With the upcoming introduction of IFRS 17, the new insurance contracts standard, the Financial Stability Board (FSB) is calling for implementation as soon as possible. Under IFRS 17, insurance obligations will be accounted for using current values, instead of historical cost. Martin Sarjeant, Global Risk Solutions Expert, FIS, below provides Finance Monthly with a thorough account of why firms should welcome the change.
With concerns over costs and a perceived lack of benefits among some insurers, there’s a prevailing mood of doom and gloom about IFRS 17. But rather than striking a deathly blow to the balance sheet, I believe that the new accounting standard for insurance contracts spells good news for insurers and stakeholders.
From this radical “glass half full” viewpoint, I’ve identified seven big benefits that IFRS 17 will bring to the insurance industry:
However you look at IFRS 17, nothing will stop it from coming into force in more than 100 countries in 2021. So, why not ditch the despair, seize the opportunity for change, embrace the benefits – and see the many positive sides of compliance?
With the introduction of the Insurance Act 2015, everything changed, and one year ahead of its implementation, Tanmaya Varma, Global Head of Industry Solutions at SugarCRM, tells Finance Monthly about the impact it’s had on the market, its insurers and customers.
It’s no secret that the insurance industry is one of the most cut throat when it comes to customer loyalty. With competitive rates available at the click of a button on price comparison websites, customers have the freedom to pick and choose their providers with minimal effort, from the comfort of their homes. The abundance of insurance companies in the market means they are on a constant uphill struggle to provide not only a competitive price, but a customer experience that sets them apart from the rest. With Gartner estimating that 89% of organisations now compete solely on this, this is the new benchmark of success for insurers.
In a competitive market, retaining that loyal ‘golden customer’ is challenging. Insurers need to show they are evolving to meet the needs of modern customers, and are not just companies who do little more than churn out cheap holiday or housing cover. Research from The Institute of Customer Service revealed an increase in customer satisfaction from July - December 2016 compared to the six months before it, with a number of insurers listed in the Top 50 organisations for customer satisfaction, such as LV and Aviva. Despite this, the sector still experienced a 9.9 point drop in Net Promoter Score, a figure which summarises the overall neglect and disconnect between insurers and their customers.
So what are insurers already doing to address this, and what more can they do to improve customer loyalty?
Changing laws
It’s clear that how insurers treat their customers is being monitored at the highest level. Prior to 2016, the insurance industry had been left to stagnate. In a sense, it was an industry complacent with its low retention rates and poor customer service. This changed last year with the introduction of the Insurance Act 2015 which set a new precedent – with BIBA marking it the “the biggest change in insurance laws in 100 years.”
The introduction of the Insurance Act promised to deliver greater transparency between companies and consumers. In an industry notorious for false claims, well-hidden small print and poor customer service, the shift was a much needed one. With this new act underway, it’s now more essential than ever that insurers have access to up-to-date data.
Providers were also instructed to improve communications across all channels to ensure clarity at all points in the customer journey. There is also an onus on customers to ensure they’re providing the correct information, and understand the policies they are signing up to.
Turning to technology
The right technology is of paramount importance to any customer-facing business. Insurers must harness tech to empower employees to work more efficiently. One way this can be done is through customer relationship software systems, which allow customer data to be collected, stored and managed to deliver a 360-degree view of the customer.
By giving employees everything they need at the press of a button, this can help alleviate lengthy, confusing calls and improve the customer experience. An easily-accessible system can deliver increased efficiency, better communication and happier customers. If we consider that in a survey conducted by Realwire 68% of questions asked digitally are inaccurately answered, it’s essential that insurers become more digitally focused and capable.
Some insurers are already adopting a digitally forward stance. The insurer Lemonade, for example, developed a virtual assistant at the start of 2017 called Jim who is able to process insurance claims in seconds. This virtual assistant reflects the advancements of AI and how some insurers recognise the power of tech. Realwire’s study concludes that with 91% of consumers saying good digital customer service from insurers makes them more loyal, it’s essential that insurers can deliver this.
The importance of the human touch
The benefits, and potential, of technology as part of the customer experience are endless, but have their limitations. Yes, there have been significant advancements in Artificial Intelligence (AI), and the rise of the chatbot is a forever trending topic. But despite a continued integration of AI in to customer service, research by Vanson Bourne concludes that 91% of respondents still preferred to contact a real person.
AI is great in automating mundane tasks, and taking care of repetitive jobs where humans don’t add value. But, so far, a robot can’t empathise with a distraught traveller half way across the world who wants to check the small print of their holiday insurance policy. That’s something that only a human can do at present. This is proven further through SugarCRM and Flamingo’s research, that found that three quarters of people surveyed still aren’t happy with talking to chatbots – a figure which clearly translates across all industries.
The future of the customer experience
Machines are great at automating repetitive tasks, and chatbots are undoubtedly becoming more sophisticated – and at a growing rate. But the real benefits of technology appear when it aids and empowers employees, and helps customers be autonomous in self-service functions where the human touch isn’t needed.
For an industry that, according to Realwire, saw a 47% decline in performance in 2016, it’s essential that insurers act quickly to evaluate the customer experience they offer at every touchpoint. The insurance industry has generally been slow to adopt a better digital approach, but, when customer dissatisfaction is often rife, it could be the difference between keeping or losing a customer.
Speciality MGA Fiducia has teamed up with a Lloyd’s insurer, Atrium Underwriting, to produce a new terrorism product which will allow brokers to offer specific cover to their clients of all sizes.
Fiducia and Atrium have developed the terrorism and sabotage policy which takes account of the changing risks associated with the latest types of terror threats.
While the UK insurance sector’s specialist terrorism risk pool, Pool Re, offers cover, it does so in most cases only if the insured’s building suffered physical damage.
However, there is now a real demand for terrorism cover which is triggered if a business suffers business interruption, although there is no physical damage to the insured’s premises.
Many firms in the recent attacks on the Manchester Arena and Borough Market found they were unable to access their buildings due to the ongoing police operations for some days or weeks afterwards. Businesses in Borough Market have also said they have seen a significant fall in trade as visitors are concerned to go to the area following the attack.
Underwriter at Fiducia, David Heeney says: “Understanding the benefits of having a standalone terrorism policy is a difficult proposition for many clients but we at Fiducia have developed, for UK regional brokers, a market leading terrorism product to assist them in engaging with clients who feel their property and assets may not be vulnerable to an act of terrorism.
“Following previous terrorism events 70% of the companies that went out of business due to the after effects had suffered no physical damage or loss. They simply were unable to access their buildings and the area, which had been popular with visitors, no longer held any attraction so business was dramatically reduced.”
He adds: “There has been a demand for terrorism cover that offers protection above and beyond that offered by the Pool Re scheme. While Lloyd’s underwriters have been providing cover with extensions for business interruption, denial of access and loss of attraction, regional brokers have not really had the ability to access it until now.”
He says that the policy comes with access to Atrium’s unique risk management analysis software that will enable brokers to provide detailed advice on the level and type of insurance needed by their clients on an individual basis.
“Blast Zone Exposure Management is a unique risk management analysis software,” he explains. “Our experience shows us that the largest single location often isn't the largest accumulation of exposure a client has within a 200 metre blast zone where they can suffer both physical damage and business interruption that reaches far beyond a top single location value. We can analyse the insured’s assets and assist them in selecting a level of cover to match their accumulation of exposure, eliminating under and over insurance.”
Stuart Harmer Underwriter Political Violence at Atrium said: “We are excited to be supporting the Fiducia team. The company has put first class service levels at the heart of their business. At Atrium we choose our partners carefully and we are confident that Fiducia and the innovative products they have designed and created will provide a very attractive alternative to those currently in the market. From the outset of our discussions we have been impressed by the drive, professionalism and depth of knowledge within Fiducia and we look forward to a long and successful partnership”
(Source: Fiducia)
More than 50% of the customers of UK financial services brands would be willing to spend more – potentially equating to billions – if only they felt more valued by them, according to new research from Jacob Bailey Group.
Missing Billions is a new report from Jacob Bailey Group, the creative business services agency, based on a survey of 1,200 UK consumers in Spring 2017, to better understand the concerns of financial services customers today.
Key findings include:
Brands are missing out on billions
Customers do not feel valued
Communication is poor
Almost one fifth of people believe their financial services provider does not communicate with them enough. This figure is higher for people who earn between £45,000 to £55,000 (22%), as well as people with an income above that bracket (21%).
The study uncovered a number of issues around how financial services brands communicate with their customers, including lack of timely, relevant, personalised and helpful information, and general misunderstanding of financial circumstances.
The Missing Billions report also ranks financial services companies according to how valued their customers feel. Out of 20 brands examined, Bank of Ireland was the top performing company with the fewest customers feeling undervalued (22%), followed by Nationwide (31%) and RBS (33%).
Rob Manning, Strategy Director, Jacob Bailey Group, said: “In an age dominated by digitisation, convenience and personalisation, the financial services sector has never been under so much pressure to evolve.
“We set out to understand why these brands are failing, losing out to savvier, more agile new market entrants, finding that how financial services brands communicate with their customers is potentially costing them billions every year. To unlock these missing billions, these brands need to connect relevance through microtargeting, based on the best use of data, technology and creativity, leading to brilliant customer experiences.”
(Source: Jacob Bailey Group)
Led by growth in Asia Pacific, the global insurance industry has been experiencing moderate growth in recent years. However, a slowdown in the industry is likely, though growth is going to remain steady.
While the life insurance sector remained the most profitable in 2015, the non-life insurance sector was not far behind, according to Global Insurance Industry - Forecast, Opportunities & Trends 2015-2020, a report recently released by Taiyou Research. The industry remains fragmented, thus increasing the level of rivalry within the market. Large, international companies have more or less entered most countries now and have either driven many smaller players out of business or have formed partnerships with them.
Online insurance is also a rapidly growing business, competing successfully with existing players. Apart from insurance market players, many financial service providers and banks are also entering into the global insurance business, thus creating even more competition for existing players.
Stringent regulations govern the insurance industry and it remains to be seen how this scenario plays out in the coming years.
(Source: Taiyou Research)
GTR spoke to insurers and brokers at the annual conference of the Association of Trade Finance in the Americas (ATFA) on how the insurance market has evolved in the US since the financial crisis.
Next up we spoke to Alan Maresky, Chartered Accountant by profession, who is currently Chief Financial Officer at Pethealth Inc. Pethealth is an international leader in the provision of animal management software, RFID microchip identification, database related services for companion animals, and pet insurance, operating in North America and the United Kingdom. More recently, the company became a leading provider of pet pharmacy and pet specialty retail products to pet owners in the United Kingdom and Germany. Here Alan tells us more about the company’s achievements and regular challenges, as well as his role and its impact over the past two years.
What are Pethealth’s top priorities towards its clients?
Everything we do is driven by our mission of bringing vitality to lives, furry and otherwise. We aim to be a one-stop shop for all pet needs. In North America, that includes pet insurance, lost pet recovery services and memberships in a community that provides, not only a forum to share and learn more about pet ownership, but also access to special offers and promotions generated by our partners. In the UK, we have a discreet pet health insurance offering, as well as pharmaceutical, specialty food and pet retail services.
What differentiates Pethealth from its competitors?
Pethealth has a maniacal focus on customer service and employee satisfaction. We believe that having happy employees results in a better experience for our customers and clients.
What further goals is the company currently working towards?
We are constantly looking to improve internal processes to become more efficient and provide an improved customer experience. The way people choose to do business is evolving every day, as we service a wide audience, it is important that we stay up-to-date. We want to continue to expand – our current goal is to grow our pet insurance and the online retail platform in the UK and Europe.
Our membership offering in North America is a collection of the products and services pet owners have come to rely on to provide the premium level of protection for their pets. At the moment we see massive growth potential for this Membership in North America.
You joined Pethealth in 2015 - how would you evaluate your role and its impact over the last two years?
My time at Pethealth has been full of surprises – no two days look the same. My team and I spend most of our time addressing our internal processes and systems. We have also made a number of significant acquisitions, both in North America and the UK, which have bolstered our portfolio. With our most recent acquisition in Germany, we have expanded our footprint into Europe.
I play a key role in a wide range of initiatives at Pethealth. In addition to the Finance Team, many other departments report into me. The impact of having these different departments working together towards our shared goal has had immeasurable impact.
We believe that we have tremendous growth potential and are excited to be part of the Fairfax group of companies. With the insurance penetration in North America being less than 3%, there is significant upside awaiting in the untapped market. We have a proven model within the e-commerce platform in the UK that I see a tremendous potential in and the recent expansion into the German market will, hopefully, be the catalyst to growing in Europe.
What challenges would you say you and the firm encounter on a regular basis? How are these resolved?
Our internal systems are in need of a renovation. This makes keeping up with the demands of the business a challenge. I don’t think that we're ‘nimble and flexible’ enough from an administration perspective. By making these adjustments on the back end, we are able to work more effectively and efficiently.
From a legislative point of view, the regulatory restrictions in the US pet insurance industry make any changes to our offering very onerous. Each state is independently regulated, so it is challenging to provide a single countrywide offering with a streamlined process. Any changes to our policies need to be approved on a state-by-state basis. which can take up to 18 months. This makes it difficult to react to market changes, however on the flip side, it acts a big barrier to enter the market.
March is Fraud Prevention Month and Insurance Bureau of Canada (IBC) is highlighting that everyone can play a role in limiting the personal and financial costs of auto insurance fraud.
"Auto insurance fraud is a serious crime that costs Canadians billions of dollars each year," said Garry Robertson, National Director, Investigative Services, IBC. "It's an illegal, organized big business, largely unknown to consumers, that siphons resources away from our health care system, ties up our emergency services and courts, and drives up insurance costs."
The property and casualty (P&C) insurance industry is increasingly sophisticated in its ability to detect and prevent insurance fraud. This includes fraud perpetrated by organized crime rings that stage collisions and involves the collusion of service providers such as medical facilities, auto body shops, and tow truck operators. IBC and P&C insurers work closely with CANATICS, an organization that uses state-of-the-art analytics technology to help insurers identify possible fraudulent activity committed by these dangerous crime rings.
IBC and P&C insurers also work across Canada with law enforcement agencies, all levels of government, insurance broker organizations and other stakeholders to raise awareness and coordinate efforts to fight this crime.
"Insurers and their partners are already playing a significant role in reducing instances of auto insurance fraud. However, it is important that consumers know what to look for and to avoid becoming victims," added Robertson.
Consumers can help protect themselves against fraud by following these tips:
Do your homework when purchasing a used vehicle:
Avoid staged collisions:
Take extra care if you are involved in a collision:
If you think you have witnessed or been the victim of an insurance crime, call IBC's confidential TIPS Line (open 24 hours a day, seven days a week) at 1-877-IBC-TIPS, or submit an anonymous tip to IBC online.
IBC Initiatives to Identify and Deter Fraud
(Source: Insurance Bureau of Canada)
To hear about the insurance industry’s evolution in the past 40 years, this month Finance Monthly reached to Joseph Petrelli. Mr. Petrelli began his insurance career in 1969 as a work study student at The College of Insurance, working for the predecessor organization to ISO. Since that date, he has been providing both actuarial and financial analysis expertise to the Property and Casualty (P&C) insurance industry. He has been actively engaged in the Title insurance industry since 1985. He has experience with loss and loss adjustment expense reserve evaluation, product development, and pricing for all P&C and Title insurance products as well as expertise with loss cost filings and Financial Stability Ratings® (FSRs).
Prior to founding Demotech, Inc. in 1985, he was employed by a large national P&C insurer, a regional property and casualty insurer, as well as Insurance Services Office.
Mr. Petrelli is the author of What We’ve Got Here Is a Failure to Communicate – How Traditional Financial Reporting Contributes to Misunderstanding of Title Insurance Loss Activity and has been published in many of the leading industry trade journals.
He is a Member in good standing of the Casualty Actuarial Society, American Academy of Actuaries, Society of Actuaries, and the Conference of Consulting Actuaries. Mr. Petrelli has a Bachelor of Actuarial Science from The College of Insurance (St. John’s University) and an MBA from The Ohio State University.
You have more than 40 years of progressively responsible property and casualty actuarial and financial analysis experience - how has the industry evolved over time?
The insurance industry’s evolution over the past four decades has been driven by the two concepts underlying Demotech’s name; demographics and technology. Demographics has impacted the life, health, property, casualty and title insurance sectors. Many life insurers now have clients that have lived to be 100 years old! Whether the issue is the graying of the insurance industry, the transition of leadership positions from Baby Boomers to Millennials, changes in the generational perspectives with regard to homeownership, telecommuting, personal, face-to-face service versus online efficiency and the implied cost savings of same, or 80 and 90-year old men and women having the physiological capability to live independently with a quality of life that is unprecedented: demographics is the driving force behind the evolution of the industry.
Similarly, technology has been instrumental in enhancing physical safety and ecological efficiencies; whether through automated safety apps that protect one’s home and contact you via smart phone when the doorbell rings or thermostat controls on a smart phone app. Concurrently technology offers challenges associated with cyber security and cyber bullying that emerged over the past several years.
Can you tell us a bit about the Financial Stability Ratings® that Demotech offers?
Financial Stability Ratings® (FSRs) summarize our unique perspective on an insurer’s ability to honor meritorious claims or otherwise defend the policyholder. “Stability” is the key variable that financial strength ratings often fail to measure. Stability implies that an insurer is focusing on core capabilities and sticking to its knitting. The best way to stay out of trouble is to do what you know how to do.
Other rating services seem to believe that possessing an abundance of capital concurrently provides the experience and expertise to assimilate into lines of insurance or geographical areas that are unfamiliar to the insurer. Stability and a focused and executable business plan are the keys to survival.
How do you tailor your services to the needs of each individual client?
We do not rely on black boxes, secret formulae or subjective criteria to assign our FSRs. We believe that ratings should be transparent and fair. In fact, we have created the phrase, Transfairency to describe our process. Tranfairency refers to a review and analysis of insurer financial stability that is fair and transparent. We believe that a process is fair when review and analysis focuses on balance sheet fundamentals presented over time, the quality and quantity of reinsurance, the carrier’s business model and the breadth and depth of its enterprise risk management program.
In terms of market competition, where does Demotech stand globally and what are its goals moving forward?
In the area of insurer ratings, as opposed to the rating of insurer investments and debt obligations, the reality is that a monopoly exists in insurer ratings. Despite the existence of a monopoly and the restraint of trade or boycott of duly licensed insurers that it creates, we have more than 400 clients operating in the US, District of Columbia and Commonwealth of Puerto Rico. We chip away at the monopoly each and every day for the purpose of leveling the playing field for financially stable insurers.
Insurance services represent an opportunity for banks to improve customer experience and increase customer loyalty.
Consumers have an average of four different insurance products split across three providers, with 63 percent saying they would prefer to deal with a single provider, according to a new survey by Collinson Group.
Following the rise of price comparison and aggregation services, the way people buy insurance has fundamentally changed – competition is fierce, prices are lower and consumers use multiple providers. However, Collinson Group research amongst 2,500 loyalty programme members has found that customers would value a more streamlined way to buy insurance through a single provider. Banks can capitalise on this opportunity by offering insurance products through loyalty initiatives, or value-added packaged accounts and credit cards – improving the customer experience, boosting loyalty and generating incremental revenue.
When asked why they would prefer insurance products with a single provider, 79 percent cited convenience. More than half (51 percent) said they would expect better prices for staying loyal and 39 percent said they would expect to receive added benefits or rewards for staying loyal to one provider.
When asked why they use multiple providers, more than a third (37 percent) said their provider doesn’t offer different products, and more than a quarter (27 percent) said they don’t feel there is any benefit for staying loyal.
An additional Collinson Group’s global study of more than 6,000 affluent middle class customers further emphasises the opportunity for banks, showing a high perceived value of insurance products. The findings found that 72 percent of affluent middle class customers highly value health insurance, 66 percent travel insurance and 63 percent lost cards assistance. Banks should also consider other non-traditional assistance products such as identity protection, to help in the modern age of cyber-crime. The research found that 57 percent of customers rated identity theft protection as a highly valuable service, and that fears over data security influences what brands or products they use. Offering identity protection insurance is another way banks can show commitment to customers.
Mark Roper, Commercial Director of Collinson Group said: “Banks have an opportunity to boost loyalty and make consumer’s lives easier by including insurance products in loyalty programmes or within packaged accounts and credit cards. Given the data banks hold on consumer spending, using this information at the right time to offer highly personalised, timely and relevant insurance products would be valued by customers and can also generate incremental revenue for banks.
“Due to their substantial buying power, banks can achieve economies of scale to deliver value across insurance products and pass this back to their customers. They can offer insurances at the low prices their customers expect due to a group risk approach, packaged as part of a bank account or credit card. This will provide differentiation and builds on or leverages existing loyalty to the bank’s core products –bank accounts or credit cards.
“With effective integration, banks could offer travel insurance to a customer that has just booked a flight, or car insurance when they buy a new car. This will be well received by customers who indicate in the research that relevant offers are welcome, and by consumers that like the idea of a ‘one stop shop’ but need to feel that the provider offers great value and quality products. Banks should be capitalising on this consumer need by seizing the opportunity to create more meaningful and deeper emotional relationships with their customers, and grow their bottom line.”
(Source: Collinson Group)
This month’s CFO Insight section features Mark Hampton – the Chief Financial Officer of Collinson Group, a global leader in influencing customer behaviour to drive revenue. The company brings together a unique blend of industry and sector specialists across four core capabilities: Loyalty, Lifestyle Benefits, Insurance and Assistance. Collinson Group is the organisation that created Priority Pass, the first independent global airport lounge access programme and was the first to sell travel insurance directly in the UK through Columbus Direct. The firm also created the first loyalty marketing agency, ICLP. Now, Collinson Group operates 25 offices across the globe, supporting more than 800 clients, in over 170 countries, and manage more than 20 million end customers.
Mark’s role as a CFO is not simply financial control and management – he drives the group’s overarching strategy, both by contributing to its development and by ensuring the plans are robust and that sufficient financial and human resources are available to deliver them. He also drives the Group’s merger and acquisition strategy, has responsibility for Human Resources, Legal, Information Security and PMO across the group, and is Non-Executive Chairman within the insurance business.
Collinson Group is currently going through a period of rapid growth – what have been the company’s major achievements in 2016?
Once again the group has reached new highs with revenues of £420m, up 20% over the previous year and the fifth year in a row in which we have experienced annual double digit revenue growth. This is testament to the strength of the business, and puts us in the position to continue to invest in new technology and capabilities.
This year’s success has been underpinned by strong organic growth of existing clients and the successful launch of new propositions. Looking at specific achievements, we have gained a lot of traction with our loyalty commerce product suite, helping organisations generate incremental revenue from their loyalty programmes along with driving increased customer engagement. Our loyalty platforms integrate with over 4,000 retailers, offering in excess of 6,000 rewards globally, across 40 product categories including travel inventory from 400,000 hotels and 120 major airlines. Working in partnership with our clients, we have advanced our data analytics to optimize both behavioural and contextual data to provide highly relevant and personalised content that delivers value to programme members globally.
We have both expanded our global client base across the Americas, Asia-Pacific and the US along with our partner networks to deliver truly international benefits that reflect the needs of modern travellers. Our growth ensures that we are able to offer our clients best in class technologies, regional expertise and continued economies of scale.
We have facilitated significant digital transformation in our client businesses and we have doubled the size of our data and insights team to provide business intelligence and enhanced customer experiences for our clients end customers and to better serve our own direct customers.
Our independent lounge access programme passed a significant milestone this year, offering members access to 1,000 lounges globally. And our LoungeKey product offers the swiftest and most secure payment-card and digital airport access programme worldwide.
We also introduced an ID Assistance solution this year which provides protection against identity loss, theft or fraud offered wholesale/ as a package or NAC benefit or a retail solution. This benefit demonstrates a commitment from organisations to ID security and can generate incremental income for brands.
Collinson Group also launched Care and Support at Home, a unique product in the UK insurance market that seeks to help financial services companies provide comprehensive at-home assistance services for millions of Britons who struggle to receive adequate care after a period of hospitalisation.
Our insurance and assistance businesses will now benefit from a single, enterprise-wide platform, enabling transparent visibility of financial flows from policy sales through to claims management. Powerful management information will drive benefits across the business, including more accurate underwriting, improved product targeting, and more efficient allocation of customer service resources
Looking into 2017 and beyond, what do you anticipate for the company?
Collinson Group’s growth is expected to continue over the next decade, fuelled by the strength of the mass affluent consumer, increased consumer expectations and a dramatic rise in customer data availability. This growth is likely to be particularly strong within financial services and travel, where we continue to focus our investment.
The advance of technology, the exponential growth of personal data and the increasing complexity of customer interactions will continue to drive demand for leading expertise in our specialism of shaping consumer behaviour. We will invest in new propositions and improved infrastructure, to fuel sales growth, increase efficiencies, and build a stronger, more collaborative structure across our global footprint. Our continued investment in digital and data resources, and in upgrading legacy systems will ensure that we fend off the ever-strengthening competition that globalisation presents.
We will continue our expansion of digital platforms including LoungeKey 2.0 and loyalty platforms to further digitalise the customer experience.
What are currently the hottest topics being discussed in the loyalty sector in the UK? What motivates you most about working within the field?
Loyalty and influencing customer behaviour is an exciting field to work in. It’s becoming increasingly important for brands, as the only real way to differentiate in a very crowded market. Loyalty is fast moving and dynamic with customers demanding highly personalised experiences, so my personal motivation and passion to continue in our broad depth of capability across the Group is high.
The loyalty landscape is changing at a rapid pace. The industry has shifted from generic reward models based on points and prizes, to something that is highly bespoke, contextually relevant, real time and digital. Our proprietary research shows that consumers are less attracted to simple discounts; they value lifestyle experience above all. They want seamless and personal customer experiences across all channels and they want personal, money can’t buy experiences as a reward for their brand loyalty.
This shift is being powered by the availability of digital tools and data analytics, and some organisations are still coming to grips with how to get the most out of these tools. The aggregation of data across almost every channel, presents a powerful opportunity to build meaningful relationships with consumers. Organisations that are not using data insights as an opportunity to personalise their programmes will almost certainly be left behind.
You joined Collinson Group in 2013 - what goals did you arrive with as a CFO of Collinson Group?
I joined Collinson Group after spending eight years at Bupa, including a period as CFO of Health Dialog, a Boston-based care Management Company. It was an exciting opportunity to join a more dynamic and entrepreneurial organisation.
My initial goal was to nurture the business and help to integrate a diverse range of companies, products and services. This involved building a layer of governance that would introduce a more structured approach to operations, without hindering the entrepreneurial culture of Collinson Group. The success of this approach to date, has been evidenced by the Group’s continued growth.
What achievements have you made in your role thus far and how have they contributed to Collinson Group’s performance in 2016?
There are many brands within Collinson Group, and all of these are now growing in terms of their revenue, offering and capabilities; it has been incredibly satisfying to be able to help drive this growth. We have worked hard to ensure that we offer our clients a broad service offering, consolidating capabilities in a combined and integrated manner. I have also overseen several key acquisitions for the business, which are starting to gain traction in the market and expand our expertise.
My role as CFO differs to my peers in other organisations as HR directly reports into me. This is really working for us, as I am able to advise on how we invest in our people. It’s cliché, but our people are the key to our success, and they are the strongest asset that we have. The development and nurturing of our employees is paramount to the success of the business, and I find it personally rewarding to be part of people’s personal development as well as the growth of our business.
What do you think are the main challenges for your company in the year ahead?
In retail banking, regulatory pressures remain a significant factor, but are now accompanied by the increasing threat of emerging competitors fuelled by technology investment. The FinTech space is particularly buoyant in the payments arena, where the likes of Google, Samsung, Alibaba and Tencent threaten to disrupt the core relationships between consumers and traditional banks. In the EU, competition will be catalysed by the arrival of the Payments Directive II, enabling a new wave of intermediaries to repackage consumers’ bank account data. These developments are galvanising banks’ efforts to invest in their consumer relationships and improve their ability to extract value from customers.
These pressures are accentuated by a protracted period of low interest rates in many mature markets and ongoing regulatory moves addressing interchange fees. The latter is particularly relevant to loyalty programmes, both those of banks themselves and those of travel programmes for which over 70% of miles can be earned on payment cards. Collinson Group is well positioned to support customers in identifying and operating more effective loyalty programmes than traditional business models, and drawing upon our cultural heritage in innovation to solve our clients’ challenges today.
The tumultuous political and economic environment created this year also presents a unique set of challenges both in Europe with Brexit and the change in President in the United States. However, our global footprint continues to be a fundamental asset to the business, providing economic stability, exposure to capitalise on growth opportunities and unique access to insight from leading markets. It’s going to be an unpredictable few years ahead, but our diversification will enable us to meet the challenges head on from a position of strength.
By Paul Davies, head of business diversification, Audatex UK
You don’t have to look very far to see that autonomous vehicles are driving the technology news agenda. Pardon the pun, but it’s true. From Tesla to Google, Apple to Uber – there’s been an explosion of interest in the automotive industry, with big players from different sectors trying to muscle in on the act. Last year, there were 1.5 million cars sold in the UK already equipped with the necessary technology to be autonomous. Research suggests that by 2025, 25 per cent of the UK’s cars will be autonomous, a number that will increase to 50 per cent by 2040.
Furthermore, a little known fact is that the UK is one of the few European countries that decided not to sign the Vienna Convention on Road Traffic in 1968, which states drivers must be in control of their cars at all times. This convenient gap in regulations has left the door wide open for the UK to lead the way when it comes to autonomous test drives, which are already taking place all over the country. There is no doubt about it: Driverless cars are going to shape the world’s automotive landscape over the next few years, something that will undoubtedly have a massive impact on the insurance industry.
At a recent insurance industry event we hosted, one of the speakers - Paolo Cuomo of Charles Taylor/InsTechLondon - described the moment his 10-year-old daughter explained that neither she, nor her little brother need to learn how to drive. Her reasoning was that driverless cars will soon be able to take them everywhere they need to go - like a driverless (and thus relatively cheap) taxi service. I remember starting lessons as a teen, feeling overwhelmed by the sense of power and responsibility I felt sat behind the wheel. Getting my license required hours of revision and practice, to make sure I possessed the reaction skills, awareness and attention to detail needed to safely navigate a car on the road.
As driverless cars become the norm, younger generations may develop this perception that autonomous vehicles are safe. If that is the case, people may shy away from learning to drive all together – instead relying on technological developments in driverless vehicles, and opening up the idea that cars will soon become ‘chauffeurs’. Given that autonomous vehicles are still far from fail safe when it comes to accident avoidance, the industry does have a bit of time to work out how best to address that changing environment.
What will car insurance in the future look like?
As an insurer, what would you do if someone came to you and asked for an insurance policy when they have a fully autonomous car, have a licence, but have never owned a manual operated car before? How do you calculate what their premiums should be? They might assume that having a driverless car would automatically reduce their premiums to a minimum, but how would that change if they had previously owned a manual car before? Research shows that young drivers (16-19 years old) are a third more likely to die in a crash than 40-49 year olds. Because of this additional risk factor, young drivers find their excitement at passing and getting their first car comes screeching to a halt when they see how much insurance will cost them. Do industry statistics like that count, or individuals driving experience count when it comes to insurance premiums and their choice of car in the future? These are the kinds of questions we need to answer as an industry.
If driverless cars take off, we should also be asking ourselves what exactly we are insuring. In the event of a crash, it’s difficult to pinpoint where fault lies - whether it’s the car manufacturer, the software provider, or the passenger?
This question of ‘Who?’ will actually need to be opened up to a much broader field – one that goes beyond purely the automotive insurance industry. With the Internet of Things (IoT) getting bigger and more diverse, it’s only a matter of time before we see a blending of the home environment and the car. Just like how life insurance premiums differ depending on your lifestyle, I can already see the day where insurers will move from insuring possessions to insuring people and the ‘things’ they interact with. And all insurance they take out - whether home, phone, travel, pet or car - will depend on the person and their lifestyle.
This is great news for the consumer, as it flips the current system on its head. No longer will they need to look on countless comparison sites to find the best deal, but rather insurers may end up competing for their business. For example, if they exercise three times a week, drive safely, leave all their valuables indoors with a premium smart security system and only spend holidays in Iceland (the safest country in the world), then they are a safe bet for insurers and at the top of their wish-list. If customers can provide the data proving they have a ‘virtuous’ lifestyle, then this power shift will be an interesting one to watch unfold.
As discussions around driverless cars become more frequent among insurers, these are just a few of the topics that will be at the forefront of their minds. From assessing legal implications, to thinking about the apportioning of blame - the questions are endless. It is up to the insurance industry as a whole to come together, ask these questions, discuss them at length and come to ethical, logical conclusions. It’s not just up to us - consumers will no doubt have a loud voice when it comes to how they interact – and we all need to make sure we listen.
