industry, very, very vital in the United States,

  • and Europe, and Japan in particular. Where are the growth opportunities for the insurance

  • industry? Well one is in the vast number of people; this huge segment of the population

  • that are aging in the world's largest economies. Including, rapidly aging populations in China,

  • the United States, Japan, most of Europe. The insurance industry has an amazing opportunity

  • to tailor products particularly investment products and annuities to take care of the

  • needs of those aging populations. Next, the biggest pure growth opportunities are in the emerging

  • and developing nations. So while insurance is a huge part of the economy, and a huge

  • part of most households' monthly expenses in developed nations like the US, the UK,

  • Japan, etc., in emerging and less developed nations, there's a very, very modest level

  • of insurance. So as middle class continues to grow in places like Indonesia, and Brazil,

  • and Thailand, and China, and more and more households buy cars; buy their own homes;

  • have other needs for insurance, that's where the real growth opportunities are for the

  • industry. The United States is a sort of unique situation because insurance, rather than being

  • broadly regulated at a national level, is regulated in each of the 50 of the of the

  • U.S. states. Each state has its own insurance commission; has its own insurance regulations.

  • Any insurance company that wants to underwrite in any state, whether it's Oklahoma or Oregon,

  • has to pass muster with the insurance regulators in that state. Consequently, most insurance

  • companies in the United States are not licensed to operate in all 50 states. It's a big regulatory

  • burden to them. Finally, we have more and more regulation going on of the insurance

  • industry in general since the big financial bust of 2007 through 2009. Watch for lots of

  • new technologies to take place in insurance particularly in property and casualty, where

  • the auto insurance companies are starting to put monitors on individual cars, where

  • the consumer is willing and actually gauge the individual driving habits of each driver

  • to then, either give the driver a discount, or perhaps charge the driver more based on how they drive. Technology

  • has a tremendous opportunity to make the insurance industry much more efficient; to deliver better

  • pricing and better products to consumers; and a tremendous opportunity for entrepreneurs

  • and startups who can come up with financial technology-insurance technology answers for

  • this huge industry. Thanks, I'm Jack Plunkett. Be sure to see our insurance industry books,

  • our insurance industry segment on Plunkett Research Online and all of the tremendous

  • insurance industry data that we gather all of the time, I know you'll love it. Thanks.

Hi, I'm Jack Plunkett. Today we're going to talk about the global insurance industry.

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B1 US insurance industry health insurance health reinsurance casualty

The Global Insurance Industry, Sectors, and Growth Opportunities

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    li posted on 2018/08/03
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