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Insurance Outlook for 2021

It may feel like the end of the pandemic is in sight, but for the insurance industry the shock waves created by 2020 will be reverberating for years. From premiums to policy language, and from underwriting to governmental action, changes are coming in 2021. 

In addition to the obvious influence of the pandemic, 2020 was also a monumental year in terms of insurance losses. It is easy to forget the historic hurricane season with its 30 named storms, the hellscape of wildfires that ripped through much of the West, the tornados and derecho that ripped through the Midwest and the civil unrest that caused huge losses for businesses in city centers throughout the nation. 

All of that loss will likely add up to higher premiums. 

Even still, the elephant in the room was COVID-19. While much of the industry already had policy language excluding communicable diseases, pandemic exclusions are a certainty in nearly every new policy. And even without pandemics, underwriters will likely be taking closer looks at nearly every risk for a while. 

But, just as risk isn’t going away, neither is insurance. Here are a few specific ways the industry is likely to change in the next 12 months. 


Perhaps the biggest disappointment for business owners during the pandemic was realizing that business interruption insurance policies excluded pandemics. But that didn’t stop them from suing.  

Barring legislative mandates or judicial intervention, pandemic exclusions won’t be changing any time soon. 

Instead, business owners are turning to practical ways to limit their liability while reopening as safely as possible. Still, liability is a concern. 

Some states have issued liability waivers for businesses that follow safety best practices, but no federal protections have yet come down. Absent that, businesses are going to have to rely on their business owners’ policies if an employee or a customer claims they caught the virus in their place of business. 

Liability may also bleed over into workers’ compensation. 

One place the federal government has stepped in is unemployment insurance. While the federal supplement has softened the blow for employees, the open question that isn’t being widely discussed is the fate of state unemployment trust funds. 

State-based unemployment insurance was never designed for an event of this scale, and many state funds are nearly empty. It will be interesting to see if federal money will top off those funds or if state statutes will kick in, passing the responsibility on to employers in the form of higher taxes. 

Travel insurance 

The two traditional components of travel insurance were trip cancellation and supplementary health. 

The health component was essential in overseas trips where a U.S.-based policy may not carry over. But with overseas travel all but shut down, that element also largely fizzled. 

The cancellation portion is continuing for now, with a huge caveat. Pandemics in general, and COVID-19 in particular, will not be covered. 

As overseas travel begins to open up later in the year, the health portion may return, but, because COVID-19 is a known event, chances of finding a policy willing to cover its risk are slim to none.  

See also: 2020 Catastrophes; Preview for 2021

Event cancellation and contingency  

Like trip cancellation, event cancellation policies can also be found, but they, too, are all but certain to exclude COVID-19, much less any communicable disease. The policies that are available now tend to only cover small-scale events.  

Before any event will be covered, though, it has to be held in a locality where that event is allowed and legal. Presuming it is allowed, the next step is going to be increased scrutiny by underwriters, who most likely won’t sign off on any event unless it’s incredibly aboveboard. 

Underwriters will be looking at event size as well as logistics. An outdoor concert will be more likely to get a policy than an indoor electronic dance music show. 

Film/TV production 

Cameras are rolling again, and, in many cases, producers have secured insurance policies protecting their productions. That said, many of those policies are requiring massive self-insured components and monstrous deductibles. 

Even with the tighter pandemic protocols, some of those productions have still suffered COVID-19 outbreaks, in many cases causing the productions to shut back down. 

For the time being, the entertainment industry will likely continue that stuttered start-stop pattern, but the profit motive of new content will make that struggle worth it. 


COVID-19 has thrown a wrench in the normal operations of health and life insurance policies. 

In terms of health insurance, paying for pandemic costs is the least of the worries. The bigger issue is that patients have foregone normal preventative care. That is reverberating in three major ways. 

First, because premiums are set according to prior-year payouts, setting rates for 2021 was challenging. Second, insurers are worried that the backlog of procedures will come flooding into the system in 2021, prompting corresponding payouts. Finally, with people not taking care of chronic conditions, industry watchers worry that health will worsen in the long run. 

In terms of life insurance, the biggest question is the paramedical exams. While many of the hard lockdowns have been lifted, people are still reluctant to invite nurses into their homes to get the data needed for proper underwriting. 

Some companies have responded by offering no-exam policies, but how that will play out is the biggest question mark. 

See also: 11 Keys to Predictive Analytics in 2021

Big picture

The biggest intermediate impact is going to be defined by Washington and the courts. 

The courts are going to have to weigh in on whether business interruption policies and event cancellation policies will be forced to pay out despite contractual pandemic exclusions. 

Lawmakers may also step in with a liability shield for businesses. 

But the biggest issue industry insiders are watching is a potential federally backed pooled risk system for pandemics similar to the Terrorism Risk Insurance Act. Without that kind of intervention, pandemics won’t likely ever be covered. There are a few pending bills that might do just that.

2020 Outlook for U.S., Americas

The past decade’s low growth rates, lack of trust in institutions and declining policy sales are forcing insurers to redefine their value propositions to stay relevant for new generations of consumers. Optimizing costs while investing in the right technologies and talent are also top agenda items. The willingness to take bold action will separate the leaders from the laggards. It will also enable some insurers to convert significant opportunity today into significant value tomorrow.

The unique mix of risk and opportunity is at the heart of the annual EY US and Americas Insurance Outlook. The report represents EY’s perspectives on the issues shaping the US and Americas insurance industry in the near term (next 3-5 years).

A complex environment and challenging fundamentals

The insurance industry is still feeling the effects of a low-growth decade. Economic inequality coupled with lack of trust in institutions is driving more lawsuits, larger jury awards and broader definitions of corporate negligence. For insurers, that translates to more claims, higher loss ratios and the need to raise premiums. It’s not surprising, then, that the number of policies sold has fallen.

Rising expectations for better customer experiences

Consumers expect intuitive, personalized experiences. But many insurers are still playing catch-up compared with digital leaders. Innovative firms will develop full customer lifecycle journeys by incorporating better data and richer insights and applying lessons learned from the most successful tech companies.

Shifting demographics

Though populations are not changing in the Americas as dramatically as in other parts of the globe, insurers are still susceptible to large-scale socioeconomic change. Mass retirements are looming. And insurers can’t take for granted that younger generations will automatically purchase conventional insurance products – particularly as they delay traditional milestones like marriage and home ownership.

See also: Innovation — or Just Innovative Thinking?  

Persistent barriers to growth

Low interest rates remain a big challenge, especially for life insurers. Flat productivity, low inflation and low savings propensity are also dragging down the industry’s prospects. New value propositions, such as those related to financial wellness, and a shift toward fee-based products are two ways insurers should respond.

A looming recession

The current fear of recession and lack of overall macroeconomic confidence threaten the recent run of successful results. A slowdown will affect life insurers as ROI dries up and consumer saving falls. Non-life insurers will be hit as government and private spending drops, affecting trade, consumption and overall economic activity.

Scarce talent

Both life and non-life insurers need more “digital people” – that is, those who know how to use advanced technology. Forward-looking executives recognize that the right talent and skills are necessary to generate strong returns on investments in technology and transformation.

See also: Insurtech 2020: Trends That Offer Growth  

How insurers should move forward

Insurers have understandably focused on upgrading technology in response to continuing margin pressures. But, technology is just one variable in the equation for successful long-term change.

A more holistic approach incorporates talent and cultural factors, as well as the emphasis on product innovation and new business models. Tomorrow’s market leaders will be technology-enabled, data-driven and operationally efficient – but also people-powered and purpose-led, with strong cultures that are adaptive, engaged and capable of rapid change.

You can read the full report here.

2016 Latin America Insurance Outlook

Despite sluggish economic growth and troubling inflation in key markets, the 2016 insurance market outlook for Latin America remains relatively bright. The rollout of new insurance products and distribution approaches at a time of low market penetration should drive strong growth for insurers. Insurance premium growth is expected to rise by around 6% to 7% in 2016 and possibly beyond should the economic environment improve as expected. At the same time, the emergence of end-to-end digital capabilities is transforming the Latin American insurance market. This digital market disruption will force insurers to make rapid revisions to existing business models to stay competitive and build market share.

Customer expectations rising

Commercial customers will continue to require more sophisticated insurance solutions in 2016, including coverage for business interruption, cyber security, civil unrest and errors and omissions. Latin American consumers, many of whom are young, cosmopolitan and tech-savvy, will continue to push for new insurance channels and services that fit their lifestyle. To respond, insurers will need to simplify and adapt products for Millennials and sharpen their focus on mobile and social media interactions. Evolving customer needs throughout the region are compelling insurance companies to rethink their strategies, processes and services. The rise of financial technology, or fintech, companies is causing insurers, particularly in the consumer insurance sector, to reconsider their business models and increase their investment in new digital technologies. Despite a desire to avoid conflicts with legacy models, insurers realize that flexibility, efficiency and innovation are critical for success in a more demanding marketplace

Competition heating up

The liberalization of industry regulation across Latin America has opened insurance markets to wider competition. The abundance of insurance capital has intensified competition from various directions: from global insurers seeking a foothold in the region to local insurers looking to expand cross country to entrenched insurers defending their turf. These competitive trends are keeping insurance rates flat through much of the region and, in some cases, pushing them lower. The most substantial rate decreases have been in non-catastrophe property.

Pockets of premium increases can be found in areas of instability, such as Venezuela. However, insurance capacity is very limited for Venezuelan political risk, with most risks dependent on the international reinsurance market.

As markets develop in Latin America, commercial demand is increasing for new forms of insurance coverage, such as environmental liability. The opening of the oil industry to the private sector in Mexico, for example, is exposing new oil exploration and production entrants to potential losses from environmental damages. But market capacity is still restrained in key markets, such as Brazil, where only a few insurers offer such liability coverage.

Read our Market Outlook for LATAM Insurance in 2016 to understand more about the dynamics facing the South America Market here.