- The impact of the unprecedented pandemic on global insurance markets is unequivocally displayed via capital market volatility, asset risk estimations, and significantly weak premium growth aspects.
- COVID-19 related losses- including event termination and business interruption, are expected to be ‘picked up’ by a plethora of reinsurers and thus not significantly exacerbate the performance of primary insurers
Regardless of the size and corporate structure of one’s business, business insurance is an absolute must in the commercial world in order to avoid potential financial ruin.
The Effect of the COVID-19 Pandemic: Reputation Exacerbation
The unprecedented lockdown has led to the introduction of a plethora of life changing restrictions from different governments around the world who have attempted to restrict the disastrous spread of the coronavirus. These restrictions have undeniably led to a plethora of extremely complicated, dynamic, and unpredictable difficulties for the insurance industry and have undoubtedly significantly exacerbated the industry’s reputation.
The insurance industry was in no way known for its exemplary customer reputation to begin with, but the pandemic has undeniably shed light to a plethora of business exclusion clauses- such as in the case of business cancellations and travel restrictions, which most customers were not really aware of and has arguably exacerbated the already poor reputation of the industry.
This is evident in recent reports which have revealed that approximately 66% of market-based brokers believe that their industry’s reputation has been irreversibly changed for the worse as a result of the pandemic. This is not too surprising, especially when considering the prolific amount of confusion and unpredictability that is associated with industry’s policies during these unprecedented times of hardship and monetary ruin.
A primary source of the unreliability and confusion that is associated with the business insurance industry can be unequivocally illustrated by a quick consideration of the events of the cancelled Summer Olympics of 2020- which saw a plethora of persons discovering that evidently their cancellations were covered but not their postponements.
The Effects of a Proliferated Remote Workforce
Given the prolonged effects of the pandemic, the increased business insurance claims are likely an indication of the increased exposure of a significant proportion of the workforce- who are now primarily working remotely. Due to the aforementioned restrictive measures that have been imposed as a result of the COVID-19 pandemic, the business insurance market has undeniably seen its rates significantly increase.
The changes in various market-related protocols and incidence response preparedness has led to a plethora of underwriters asking detailed questions in relation to various business activities and practices- especially in relation to claims. As the downtimes of ransomware continue to significantly expand, carriers are experiencing a rapid change in business behaviour which has led to them requiring both: a) increased information in relation to patching, and b) increasing information in relation to backups and downtimes.
Market specialists have indicated that the sector should likely expect to see a significant expansion in relation to the number of underwriter-related scrutiny- particularly in cases of disaster recovery, external vulnerability reports, and response planning related claims.
Employment Law and its Effect on the Insurance Industry
Currently, employment law and its relative legislation effectively means that laying individuals off work or requiring them to work remotely can create a plethora of legally contentious issues in relation to work-based discrimination, invasion of privacy and retaliation.
On the other hand, requiring or asking individuals to resume work during the COVID-19 pandemic can easily be considered as a workplace safety hazard- leaving employers to choose between two inconvenient options which are both pragmatically unfavourable.
Some industries- such as retail and hospitality, are also seeing significantly increased retention rates by carriers which has unsurprisingly led to the mandatement of COVID-19 related employment exclusions and the cutting of workforce capacity.
Moreover, practically all industries have seen carriers electing to require: a) significantly more detail in relation to the quality of the underwriting information they receive- leading to the regular exclusion of most new and starting businesses, and b) updated diversity policies which account for the aforementioned legally contentious issues in an employment setting.
As touched on above, the insurance industry has undoubtedly seen better days- especially in relation to their reputation and their ability to accurately predict market trends and make corporate decisions accordingly.
Nevertheless, it should be duly noted that a smart, robust business insurance plan remains an absolute prerequisite for all business owners, as it is arguably the only tool that can effectively protect their businesses from complete financial ruin in times of unprecedented or unpredictable disastrous events.
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Foxconn chairman says expects “limited impact” from chip shortage on clients
TAIPEI (Reuters) – The chairman of Apple Inc supplier Foxconn said on Saturday he expects his company and its clients will face only “limited impact” from a chip shortage that has rattled the global automotive and semiconductor industries.
“Since most of the customers we serve are large customers, they all have proper precautionary planning,” said Liu Young-way, chairman of the manufacturing conglomerate formally known as Hon Hai Precision Industry Co Ltd
“Therefore, the impact on these large customers is there, but limited,” he told reporters.
Liu said he expected the company to do well in the first half of 2021, “especially as the pandemic is easing and demand is still being sustained.”
The global spread of COVID-19 has increased demand for laptops, gaming consoles, and other electronics. This caused chip manufacturers to reallocate capacity away from the automotive sector, which was expecting a steep downturn.
Now, car manufacturers such as Volkswagen AG, General Motors Co and Ford Motor Co have cut output as chip capacity has shrunk.
Counterpoint Research says the shortage has extended to the smartphone sector, with application processors, display driver chips, and power management chips all facing a crunch.
However, the research firm predicts Apple will face a minimal impact, due to its large size and its suppliers’ tendency to prioritise it. Apple is Foxconn’s largest customer.
Foxconn is looking at other areas for growth, including in electric vehicles (EVs), and Liu said their EV development platform MIH now had 736 partner companies participating.
He expected it would have two or three models to show by the fourth quarter, though did not expect EVs to make an obvious contribution to company earnings until 2023.
Liu also said the company was still looking for semiconductor fab purchase opportunities in Southeast Asia after not winning a bid to take over a stake in Malaysia-based 8-inch foundry house Silterra.
(Reporting by Ben Blanchard and Jeanny Kao; Writing by Josh Horwitz; Editing by William Mallard and Ana Nicolaci da Costa)
EU seeks alliance with U.S. on climate change, tech rules
By Sabine Siebold and Kate Abnett
BERLIN (Reuters) – Europe and the United States should join forces in the fight against climate change and agree on a new framework for the digital market, limiting the power of big tech companies, European Union chief executive Ursula von der Leyen said.
“I am sure: A shared transatlantic commitment to a net-zero emissions pathway by 2050 would make climate neutrality a new global benchmark,” the president of the European Commission said in a speech at the virtual Munich Security Conference on Friday.
“Together, we could create a digital economy rulebook that is valid worldwide: a set of rules based on our values, human rights and pluralism, inclusion and the protection of privacy.”
The EU has pledged to cut its net greenhouse gas emissions to zero by 2050, while President Joe Biden has committed the United States to become a “net zero economy” by 2050.
Scientists say the world must reach net zero emissions by 2050 to limit global temperature increases to 1.5 degrees above pre-industrial times and avert the most catastrophic impacts of climate change.
The hope is that a transatlantic alliance could help persuade large emitters who have yet to commit to this timeline – including China, which is aiming for carbon neutrality by 2060, and India.
“The United States is our natural partner for global leadership on climate change,” von der Leyen said.
She called the Jan. 6 storming of the U.S. Capitol a turning point for the discussion on the impact social media has on democracies.
“Of course, imposing democratic limits on the uncontrolled power of big tech companies alone will not stop political violence,” von der Leyen said. “But it is an important step.”
She was referring to a draft set of rules unveiled in December which aims to rein in tech companies that control troves of data and online platforms relied on by thousands of companies and millions of Europeans for work and social interactions.
They show the European Commission’s frustration with its antitrust cases against the tech giants, notably Alphabet Inc’s Google, which critics say have not addressed the problem.
But they also risk inflaming tensions with Washington, already irked by Brussels’ attempts to tax U.S. tech firms more.
Von der Leyen said Facebook’s decision on a news blackout on Thursday in response to a forthcoming Australian law requiring it and Google to share revenue from news underscored the importance of a global approach to dealing with tech giants.
(Additional reporting by Foo Yun Chee; editing by Robin Emmott and Nick Macfie; editing by Jonathan Oatis)
Packaged food giants push direct online sales to gauge consumer tastes
By Siddharth Cavale and Nivedita Balu
(Reuters) – Packaged food giants including Kraft Heinz, General Mills and Kellogg are pushing sales of their products to consumers directly via their own online channels, in a quest to gather more data about shoppers’ purchasing habits.
Velveeta-cheese maker Kraft Heinz saw its e-commerce sales double in 2020, now representing more than 5% of its global sales, Chief Executive Miguel Patricio said at the virtual Consumer Analyst Group of New York (CAGNY) conference this week.
The company sells Heinz baked beans and tomato soup by subscription or in bundles directly to consumers on a “Heinz To Home” website in the United Kingdom, Australia and Europe.
Sales on the site are “giving us valuable insights into consumer behavior, enabling us to quickly test and learn from innovations,” Kraft’s head of international business, Rafael de Oliveira, said at the conference.
Kraft would continue to use the site as a channel to generate strong sales in developed markets, he said.
The company also counts sales of its products through marketplaces such as on Amazon.com and Walmart.com as part of its e-commerce sales.
U.S. shoppers spent on average $1,271 buying groceries online last year, 45% more than they did in 2019 as the pandemic spurred shopping online, according to market research firm Earnest Research. In contrast, the average dollars spent in stores rose only about 7% to $3,849.
PepsiCo sells products including Doritos, Quaker oats and Gatorade directly to consumers through two websites, pantryshop.com and snacks.com, both launched in 2020.
Chief Financial Officer Hugh Johnston said that more than 45% of the company’s capital investments over the next few years would be dedicated toward manufacturing capacity, automation, and a “ramping up of investments in our e-commerce channel.”
As major online retailers including Amazon.com and Walmart.com continue to gather valuable data on shoppers, many packaged food manufacturers are keen to gather their own data on shoppers, too.
“COVID (has) simply accelerated our digital growth and has provided us with yet another source of data and insight,” Monica McGurk, chief growth officer at breakfast cereal maker Kellogg Co., told the conference.
Kellogg, producer of Corn Flakes as well as Pringles chips, said on Wednesday it had launched a direct-to-consumer website focused on digestive wellness. The group plans to sell its new Mwell Microbiome Powder for gut health via the site to gather data on customer interest before it launches the product more widely.
E-commerce sales have doubled in the past year and now represent about 8.5% of the group’s $13.77 billion in annual sales, Kellogg said.
Pillsbury dough-maker General Mills also sees the benefits of tracking consumer habits more closely.
“We’re aggressively investing in data and analytics. We are gathering unparalleled insights from the first-party data we collect through our brand websites,” General Mills’ Chief Executive Jeffrey Harmening said at the conference.
On its Bettycrocker.com website, General Mills provides hundreds of recipes using Betty Crocker cake mixes and frosting. The site leads people to the closest store or an online retailer where they can purchase the products, thereby generating data for General Mills on what a particular customer from a certain zip code is buying. The company does not sell the food products directly on its website.
Consumers, however, may have to shell out more if they shop directly from brand websites.
Prices on the two PepsiCo sites, for example, were generally higher than those on Walmart.com or Amazon.com, Reuters checks show. On Walmart.com, for example, a 10 oz pack of Doritos Nacho Cheese was on sale for $2.50 compared to $4.29 on Pepsico’s website.
Kraft Heinz offers tins of soup, beans, pasta and baby food bundled into packs ranging from six to 25 items and costing between 10 and 20 pounds ($14.01-$28.03) on its UK website. It told Reuters the relatively higher prices of items and bundling of packs than on some other online marketplaces was to be able to eke out a margin after including delivery costs.
“Longer term, we see real value in this channel to be an insight and data channel for us,” Jean-Philippe Nier, head of e-commerce for Kraft Heinz’s business in the UK and Ireland, told Reuters. People are more prepared to order directly from manufacturers than they were before. The time is now.”
Graphic: Direct online sales to cross $20 billion in 2021 – https://graphics.reuters.com/PACKAGEDFOODS-ECOMMERCE/rlgpdexngvo/chart.png
($1 = 0.7137 pounds)
(Reporting by Siddharth Cavale and Nivedita Balu in Bengaluru; Editing by Vanessa O’Connell and Susan Fenton)
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