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Self-forming Groups and Insurance

In the past I have written about self-forming groups and insurance. Sometimes these are referred to as peer-to-peer models of insurance. Generally I have not been impressed by these groups. Consumers find it so hard to understand insurance at the best of times, how could they possibly self-organise something as complex as an insurance company?

I still hold that view, but it is complemented by some new data, which suggests a more complex and richer environment. 

Think of Bitcoin. This is a very complex system. In essence it was a new self-organising currency. The foundation of Bitcoin, the blockchain, has been referred to as "The Trust Machine" and hailed as a development that may prove to be as important as the creation of double-entry book-keeping to the future of commerce. Here are two excellent articles on the subject Link and Link

That suggests something new could happen. My previous picture of a group of uninformed consumers building an insurance company was, and still is, a laughable proposition.

But the world isn't like that.

More likely: some informed people, probably from the risk and financial services sectors, could create a proposition backed up by a blockchain, which could then be subscribed to by individuals or companies.

In effect the technology could re-enable the efficient creation of syndicates or mutuals. It should be no surprise, given the pooling of risk required by insurance, and the fact that these structures have always had a significant role in the sector. The point is that the technology may reduce the cost and allow the spread across lumpy national borders. 

 


The Value of Financial Advice

Goodreturns has this interesting article which highlights that holders of KiwiSaver that have a financial adviser are less likely to switch to a conservative fund following recent market instability than those that do not have an adviser - by a big margin. You can check out the full story at this Link

This is important. It is all about the value of financial advice. Too often I have seen comparisons of 'going direct' particularly for investment advice, and working with a financial adviser, that ignore the question of performance, assume the same gain is available simply by investing in the index, and then focus on the higher cost of advice.

That is valid from one point of view, but what if the investor's behaviour is different because of the lack of advice?

Investing for retirement is a long-term business and small differences can compound to very different outcomes. If you are alone in your decision-making and get spooked by a bit of a fall back in a market and at that moment switch to a conservative fund you may be moving out of equities and into cash at precisely the wrong time. Wait until the market picks up a bit and you may move into equities at or near the top, missing most of the gain. Repeat that several times over 30 years and you may have cost yourself a fortune.

Good advice may help. 


Recent AMP Product Changes

AMP Lifetrack and RPP recently made a range of enhancements to the following products in both the RPP and Lifetrack ranges. Quality Product Research ratings and policy wordings have all been updated on quotemonster.co.nz 

Life

RPP:

Clarification of the main Life benefit and Business Future Insurability wording.

TPD

RPP:

Increase in partial payments from 10% to 25%.

Addition of Life Cover Buyback option.

Lifetrack:

Increase in partial payments from 10% to 25%.  

Addition of Life Cover Buyback option.

Removal of claim restriction in last 3 months. 

Linked TPD cease age extension from age 65 to age 70.

The removal of the claim restriction in the last three months of the policy life is particularly welcome. It removes a strange, and yet probably rarely applicable, complexity. 

Trauma

In addition to the following enhancements the rating of the heart attack benefit in the trauma product has been reviewed by Quality Product Research and the rating has been revised, resulting in an improvement in score for this important benefit. 

RPP Trauma / Plus:

Alzheimer’s & Dementia definition - addition of supervision qualification measure.

Additional of Trauma Buyback Reinstatement Discount.

Diagnosis and Partial definitions - restructure.

Lifetrack Trauma / Plus:

Alzheimer’s & Dementia definition- addition of supervision qualification measure.

Diagnosis and Partial definitions - restructure.

Income Protection

Lifetrack:

Addition of Accidental Lump Sum (ALS) option.


Governance, Risk, and Compliance Experts Highlight Big Data

Governance, risk, and compliance experts are to highlight the risks posed to traditional financial services companies and insurers from the use of big data to disrupt the sector. That is the message at the GRC convention about to start in Melbourne tomorrow.

We have written about this before, and sadly there seems to be a passive 'wait and see' approach being taken by most insurers in this market to the threat of big data. There is a suggestion that whatever happens in big data, it will be invented elsewhere, and may not affect the industry here for a long time... such views might suit a pragmatic middle-manager seeking a quiet life, but it is unlikely to impress anxious shareholders who are worried their equity might shrivel up in the face of a determined assault by a motivated fintech play leveraging masses of user data. 


Four Ways Social Media is Changing Insurance

This article by Jon A. Scaman on Producersweb.com takes a look at four ways social media is changing the face of insurance sales and service.  

  1. Social media allows for increased visibility
  2. Technology allows for a head start in relationship building
  3. Technology, including social media, gives us a whole new way to present marketing materials
  4. Social media offers social proof

That ties in with our experience. After nearly seven years of blogging and connecting with clients through LinkedIn, Twitter, and email marketing we have built up a huge library of content. People searching for content in our industry are now far more likely to discover us, discover that we have something useful to say, and can see long-term evidence of our commitment to the industry.