Insurance plays an important role in ensuring that people and households have the ability to manage and lighten unexpected financial shocks, preserve their assets, and take productive risks. As advanced practitioners, we need to understand the wider role insurance can play in developing economic opportunities. When insurers build the resilience and productivity of businesses, other sectors in the economy grow. And when insurers use premiums that they have collected together to invest capital over longer-term horizons in productive opportunities such as infrastructure development, they create jobs, fuel growth, and motivate innovation.
The COVID-19 pandemic has loudened the importance of the insurance sectors’ role in the development and in the economic resilience of individuals and businesses. By April 9, one-third of the global population was in lockdown to moderate the spread of the coronavirus. Lockdown measures have made many businesses not operating in essential services to temporarily close their shutter. While this has a large impact on all scales of businesses, it is most likely to hit micro-small-and medium-sized businesses hardest. Without adequate reserves, appropriate insurance solutions or easy access to credit, such businesses are forced to lay off workers or worse, shut their doors permanently. This in turn has devastating effects on individuals’ welfare and economies at scale.
Sometimes we as individuals, families, and societies face unforeseen external occurrences in our lives that are not in our control. We cannot circumvent some of these risks but as a society, we have to manage the risks and to mitigate the results of such externalities, be it earthquakes, cyclones, floods, or pandemics. The difficulties caused by COVID-19 on individuals, businesses, and economies have further highlighted the importance of a sound, stable, and developed insurance markets. Insurance cannot be the sole solution for addressing the obstacles faced by these micro-small scale businesses, but it can play an important role in bolstering their survival rate.
Risk management is something that we hear frequently but rarely evaluate or implement it for ourselves. During the lockdown in our homes, the majority of us, would have realized the value of insurance as a risk mitigation tool. The financial markets in March 2020 witnessed substantial turmoil with equities seeing the steepest 35-40 percent decline and businesses or incomes froze. There are times like these when we need an evacuation mechanism like insurance.
Covid-19 has led to unusual health, social, and economic impacts globally. The efforts to determine a treatment for covid19 and to develop a vaccine are also extraordinary in magnitude and capability. The scientific prowess developed over generations, now aided by quantum computing and artificial intelligence coupled with global coordination could lead to safer and reliable solutions to manage the pandemic.
