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Post-Disaster Sales Surges, Life Insurance Profits

Following the Japan earthquake and tsunami disasters, shares in insurance companies - especially those selling life and health policies - seemed to be in a freefall. This, after worries that the billions of dollars in payouts owed from the death toll and injuries could financially cripple insurers.
Now, however, that dip in stock prices has slowed amid new evidence that the disaster might actually be good for insurers.

Premiums Going Up?

There was some speculation immediately following the disaster that, since U.S. insurance companies are operating in Japan, American consumers would see their premiums rise to compensate for losses in the Japanese market.

An analyst interviewed for this article said that this was not likely to be the case, because there are so many different insurers operating in that market that no one company would take a big hit.

However, she pointed out, actuaries may upgrade the risk of natural disasters and nuclear energy facilities, which could lead to premium hikes in effected areas.

Sales Increase Following Disasters

When people witness huge losses in human life because of a natural disaster that could happen to any of us, it makes sense that more people would make the decision to get insurance - especially life.

Following at least two other disasters - the September 11th attacks on the World Trade Center and Japan's Kobe earthquake of 1995 - life policy sales skyrocketed, more than making up any losses. In fact, insurance providers emerged from the chaos of each disaster stronger.
Following 9-11, U.S. sales went up at least 10% in a year.
The pattern seems to be repeating itself.

Why didn't Haiti earthquake lead to huge insurance boom?

The 2010 Haiti earthquake disaster is one of the deadliest ever; the death toll could reach as high as 800 thousand people by the time this is done.
And yet, insurance policies didn't seem to get a huge boost from this.

One insurance market analyst points out that American consumers are able to write off what happened in Haiti because it is a country stricken by poverty. Indeed, the death toll would not have been so high were Haiti as developed as Japan. And the toll in Japan would certainly have been higher had it had the facilities and resources of Haiti.

The fact that Japan is as developed and advanced as the United States forces American consumers to realize that this could easily happen to them.

Short-term Impact Ultimately Mixed

While a 10% sales increase would be a big boost for the industry, there is likely to be a dip for a while. Morgan Stanley thinks that this next quarter could see a 15% loss in life insurance policies due to the need for economic recovery and a monetary focus on more immediate concerns.

The life insurance industry is plenty big to survive however, and 5 years is short term for them. Will this be good in the long run? Say, 15 years?

"It is unlikely to have any real impact over 15 years. Disasters hit fairly consistently, and the insurance system is built to withstand huge payouts. I'd worry more about policyholders than insurance companies."
Well, there is always life insurance quotes.

 


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