The Global Economy Meltdown and Car Insurance Companies


STCO-00024578-001Insurance companies have spoken and broadsheets have announced…no company is being wasted by the global economy meltdown. One by one, insurance companies lose one tire in the leg of the race in the competition to service delivery to every insurance holder in the country. Even the biggest was not spared.

The most recent of reports announced State Farm—one of the biggest insurance corporations, was badly hit by the wave of critical dilemmas of the economic crisis. From investigation backed up by statements and reports from the company, 2008 was the biggest lost yet, with a sum total of USD 542 million. Revenues fell back 16 percent from the recent year’s income net worth. Reports state that it was neither about client problems nor inefficient systems management. Instead, the company claimed the stock exchange collapse during the recession to have been the major cause.

Insurance company consultants explained that people are the life of insurance companies. When the prices are high, people buy stocks and become part of the corporation. However, it will always be part of the risks when economic crisis storms and breaks the prices and create a major commotion on every stock holder. Basing on how the insurance system works, critics have assessed how the downslide of State Farm and other car insurance companies came to be.

In a car insurance company, a client is charged fees for policy and premiums for monthly income that is invested for claims in the future. A dedicated percentage of this revenue goes to shares. At the prime of the economic crisis, plunge to rock bottom has been common to stock exchange indexes. The upshot is that, car insurance companies lose the capital value of their investments. In addition to this, interest of the shares will no longer continue to pour in.

State Farm believes that they could have been in control of the dilemmas, however, more problems have risen and piled on top of the other, causing unmanageable losses in clients and revenues. As in the case of 2008, natural catastrophes wrecked havoc to the world. More insurance claims are reported and increased in percentage for all existing insurance companies. The collapse of investment rates, in addition to the high rise of damage claims brought by natural causes has brought together a net loss of USD5.46 billion in 2008. Furthermore, reports state that car insurance companies are still working on the case for further loss will be almost impossible to avoid.