Planning for 2021: how optimistic are you? Why?

In planning for 2021 I found myself researching optimism as an approach to checking assumptions about the future. Why? The Insurance industry has had some pretty awful quarters in terms of production - yet we know some fundamentals about the sector are strong. Is this a bad patch, and if so, when will the recovery begin? Or is this something more persistent, and if so, can anything be done?

Before I tell you my views, let me share a good question. Not my own, but based on some research about examining possible futures, which I will adapt as: "It is helpful to make a distinction between our outlook on the underlying course of events and our ability to influence them."

Some pretty big divergences between views can be traced back to either a perception of the underlying conditions and likely outcomes based on those and also whether we believe anything can be done about them. When separated out it can help to explain a lot of conflicts: the big differences in views between new and old insurers, also some big differences in views between dealer groups, between older advisers and newer advisers, and finally between many advisers and insurers. It all depends on where you stand.

More work on this will come in the next quarterly life and health report - due at the end of March. Inspired by the work of Peter Hayward and Stuart Candy, published in 2020 as The Polak Game. 

The missing customers, the missing new business

This article from The Economist discusses how companies from Silicon Valley are creating products that are much more suited to males than females, alienating half of their potential customers. This is in some surprisingly obvious ways: most mobile phones and gaming devices are simply too big for most women's hands to use with as much comfort and utility as the average man using the same device. This is my my wife persists with her ancient, but correctly sized, iphone SE, rather than choosing to upgrade. It's a huge lost opportunity. If you read the article you can easily feel smug - as I did - about the silly mistakes these silicon valley geniuses make - like trusting the design decisions to teams that are 75% male. But there's another part of me worrying - what are we missing? Here are two examples: 

We're missing out on women. Looking at several hundred thousand quotes, 43% of quotes arose from couples and 57.4% arose from quotes for single adults. Men were quoted for insurance on their own at a rate twice that of women. Increasing the engagement of women quoting alone to that of men would be a 20% boost to quotes for the industry. In the advised channel we are not quoting single women as often, and when we look at cover levels for women, they remain lower than for men. Remember that with declining marriage rates women tend to remain single, or if in relationship, financially independent, for longer, which expands the impact of this industry weakness. There is nothing like this skew in direct insurance.

In Auckland we're also missing out on adequately serving the multi-adult household, which now accounts for 30% of all households in this region, by featuring mainly traditional families. We're missing out on women, big time. The  We're missing out on genuine connection to client needs - by talking about insurance all the time, and not about health, risk, or the great purpose of financial risk transfer. Where there are people with a financial dependence on each other, there is usually a need for insurance. Marketing to that segment with a new solution to the challenge of making sure the benefit goes for its intended purpose would help. 

There are more, and they require detailed evaluation. The solutions to accessing ignored segments is not straightforward. All change is difficult. It's an example, however, that the industry needs to change to reflect changes in society around us. While it might be embarrassing to be talking about selling more to single women in 2019, it would be even more embarrassing to be still talking about it as a problem in 2029. While the housing crisis has been in the news almost every week for the last five years, we do not appear to have recognised one of the most obvious consequences: more shared housing. 

More details will be in the Quarterly Life and Health Sector report. 


Rising insurance premiums

RBNZ has warned that rising insurance premiums could hit property values in their latest Financial Stability Report. RBNZ Governor Adrian Orr said, our financial system is resilient to current risks – but risks remain elevated. In the case of the risks associated with climate change, like average world temperatures, they are slowly rising. Insurance premiums could play a valuable role as a price signal in making the risks, and their costs, real to more people. Click here to view the report. 

Image from the RBNZ report.


Planning series: innovation

Looking at 2019 and planning to do things differently inevitably brings us face-to-face with the need to innovate. But innovation is a widely misunderstood concept. First, ideas are not equal to innovation. To innovate we must do more than think of a cool new way things could be done, the idea must also work. The whiteboard exercise means nothing until the new thinking delivers value. Second, innovation is rarely a lightbulb moment - it generally emerges from organised and disciplined search. If you have identified a need to innovate, and you are wondering how to start, you could do a lot worse than ponder the seven sources of innovation identified by Peter Drucker in his 1985 classic "Innovation and Entrepreneurship - practice and principles".

Planning series: slow change

Slow change can be a great ally. Take any large project, break it down into many small steps, and you can win by gradually tackling each one over time. Whatever your 'elephant' sized business problem is - digitising old records, preparing for the new compliance regime, or establishing content creation skills within your business - slowly but surely, 'eating the elephant' can be made possible.

Slow change can also be a great enemy. The classic personal example is how weight tends to creep up slowly over time. The classic business example is failing to keep your skills up to date. Underinvestment in personal skills does not show up straight away - in fact it looks like a gain: you can spend that time on something else, maybe something with a short-term payoff, while the cost savings fall to the bottom line. But it is really a question of making a withdrawal from the long-term value of the business.

Sooner or later a reckoning comes - and then perhaps the bill falls due all at once: income falls, or you have to make a large investment of time and money to catch up.


Planning series: the dangers of seeking a silver bullet

A silver bullet, the quick, simple, solution to your number one problem. The thing that will kill the vampire. The only thing is that while you're searching for the silver bullet, which may not even exist, the solution that was always available was ignored. It was ignored because it looked too hard, too complicated, or required skills your organisation doesn't have right now. But most really difficult problems require those sorts of solutions. The kind of problem that can only be fixed by difficult work, investment, and adding new skills is a blessing. That kind of problem contains the gift of competitive advantage - because once you have cracked it, it remains hard for someone else to copy.

Inspired by Seth Godin's article on difficult problems.

Planning series: sources of capital

Whether you are large or small, starting a new initiative implies risk. Sure, you can draw a slug of capital down, and allocate it to a project. There are problems with that. Some perfectly good projects die for lack of capital, some die from having too much - without scarcity, there is often a lack of focus. So this post is about alternative sources of capital, the kind you can draw on to build new things from idea to the point you have enough data to build a proper business case, and get the capital you really need.

  • Time - yours, and the time of another who also wants in on the new idea. Collaboration brings leverage, a solid critique of yours ideas, and perspective - provided you are collaborating with some one who perceives themselves as your equal, who won't be too scared to share their ideas, and is not a clone of you. Working with others, while annoying at times, also means your idea has to pass its first crucial test: will someone else believe in it? The key is to pinch a bit of time - a regular patch of time, and make yourself accountable to someone to keep that time for your new project. Staff are often seconded for a period at no cost - you just have to have a good pitch.
  • Business partners - Advisers might best think in terms referral sources, other advisers, dealer groups, or adjacent disciplines in financial services. Somewhere, the solution you are developing will provide benefits to someone who is not in your business. Call them, set up an appointment in January or February, and then you will have taken an important first step.
  • Capital in kind - people are sometimes more prepared to extend services to a new project than they are to deploy cash. Share your idea, then negotiate a free period for the service you need while you get set up. To be fair to all concerned, put a sunset date on the arrangement, to spare embarrassment if things stretch out.
  • Build once: tack your requirements on to the build process for another project. Often this will be seen as an added benefit, with small marginal cost. People like options. So thinking ahead, especially with IT requirements, can help you to pinch a little resource where needed.
  • Clients - some of your clients will be delighted to help out. Typically, they like to be invited to qualitative sessions to discuss new ideas, or to join closed groups to test alpha versions of services, or even just look over wordings and graphics at the end of a meeting with you.

But remember, don't be dick and abuse the privilege. Belief may overcome accounting for a while, but only a short while. The consequences for asking for too much can be a sharply worded email, or a consumer revolt. Sooner or later, everyone has to get paid. If your project isn't viable without a lot of free stuff, then it isn't viable.

Planning series: what will you stop doing?

Before you can do more, you must do less. Yesterday you were alive for 24 hours. You did something with the time. Most of the people I know don't have loads of free time. Even if you spent a lot less time working yesterday than you could have, if you are planning a big change... you need to take into a account what you will do less of. If it was leisure, then how will you adjust? If you are going to change what you work on, within your typical working week, how will you do that? There are three main strategies: ditch, delegate, and digitise.

  • Ditch unproductive tasks, or those tasks that don't align with your new plans.
  • Delegate tasks where you can, choosing to train, trust, and manage others to achieve goals in your business usually creates growth for you and for them.
  • Digitising tasks to create more efficiency, freeing up time to do new things, is a worthwhile ambition. It can get complicated, you may need help.

But once you have worked to free up a significant chunk of your diary, then there is real space for new things to grow, and new goals to be achieved. Without first creating the space, they will remain just a pipe-dream.

Planning series: women shun financial advisers in favour of money advice from robots - why?

When you are planning the year ahead, keeping an eye on new trends may provide you with insights. At first, I thought I would write about advice automation when I read this article from the Sydney Morning Herald, but then I realised there may be a different angle. The article states that women are more likely to invest through robo-advisers than men.

'Six Park reveals that accounts held solely by women have more than doubled in recent months to sit at 40 per cent, up from 20 per cent in January. The firm delivers financial advice online using algorithms and technology in place of a human financial adviser.' Click here to read more. 

It is fascinating, it felt to me that the issues of convenience would apply equally to men as to women - so there must be some other reason why women seem to take up robo-advice offers more than men. Maybe it is a reflection of the old-school, male dominated industry image. Of course, I might be wrong, this is probably insufficient data, but perhaps there is a business case for diversity. Which brings us back to planning. You might be able to figure this out on your own, but maybe you need some fresh perspectives. Bear in mind, if your next hire is just like all the other people you have ever hired, they aren't likely to take you to new places.

You might also like this article.

Planning series: do all advisers have to sound the same?

According to a new study from BNY Mellon's Pershing the survey finds most advisors fail to convey a unique value proposition. This is not unique to the investment world, and is a trend that could worsen as advisers, concerned about compliance, tend to try to be in the mainstream. Innovation, it seems, has a bad name.

But does it have to be that way?

I know that many financial advisers, not being IT experts, go to service providers to set up their websites - and those companies often employ template-based approaches. Advisers concerned to allow their sites to be found by search engines tend to prefer using standard or widely accepted names for different services. The challenge is, you lose your differentiation. All you do is prove that you are 'just like all the rest'.

Sure, your SOA must address the six step process, but most advisers I know are not short of personality. It isn't a bad thing, you don't need to hide it. Showing who you are, and that includes what annoys you and what you like to celebrate in life, helps your clients to relate to you. That is at a personal level. Now translate that to your business. With a little more scale your business can have a broader personality, or reputation. If you are in a diverse market, and hire for diversity, then you can serve more segments in that market. 

It is worth trying to break out of the boring old sameness, and it isn't hard, just be you.