Introduction
Insurance has been a key element in the financial market of United States right from the beginning of insurance business. Insurance giant has developed both in magnitude and structures over the past several decades as a critical service provider to millions of the American citizens. Various types of insurance and services that penetrate almost every sphere of people’s lives starting from the property and casualty insurance and ending up with the health and life insurance are offered on the market nowadays and were dynamically developing affecting people’s lives, families, and enterprises throughout the country.
To this end, the present article aims to provide a brief background and overview of insurance firms in the United States, as well as offering an overview of the nature of this segment of the US financial market. Furthermore, the role of insurance in the current economy will be explained, and some of the pitfalls observed in this field will be presented.
Insurer History in America
Insurance Company in United States began in the first half of the eighteenth century, particularly fire insurances. Insurance Company of North America was one the first such organizations, formally created in Philadelphia in 1792 by a number of insurance industry members. It was created mainly to provide fire insurance to property owners since the growth of the American cities in late 18th and early 19th centuries compelled by expansion resulted in massive losses to properties than to fire.
The Great Chicago Fire that occurred in 1871 and the California earthquake of 1906 pressed for need for much broader insurance packages which stimulated the formation of property and casualty insurance and growth of the life insurance segment. During the middle half of the twentieth century the insurance industry had grown into a superb player within the overall economy of the United States and had begun to present a whole host of insurance products to the American people.
Prio & Structure of Whole Insurance Market
The insurance sector in the USA is made up of many insurance companies which can broadly be grouped as property and casualty insurers, life insurance companies, health insurers and reinsurers. Property and casualty insurance providers provide insurance on property and physical property such as on homes, cars, businesses etc. Life insurers offer families a type of insurance that helps out when the main income earner is no longer alive, this include term insurance, whole insurance and universal insurance.
Employers essentially provide medical insurance and employers and individuals pay for dental insurance so as to offset a variety of medical costs. Reinsurance companies offer insurance to insurance companies and thus diversify certain risks in other to reduce instances of direct losses on particular firm.
Insurance is a highly regulated industry mainly at state and federal levels to protect consumer and maintain insurance companies solvency. Apart from government regulations, insurance companies are regulated by state insurance commissioners; besides federal centers like the NAIC.
Insurance companies’ effects on the United States Economy
Importance of insurance in the America cannot be underemphasized, as insurance has a central therapeutic role to a large magnitude of the overall insurance market share in the America’s financial service industry. Insurance premiums formed 7% of the GDP of the country in 2018 as estimated by the Insurance Information Institute.
Insurance companies also play their part in the overall U.S. economy significantly. Insurance allows people and businesses to purchase houses, cars or other aids through the covering of risk therefore increasing the economy. insurance producer roles for individuals with different positions, from actuaries, underwriters, claims adjusters, and call center representatives.
Besides these first-hand economic effects, insurance businesses mainly have the responsibility of managing the economic losses related to natural disasters and other disasters. This risk is distributed across many policy holders, which serves to spread the cost of large catastrophes over a large pool of policy holders thus being of benefit to individuals and business.
The analysis of challenges that insurance industry has faced
May it be due to their importance to the economy, insurance companies have severely been hit by some challenges that prevail in the current market. This is one of the key things firms have to respond to, which may lead to having to respond over and over again to new technology and changes in the demand patterns of consumers. With an increasing number of customers using the social network and mobile devices for purchases, insurance organizations should consider innovations to fit their clients.
This way, the insurance companies face another problem – the cost of treatment, which has led to an increase in the cost of health insurance. Since the Affordable Care Act was enacted in 2010, there have been modifications to the sort of plans now available together with regulation of insurance providers to eliminate rating based on pre-existing conditions.
Furthermore, insurance companies face competition from various players and new entrants, retain and manage risky as well as complex risks, and deal with evolving, multiple, diverse regulatory authorities’ demanding different requirements and restrictions on the insurance business. As mentioned the insurance carriers are forced to adhere to these regulatory needs hence they might take a lot of time and resources; this makes it hard for them to come up with any new solutions in order compete in the market.
Conclusion
It is significant to note the United States insurance industry has gone through some major changes in the pursue of providing insurance and related services that are vital in the structure of the nation’s economy. So far, we have emerged to see that property and crime insurance, life and health insurance have been very instrumental in shielding people and their families as well as businesses from the financial impact caused by the events taking place such as diseases and natural calamities.
In the insurance industry which is undergoing refinement through the adoption of new technologies and the ever-shifting market dynamics, insurers will have no option other than having to push for new solutions that will address the needs of consumers. In this way, they will be able to keep on serving the American people by serving as an insurance policy where people need it most: to support and protect the economy of United States of America.
