The insurance industry is one of the most profitable segments of the financial services sector. It forms a major component of the economy owing to its large amount of premium transactions & investments and the social and economic role it plays in personal and business risk coverage. The insurance industry provides coverage against various risks such as death, health issues, property damage, directors’ and officers’ liability, crime, third party liability, weather and natural disasters, injury to workers, and fidelity. In addition to that, the industry also covers several emerging risks areas such as failure of technology systems, terrorism, computer and cyber failure, supply chain coverage, etc.
The global insurance industry offers two types of insurance policies: life insurance and non-life insurance. Life insurance guarantees a specific sum of money to the beneficiary in case of death of the insured or to the insured after reaching a certain age. Life insurance is further divided into term insurance and whole of life insurance. Non-life insurance, also known as general insurance, includes health insurance and other miscellaneous insurance such as property insurance and auto insurance. Health insurance market is expected to grow with increasing health awareness and rising health cost.
Increased usage of internet and growing digitization have made a great impact on the insurance market. Companies are using the internet as a business interface to attract customers while reducing the marketing and administrative cost. Use of advanced technologies such as telemetry, smart wearables, internet of things (IoT) and big data analytics is emerging in order to offer competitive but profit making premiums to customers. Furthermore, risk of cyber-attacks and system failures have opened the opportunity for cyber insurance.
With increasing incidence of catastrophic events and declining risk tolerance, insurers are resorting to reinsurance in order to stabilize the loss incurred by them. Reinsurance is the insurance for the insurers which acts as a risk mitigation tool by spreading the risks across alternative institutions. Reinsurance is segmented into facultative reinsurance and treaty reinsurance.
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