Tag Archives: boobier

The Most Stressful Job in Insurance

So we all feel we have a tough deal. Creating a product, reducing claims ratios, improving profitability – and even being the captain of the ship when all around us the waters are turbulent, and storms are on the horizon.

But I wanted to share with you what I think is one of the most stressful jobs in insurance. And that is in the HR (human resources) department. Okay, so you are thinking that HR is a comfortable, backroom activity away from the heat of the insurance battle. But that’s not the case.

The insurance battle — if not much of the war — relates to cost-cutting. And that means losing people. Often good people, because they are expensive. These industry experts are often let go quickly, with little warning and with poor compensation despite years of service.

See also: 8 Things to Know About Insurance  

Why should this create stress in the HR department? First, let’s get over the notion that HR is the employee’s friend. I remember when HR was the “trusted adviser” to the employee as well as representing the employer’s interest – but now HR is firmly there to implement employment processes within the terms of employment law. Many senior professions entered HR because of their soft skills, but now they are “the hatchet men” who have to implement major change. No wonder they feel uncomfortable.

(We won’t touch on why it seems to be the guys in HR who get the top jobs, and not the women. That’s a different blog entirely. Think “glass” and “ceiling.”)

Then there is the issue of social media. Many conversations within businesses are meant to take place in an environment of confidentiality, but disgruntled employees are sharing information — often under an alias — about their severance terms and conditions. In many cases, the HR department has little insight into what is being said about their performance and behavior; if they did, they would be horrified.

See also: The Human Resources View Of Health Care Benefits Needs To Change  

The reality is that HR is a profession living in the 1980s but trying to operate in a a business environment of the 2020s, or thereabouts. No wonder HR professionals feel disillusioned and under stress. Big stress.

HR needs to adapt rapidly. HR professionals need to be able to manage social media analytics, especially sentiment analysis, and to be able to manage employees in same way that the marketing department seek to understand their customers. Until that happens, these key professionals will feel like victims of change rather than being the effective implementors.

(Even as victims, of course, at least they’ll keep their jobs. After all, doesn’t someone have to turn off the lights at the end of the day?)

Thoughts on Insurance After Brexit

On the day after the U.K. referendum voted to leave the European Union, a leading U.K. newspaper ran a cartoon with the caption, “Democracy is too important to be left to the people.” Of course, it was tongue in cheek, but the point was well made. Since the vote, markets globally have tumbled, shares in financial institutions have fallen, some as much as a third, the U.K. has “lost” Prime Minster Cameron and some are already seeing this referendum as the first sign of the breakup of the European Union.

In my blog of Feb. 29, “What Happens if U.K. Exists the E.U.?“, I suggested that, for the insurance industry, nothing good would come of the U.K. leaving Europe. I wasn’t alone in that thinking. In the days immediately before the vote, 20 European insurance institutes signed a letter asking that the U.K. not leave. The U.K.-based institute of brokers BIBA urged its members to vote to remain. Surveys of U.K.-based insurance executives showed almost universal agreement to stay.

But everyone was allowed to vote, not just insurance professions. The results showed massive division between different parts of the country, and even directly within families, with the agenda dictated ultimately by three key aspects: the economy; sovereignty and immigration. Some are currently arguing that the third factor, immigration, was the most persuasive and divisive – but in fairness they do a disservice to the complexity of the arguments.

In my lifetime, this event is outstanding in that almost everyone had a point of view, and in many cases were prepared to vocalize it. One madman even exercised his democratic freedom by murdering a member of the U.K. Parliament on the other side of the issue. Overall, it was a dirty campaign that, if anything, has undermined the public’s trust in our public representatives.

The challenge really rested with the bilateral nature of the decision. You were either Remain or Leave. There was no halfway house or room for indecision.

And then the results came in. And chaos was unleashed. The philosopher and statistician Nassim Taleb talks about “black swans” – events of low probability but maximum impact – and many are saying that this is one of them. His 2007 book Black Swans – Coping With the Improbable suggests that many financial services organizations are simply not prepared to cope with losses beyond what they have predicted in their models.

But this isn’t entirely true. One major U.K.-based global insurer has already said that, despite its stock value falling by 25%, it has adequately stress tested its business. I really hope that it represents the wider U.K.-based insurance industry, as opposed to being a one-off. Even so, asset managers are already actively reviewing their portfolios, and there will inevitably be a number of knock-on effects.

What all this means for the man in the street remains uncertain. In a saturated market, suffering from overcapacity, will the “leave” vote affect insurance premiums and, if so, in what way? There is already a threat of increased taxation, and it’s unlikely that the insurance industry will remain unscathed. How the major global insurers based in mainland Europe will respond to the U.K. “issue” will also make interesting viewing.

The fall in value of U.K.-based insurers coupled with the weaker pound sterling will make some U.K. insurers extremely vulnerable to predators, especially those keen to gain a foothold in the Northern hemisphere. Do not be surprised by some M&A activity in the coming months.

At the end of the day, despite all the uncertainty, this is an industry – and a country –that is characterized by resilience. For those working in it, and living in it, we have to be honest and recognize that there are likely to be difficult times ahead. But whatever we think of the vote, the essence of how we choose to live in the U.K. (and the Western world) is in respecting the will of the people. Let’s just get on with it.

Could Location Data Be the Golden Thread?

In insurance, location is everything. It helps insurers understand where the risks are, whether there has been accidental (or deliberate) accumulation of risk and where their customers are. Location helps insurers optimize their distribution strategy, their claims services deployment, their supply chain and even how they market and advertise their services.

The technologies of location intelligence and weather prediction also naturally converge to help anticipate the impact of hail and storm, and allow insurers to proactively advise their policyholders to act (although only half of policyholders who are warned of an impending event actually take action). Bringing weather and location information together creates an environment where insurers change from being reactive to being proactive. New touch points are also created with policyholders (as opposed to a single annual request for premium), with the potential both to add value to the insurance proposition and also to improve loyalty

Some might reasonably argue that weather forecasts are already available from the news. Perhaps one task for insurers going forward is to create a more effective interlock between weather forecasting, policyholder behavior and premium reduction?

Increasingly, location is being seen as a subset of big data rather than a stand-alone technology. In a world of data where 80% is unstructured and uncertain, do the coordinates of location provide some sort of anchor for all the new information becoming available? After all, what could be more certain than where something or someone is physically located? Imagine if location data became the golden thread that tied all insurance information together?

For many, location information still equates to mapping and “flat” visualizations. It is fundamentally descriptive in nature, albeit providing effective illustrations of potentially complex issues. As location intelligence increasingly aligns to predictive and cognitive analytics, perhaps the “power of place” may start to assume new meaning?

Location data is becoming increasingly pervasive in the insurance industry. The connected car, the connected home and the connected person all have a location component.

Perhaps the future for insurers isn’t just around being “data-driven” but “location-data-driven”?

What Happens if U.K. Exits the E.U.?

On June 23, 2016, the U.K. population will vote on whether to stay a part of the E.U.’s 28 countries or to leave. It’s a once-in-a-generation decision, and it is likely to dominate U.K. press for the next six months. But what impact would a British exit, or “Brexit.” have on the insurance industry?

A report by Euler Hermes, a consultancy backed by Allianz, indicates this exit would include:

  • Massive loss of U.K. exports, which could take 10 years to recover
  • A heavy hit to financial services
  • London’s loss of its supremacy as a financial center
  • The likelihood that trade barriers would be imposed by continental Europe

Global insurers would inevitably be affected. Zurich Financial Services says it is “monitoring developments carefully.” The AXA chief executive described the situation as the U.K. “playing Russian roulette” and predicted a severe negative impact on London. Moody’s says the U.K.’s credit rating would be hurt.

Despite the recent challenges of Solvency 2, the argument that there will be less regulation if the U.K. leaves the E.U. doesn’t hold weight with Lloyd’s of London, whose Chief Risk Officer Sean McGovern recently said, “None of the alternatives will be as beneficial for the London market as the current relationship.”

Companies are already indicating they will need to make stockholders aware of the consequences of leaving—if only to avoid directors and officers (D&O) claims down the line. Because most annual reports are published only months before the vote, there’s likely to be a swell of activity; social media analytics measuring citizen sentiment will have a field day.

In October 2015, U.S. administrator Michael Froman ruled out a separate trade deal with the U.K. in the event that it leaves the European Union. He said, “We have no free trade agreement with the U.K., so it would be subject to the same tariffs—and other trade-related measures—as China, or Brazil or India.”

At face value, staying in the E.U. seems like an obvious choice, especially as the U.K. population—like the insurance industry—is risk averse and often reluctant to change. But there are other issues at play here, especially those regarding the emotional response.

Some are suggesting that London would be at greater risk of terrorism if the U.K. remains part of the E.U. Others are concerned about the immigration issue and the effect of the Euro crisis. Others simply argue that that the U.K—which has the fifth-largest economy in the world, is the fourth-greatest military power, is a leading member of the G7, has more Nobel Prizes than any other European country and is one of only five permanent members on the U.N. Security Council—is entitled to greater autonomy to make its own decisions and should not be constrained by politicians who are not elected by U.K. citizens.

“After all,” say those in favor of an “out” vote, “isn’t the current safety and prosperity enjoyed by the U.S., Australia, India, Canada and others founded on the principles of democratic self-government created by those who were once prepared to take matters into their own hands?”

Luckily, even with an “out” vote, the exiting process won’t happen overnight. There will be processes to follow, some of which could take years. It’ll give plenty of time for insurers and intermediaries, (not just those in the U.K. or Europe) to think carefully about the consequences on their businesses, the economy and their customers.

Here are some issues that would have to be considered:

  • As London reduces its influence and there is a brain drain, where might the power shift to, physically, and will some of the big broking houses move house (again)? Where will the new powerhouse occur? Singapore or Shanghai?
  • If there are new trade tariffs, how will this affect the flow of global business? According to U.K. government data, in 2011, the U.S. exported $3.5 billion of insurance services to the E.U.—that’s nearly $1 in every $4 in global insurance services exports.
  • How might an economic squeeze in the U.K. over the next decade affect consumer behavior in terms of buying both property and life insurance, and will this lead to further consolidation of an already saturated marketplace?

There is a basic insurance principle used to establish negligence that dates back more than 100 years. It refers to the “man on the Clapham Omnibus,” a hypothetical character epitomizing the “common man,” who is described as reasonably educated and intelligent but nondescript and against which a defendant’s conduct is measured.

So, on June 23, 2016, everyone in the U.K. over the age of 18 will get to vote regardless of their expertise on the topic. On that day. it will not just be a matter for the entire U.K. population but for the “man on the Clapham Omnibus.” At this moment, we can only speculate whether his head will rule his heart, or vice versa.

The Future of Life Insurance

In its most recent report, “Tomorrow’s World; the Future of Aging in the U.K.,” the International Longevity Centre, a think tank focused on longevity, population and aging, painted a gloomy picture. The report says:

  • That the social care system is crumbling, and social class will heavily affect the life experience of the aged.
  • That housing and planning are inadequate to meet the needs of an aging population.
  • That individuals are underestimating their life expectancy and are likely to run out of money in old age.
  • That older people will suffer (and perhaps die) of different things: Where once the issue was heart and respiratory diseases, now it is likely to be illnesses of non-communication such as dementia.

It’s a worrying vision – one that perhaps is replicated in many other countries. The report recommends a bold 10-point action plan. It says:

1. Health must find a way to be more responsive and preventative.
2. Government must make progress in delivering a long-term settlement to pay for social care.
3. Savings levels for working age adults must increase.
4. The average age of exit from the workforce should rise.
5. The number and type of homes built should be increasingly appropriate for our aging society.
6. Government should make progress in facilitating greater risk sharing in accumulation of retirement income.
7. There is a need for a more informed older consumer.
8. Our aspirations for retirement must be about much more than us spending more hours watching television.
9. Businesses should better respond to aging.
10. The social contract needs to be strengthened between young and old.

Doesn’t the life and pension insurance industry have a part to play in almost all of this road map? Is there any reason why the industry should sit on the sidelines?

Here are five issues for the industry:

  • Insurers need to continue the shift from being reactive to being proactive – and must share the benefits with policyholders. Stakeholder buy-in through effective communication and enlightenment is critical – and it is increasingly becoming urgent.
  • Can insurers – on behalf of their policyholders, who are inevitably with them often for decades – influence issues related to home building and planning? I wonder how I would react if I really thought that my life and pension insurer was representing my interest to a point that it was lobbying about this type of stuff on my behalf?
  • The need for cooperation between the private and public sectors reinforces the need for empathy by both government and private insurers toward each other, perhaps with tacit agreement that they (we) are all in this together.
  • As the average age of workers increases, and some seek an alternative to watching TV or just trying to make ends meet, I wonder whether there is propensity for more workplace accidents. Isn’t there an employers liability/workers’ compensation angle to consider?
  • And, of course, how do we make life and pension insurance attractive to those starting their work life? Doesn’t the industry really need to make insurance both more relevant and fashionable?

Don’t insurers need to communicate better, engage differently, think more about the changing demographic footprint and generally step up the pace? All the innovation seems to be going into P & C insurance, but we can’t allow that to suck the energy from life and pension.

After all, having a “connected bedpan” as part of the Internet of Things might be useful for some – but don’t we need to be bolder than that in our thinking?