Tell us more about the services that Caunce O’Hara offers? What are the most common issues that freelancers approach you with?
Caunce O’Hara offers insurance to freelance contractors including Professional Indemnity, Business Combined (including Liabilities) and Tax Enquiry & Legal Expenses. In addition to these policies, we offer many other types of insurance, all tailored specifically to the freelance sector.
The most common issues that we are approached with are clients being requested to hold insurance, at set levels of cover, for their contract. A lot of freelancers are unaware of what these insurances are, and our award-winning team are on hand to help them. In reality, freelance contractors are busy individuals who don’t want to waste time completing reams of paperwork to get a quotation and they need their certificates immediately. With Caunce O’Hara, we have a very short online application form, which we can also do over the phone if preferred, and certificates are sent instantly by email. You can apply, purchase cover and access your certificates within five minutes.
What are the most common challenges that freelancers and contractors face when it comes to insurance?
Currently contractors are facing an uncertain period due to the changes in IR35 legislation, come April 2020, whereby they are required to prove that they fall outside of IR35 rather than inside.
A large number of freelancers are simply opting not to do anything at this stage and see if the onus is passed onto others, i.e. their agency, but we, at Caunce O’Hara, are being proactive and are offering a number of ways to assist freelancers in proving they fall outside of IR35. For example, we have a Tax Enquiry & Legal Expenses Insurance, which covers the cost of defending an IR35 investigation. In addition, as an extension to this, we are offering a Contract Review service which will assist you by letting you know if your contract will pass or fail an IR35 investigation. If your contract fails, we will guide you towards the areas you need to get your client to amend to protect you.
Currently contractors are facing an uncertain period due to the changes in IR35 legislation, come April 2020, whereby they are required to prove that they fall outside of IR35 rather than inside.
What are the particular challenges that insurers in the UK have been facing over the past year in relation to changes in what customers expect in terms of products and services?
The main challenge we have seen is competition and customers expecting price reductions. The insurance sector is very competitive and we pride ourselves on not only our extremely competitive rates but also excellent policy wording. Our products are of the highest standard which is matched by the customer service we provide. We have a great number of clients return to us year on year because we are excellent on price and quality.
Looking forward, what’s on Caunce O’Hara’s agenda for 2020?
Growth! Whilst it is naturally what all businesses wish for we have a huge appetite for growth and are excited to be going into 2020. With the challenges of IR35, we realise the difficulty facing freelancers over the coming months and our aim is to be there and support our clients. The next few months will be challenging but we are ready to meet them head-on!
In a recent interview with Finance Monthly, Dame Inga Beale discusses the current state of the insurance industry, drawing a contrast with the innovations occurring in banking.
“If you speak to some of the challenger banks, and you say, ‘who are your competitors?’ They say, ‘Oh, we don't really have any competitors. We're so unique, we're so different to the old banks that we don't really regard them as competitors.’” she said.
“It's interesting how they think they've created something so new and innovative that they don't even regard the old traditional incumbents as being a threat.”
It has been a memorable year for FinTechs, culminating in British challenger bank Starling pipping traditional firms to the title of Best British Bank. Business Insider Intelligence reported in October 2019 that 68% of consumers are using a checking or savings account with a challenger bank. 83% of those surveyed claimed they are likely to switch to a challenger bank in the next 12 months. Beale believes it is a focus on the consumer that has driven a revolution.
“Insurance I believe is behind banking. I think it's because we haven't been putting the customer at the heart of what we've been doing. They [challenger banks] have appealed to the young generation much more and have managed to brand themselves in a modern, exciting way. I think insurance has got a bit of catch up to do” she said.
“We [insurers] often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”
“We often traditionally look at things from our internal point of view. We segment customers according to the way we look at them; maybe by postal codes or something rather than the wants, needs, desires of the customers.”
The insurance industry has also been slower to adopt the innovations of InsurTech firms. Usage-based insurance (UBI) is increasingly becoming the norm but the implementation of technologies such as Robotic Process Automation (RPA) has been slow to market. While 30% of companies adopted this technology to review claims in 2018, no insurers were using it to evaluate the risk of insuring a client in the underwriting process. Despite this, the market for underwriting improvements is set to grow to over 60% by 2020.
“Most of the insurers these days are investing in incubators or innovation labs. But to actually amalgamate them into your existing business is the tough call. There are not many [insurance firms] that have mastered that yet,” says Beale.
“If they don't learn how to amalgamate this new InsurTech and this new technology approach, the interaction with a consumer will suffer. Consumers want a different type of product that's more tailor-made, responsive. We need to think differently and incumbent large insurers, unless they adapt, will be left behind.”
A multitude of choice is available to today's insurance consumers. Beale pointed out the moves the industry has made to simplify the process.
“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions,” she said.
“Consumers want to shop around and the price is important to them, so, lots of companies have responded by providing an online product where they're part of price comparison websites. That means the consumer can make instant decisions."
Though price comparison websites have now serviced an estimated 85% of consumers, Beale believes they may already have peaked.
Beale says: “There might always be a place for comparison sites but I think this idea, that you will partner with a firm and they would be your financial support is much more likely to be the future. Therefore, you will have a strong affinity with that firm providing the customer service is up to it.”
“I think you'll shop around far less on price because we'll be using data triggers to feed in automatically, and you'll feel, actually, that pricing is fair because I only paid for the exposure I had on that day.”
Beale also admitted that there is a long way to go before customer loyalty reaches such heights to make a dent in the role of price comparison websites.
“We tend to have people buying insurance products that are very geared to specifics; so people will buy insurance for their car, insurance for their travel, insurance for their home. We haven't yet managed to package that up nicely so that the consumer's life is made simpler.” she said.
“We've got a long way to go to build that ecosystem around an individual and surround you with this nice bubble of the financial protection and support that you need in your life.”
Since leaving the demands of corporate life behind, Inga Beale has become a regular keynote speaker with the Champions Speakers agency, where she specialises in topics such as diversity and inclusion, insurance and business management.
Of course, the rise of Human Factors Analysis Tools (HFAT) has forced financial services firms to push the envelope, but AI is gradually beginning to be integrated into the operations of firms across other industries. Perhaps, one sector which lags behind is insurance. However, according to Nikolas Kairinos, CEO and Founder of Fountech, attitudes are definitely shifting and in large part, this is due to the possibilities presented by AI toolsets.
Indeed, the venture capital community considers the insurance industry to be so ripe for disruption that Lemonade, a US InsurTech company, managed to raise $300 million in seed funding earlier this year. As an AI developer myself, I believe that the technology can drastically improve insurers at all levels, but only if industry leaders understand what AI actually offers and how to effectively integrate it into their organisations.
The first, and arguably, most important part of this process, is having a sophisticated awareness of what AI in insurance actually means. For most firms, the benefits of AI actually come through robotic process automation (RPA); in other words, automating existing processes to save time and resources. For example, insurance AI exists which could remove the need for firms to manually classify documents, write contracts or process claims.
However, the most significant advantage that AI offers to insurance firms specifically stems from the way in which sophisticated algorithms can use vast datasets in order to predict and monitor risk. This would have many applications across the crucial functions of underwriting, pricing and risk management. Going further, the technology could even be used to prevent fraud by detecting tiny inconsistencies in either publicly available data or a client’s financial history.
However, AI doesn’t simply provide a competitive advantage for the forward-thinking firms who employ it, it also benefits policyholders who would enjoy cheaper premiums as a result of lower overheads and reductions in the amount of fraud.
Still, some within the industry remain apprehensive about the impact of AI on either the employees or customer base of an insurance firm. The first thing is to say that many of these concerns, particularly around data security, are legitimate but it’s important that industry leaders do not see these apprehensions as an insurmountable obstacle. Integrating AI is not about saving resources for the sake of it but rather adopting new tools with the potential to improve the industry as a whole.
I’ve been developing software for professional services companies for years and based on what I have seen, I believe that successfully integrating AI into your services boils down to three things. Understanding the limitations of both the technology and your organisation, working with developers as much as budget and time constraints allow and being critical about where and why you’re integrating AI into your company’s operations.
At Fountech, we think it’s important for firms to understand what AI has to offer the insurance industry, and so we recently released a new white paper which explores how insurers might integrate AI into their business. Ultimately, with a proper understanding of AI’s strengths and limitations, industry leaders can begin adapting their firms to the rigours of the new data-driven landscape.
As AI begins to play a central role in the functioning of insurance firms, it’s important that industry leaders remain invested in the technology’s potential to change insurance for the better. At root, this means having a sophisticated understanding of how AI can benefit your organisation but also remaining vigilant to any problems that might arise as a result.
Finally, as we move towards a more data-driven insurance industry, it’s essential that insurance firms begin playing a more active role in the development of new AI either through investment, active feedback, or by providing a breeding ground for new tools to be refined. Now is the time for insurance firms to begin playing a more active role in the development of the tools that are going to fundamentally reshape the industry over the next few years.
This guide will cover the basic and essential information about home insurance policies, so you know where you stand come the unexpected.
Most standard home insurance policies cover structural damages, your belongings – as specified in the contract, and liabilities in case of accidents and injuries on your property.
As a homeowner, you have to make sure that you carry both structural and contents insurance, so you'll have lesser things to worry about should disasters like fire or water damage happen.
Typically, home insurance policies also include liability coverage that protects you from and helps you take care of lawsuits and medical responsibilities if someone gets hurts or injures themselves while in your home.
The amount of your home insurance coverage should depend on what you need and what you want to protect yourself against. That said, three factors usually determine your level of insurance.
If you're purchasing home insurance as part of your mortgage, your lender will require you to carry coverage of at least the same amount as your mortgage. The reason behind this is pretty much self-explanatory. Your lender will want assurance that if something catastrophic occurs and the property is a total loss, your home has enough insurance to cover the damage.
There are limits to what and how much your premium will cover in case of a disaster or accident. That is why, you need to contemplate on extending it or purchasing riders if you have the money to spare.
Let's say you own plenty of valuable items like antiques, jewelry, or precious artworks. You may choose to have a higher level of contents insurance to protect those assets from loss or theft.
There are also instances when the insurance company asks clients to purchase specific types of coverage, as they deem necessary. Those who are living in flood-prone areas, for example, may be required to have flood insurance for them to carry a general homeowners insurance policy.
Homeowners insurance have four basic types, namely: property, additional living expenses, personal liability, and medical payment insurance. These four, however, are further broken down six different coverages. It is the level of coverage that you need - or want - for each of these six areas that determines your premium.
No two homes and lifestyles are exactly the same; thus, there is no one-size-fits-all home insurance policy. If you really want your homeowners insurance policy to serve its purpose the time you need it the most, you must know what it covers and understand how it works.
If you want to enjoy a healthy annual profit margin and long-term success in your industry, you must take control of your cashflow. Here are four financial management mistakes your business must avoid.
An emergency fund could help to keep your business afloat during a difficult time in your industry or when you received an unexpected bill. To ensure your company is never faced with financial hardship, aim to save a minimum of three months’ worth of corporate expenses, which could ensure your company’s survival should an issue arise.
Many business owners believe they need to make large expenses to separate their brand from their rivals. As a result, they might pay a significant sum for the latest technologies, office equipment, or staff salaries.
It is, however, a smarter approach to adopt a more frugal mindset. For example, invest in second-hand products, haggle with suppliers, and find an affordable lease for your office or building space.
Never spend a penny more than you need to, even when your company is generating a superb return on its investment. By running a lean business, you’ll have more money available to overcome a financial obstacle.
The right insurance policy could help your business to make a swift recovery following onsite damage or compensation claims. Yet, many companies make the mistake of not choosing the right coverage to suit their specific needs.
There a wide range of options to suit different companies’ needs, such as business insurance, cyber and data risk insurance, and employers’ liability insurance. It is, therefore, important to consider the potential risks your organisation might face and to find an insurance policy to match.
If you fail to invest in the right insurance policy, your business could be liable for a considerable amount of money, should a client make a claim against you. For example, if you regularly provide professional advice and services to clients, you should learn more about professional indemnity insurance as well as public liability insurance. Reputable providers such as Hiscox can instantly provide coverage of up to £10 million with both professional indemnity insurance and public liability insurance so that your company aren’t caught out, with flexible policies tailored to your needs.
Many businesses are guilty of failing to budget each month, but it could be critical to your company’s success and survival. It ultimately helps a business owner to maintain a tight control of their finances, as they will know exactly how much money they will need to spend each month and where it is going.
Without a budget in place, you could fail to account for your tax obligations, insurance premiums, office expenses and more. If you spend too much, you may then need to apply for a business loan or run up debt on your credit card if you urgently need cash to pay for a debt repayment or corporate expense.
Technology is radically changing the way we live and interact. Customers are increasingly expecting smart, easy to use, one-click, mobile and personalised services. Insurance is part of this too, and as Irene van den Brink and Ingo Weber from the Digital Insurance Group point out, it’s time for the industry to be spiced up.
Data, analytics and AI are exponentially putting pressure on incumbent insurers to rethink every element of their business model. New initiatives are popping up, innovation garages are becoming popular in most traditional insurance companies and above all, we’re witnessing the rise of InsurTechs.
Initially, InsurTechs like Knip served as a wake-up call to incumbents. In the meantime, all insurance companies were at least talking about digital transformation. In the past few years we have seen an impressive rise of InsurTechs aiming to shape the future of the insurance industry and even though the number of start-ups is stabilising a bit, investment in more mature InsurTechs is consistently increasing.
Combining the efforts of InsurTechs and traditional players would have the most sustainable and impactful results in the market. Exploring ways to collaborate, we see a lot of traditional players setting up VC funds to invest, we see partnerships, and we see incumbents taking over InsurTechs in an attempt to accelerate their business. Let’s explore the three benefits that such collaborations could bring for both sides.
Combining the efforts of InsurTechs and traditional players would have the most sustainable and impactful results in the market.
Scalability
If we purely look at numbers, the impact of InsurTechs is still limited: traditional players still have access to a large customer bases whereas InsurTechs are often struggling with distribution and have a small market share. They both thrive on big numbers and scalability cuts both sides: a massive benefit of technology is the scalability it offers. In essence, technology allows for a digital model where increasing sales can be done at a stable cost level and the same goes for claims. Dutch digital insurer InShared was able to double in volume at the same cost levels, thus decreasing the cost ratio dramatically. Starting from scratch and getting to substantial numbers takes time.
While InsurTechs have innovation, they still lack volume, which is where the traditional players come in: they have the volume but need to find a way to serve at a lower cost. Getting existing portfolios on a platform helps in getting to higher volume and therefore, better ratios.
Time to market
The fast pace of an InsurTech can motivate traditional players to start ‘running’; there’s one comparison that has been used frequently – oil tankers versus speedboats. While traditional players used to be fine with yearly renewals of their base, InsurTechs are continuously developing or reinventing themselves – their middle name is ‘flexibility’.
AXA has announced that it’s launching a new cyber insurance with Slice Labs, which will allow them to launch a digital end-to-end cyber offering for SMBs in just three months. They use Slice Labs’ technology, underwriting and claims expertise - all combined with their own current dominant position. Another example is Zurich Insurance that works globally with the Digital Insurance Group to build new digital propositions on top of existing IT infrastructure at a record speed.
The low interest rate environment, weak insurance markets and changing customer behavior have put insurers’ profits under pressure.
The big challenge is to let InsurTech have its own speed, with different measures and KPIs, without trying to put the big oil tanker on top of it, as it will end up sinking. The best way to approach this is to use the entrepreneurial spirit and tech DNA of InsurTechs to inject new processes into traditional players’ offerings and work towards improving their customer experience.
Services
The low interest rate environment, weak insurance markets and changing customer behavior have put insurers’ profits under pressure. Acquiring new customers is becoming more expensive, which is why insurers need to find new ways to differentiate themselves from competitors and find new revenue streams. Introducing new services would be a great way to add new revenue streams as they not only open new business models, but can also add a huge value to clients.
Think of the way Ping An is boosting an ecosystem where they (as a traditional player) are the central platform to a number of different services (like health checks or telematics). InsurTechs can potentially be the providers of these services, and they could actually benefit from the enormous database that Ping An offers.
In Europe, Generali was given the exclusive rights of the Vitality programme (which originated in South Africa) as part of their plan to move away from simply paying their clients when things go wrong and focus on preventing bad things from happening. They see the Generali Vitality programme as a way to frequently engage with the customer and to reward them for looking after themselves, being careful and maintaining good health.
What we can take from all of this is that InsurTechs can undoubtedly help traditional insurers and contribute to building partnerships and ecosystems through API middleware, customer engagement platforms and new digital tools. When trying to determine whether they are friends or foes, it currently feels like they are both, but together, they have the potential to mutually benefit from one another and shake up the industry – watch this space!
About Digital Insurance Group
Digital Insurance Group is an InsureTech and a next-generation technology partner to insurers, banks and brokers globally that enables clients to innovate at record speed while leveraging their existing IT architecture.
The company, which advises organisations of all sizes on their insurance requirements, and which has worked with a quarter companies in the FTSE 100, has recently launched a new Cyber Risk Consulting Practice. This helps clients to understand their exposure to cyber risks, and to source appropriate insurance cover for these. In a report, it has recently reviewed dozens of ‘off-the-shelf’ cyber insurance policies and identified seven significant common flaws:
1. Cover can be limited to events triggered by attacks or unauthorised activity – excluding cover for issues caused by accidental errors or omissions
2. Data breach costs can be limited – e.g. covering only costs that the business is strictly legally required to incur (as opposed to much greater costs which would be incurred in practice)
3. Systems interruption cover can be limited to only the brief period of actual network interruption, providing no cover for the more significant knock-on revenue impact in the period after IT systems are restored but the business is still disrupted
4. Cover for systems delivered by outsourced service providers (many businesses’ most significant exposure) varies significantly and is often limited or excluded
5. Exclusions for software in development or systems being rolled out are common and can be unclear or in the worst cases exclude events relating to any recently updated systems
6. Where contractors cause issues (e.g. a data breach) but the business is legally responsible, policies will sometimes not respond
7. Notification requirements are often complex and onerous
Bruce Hepburn, CEO of Mactavish said: “There are a number of new cyber insurance policies being launched, but despite a sharp increase in cyber incidents this market is very immature and in many respects untested. Perhaps some of these policies have been rushed to market by insurers eager to capitalise on the growing cyber risks facing organisations, and their desire to spend significant amounts of money to protect themselves against this.
“Very few claims have been made on these new cyber insurance policies, but my bet is that many will be disputed, or settlements will be much lower than clients expected. However, this can be avoided if organisations first understand the cyber risks they face, and then secure a bespoke policy to meet their needs.”
(Source: Mactavish)
The insurance market exists to transfer risk from those who face it to those who can afford to assume it; at a price. In a world that is developing at an ever-increasing rate, risk is also changing, and insurers must constantly adapt the products that they offer to ensure that they are protecting risks that affect the modern world. Over the next few years, it can be expected that cryptocurrency covers will become commonplace and insurers will take a leading role in developing security standards.
At a time when the risk of bank robberies and wages snatches has declined substantially and motoring has become safer, aeroplanes are less likely to crash and other traditional areas of risk are declining, insurers must look to developing areas of risk and provide cover against those risks.
Not long ago, it was necessary, if one wanted to take money from a bank, to pull a stocking over one’s head, saw off a shot gun and take enormous personal risk, as well as the risk of being caught, in an attempt to deprive a near-by bank of cash. Today, the risks for robbers are much reduced but the risk for those holding money is greater. A modern robber can seek to steal money held across the world from the safety of his bedroom. His personal risk is considerably less as is, potentially, the risk of him being caught. The risk to those holding money, however, has changed and has possibly become greater.
While insurers were responsible for many of the innovations that made banks safer, now they must lead the way in enhancing security for those who hold cryptocurrencies. Insurers are working closely with cybersecurity experts to develop standards for their policy holders, often offering discounts for adoption.
Therefore, they are looking at uses of both cryptocurrencies and blockchain in the way in which they work. Already, insurers are being required to hold cryptocurrencies in order to handle some aspects of cyber insurance, particularly when their role may be to negotiate and pay ransom demands from hackers.
While insurers were responsible for many of the innovations that made banks safer, now they must lead the way in enhancing security for those who hold cryptocurrencies.
Where protection is given against cryptocurrency theft, insurers may increasingly seek to protect themselves against currency exchange fluctuations by charging premium, holding reserves and paying claims in cryptocurrencies.
In addition, the development of InsurTech is creating an environment in which insurers must compete to reduce premium levels by increasing efficiency. Expense ratios are already too high and insurers are looking to reduce these substantially on the basis that, if they don’t, their rivals will be able to undercut them.
As part of this efficiency, insurers are exploring uses of blockchain to reduce the frictional costs associated with the provision of insurance cover and obtaining reinsurance for it and some blockchain transactions have been concluded already. Major insurers and reinsurers are investing considerable time and money into this area and, without a doubt, the results of this investment will shortly become common practice.
One idiosyncrasy of insurance makes the creation of a closed contract for blockchain insurance problematic. Every insurance and reinsurance contract requires an insurable interest and proof of loss before any claim is paid. These elements mean that an entirely closed contract, which operates without outside intervention, is difficult. At some stage in the process, an adjustment of the claim will be required and an external element will have to be injected into the process.
That said, steps are afoot, both within insurers and regulators, to look at these issues and determine whether changes to the underlying principles may be effected, which would lift this potential road block.
To survive, insurers must embrace modern risk and modern working practices. The rate of change in the insurance industry is rapid and accelerating and within the next five years, we can expect considerable developments - both in terms of the risks that are assumed and the way in which risks are assumed.
Website: https://mccarthydenning.com/
Amidst a large swathe of planned job cuts at Lloyds, at the beginning of November the bank announced that there was a silver lining - a £3 billion investment programme that will see the country’s biggest high-street lender radically transform its digital strategy. While 6,000 existing roles are being cut from a broad range of areas, 8,000 are being created to focus on areas of digital expansion, including in the group transformation unit. And, the CEO of Tectrade Alex Fagioli points out, it’s about time for Lloyds, as it begins to play catch up with an industry that has quietly been revolutionised by high-street banks and start-ups that have gone all-in on digital banking.
Digital banking provides a great deal of benefits to administrators and alike. Customers are given a more flexible way of banking, accessing their accounts and transferring their money without relying on bank hours. Managers have an unprecedented insight into the activity of branches and can offer services to their customers which they had previously been incapable of. However, the challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.
In April, a routine systems upgrade at TSB went awry and left 1.9 million customers locked out of their accounts for up to a month. Similarly on Friday 1 June, 5.2 million transactions using Visa failed across Europe as a result of one single faulty switch in one of Visa’s data centres. This isn’t just a continental issue; Atlanta-based Sun Trust – a bank with 1,400 bank branches and 2,160 – experienced a significant outage to its online and mobile banking platforms in September due to a botched upgrade. In all of these cases, the outages weren’t the result of cyberattack or weather-related problems. Instead, these outages came as a result of seemingly insignificant technical factors that had been overlooked – and Lloyds would be wise to heed these cautionary tales.
The challenges and risks that come with digital transformation have led traditionally large financial institutions like Lloyds to poorly implementing such practices to the detriment of all involved.
In the first two instances, cause of the outages are very clear– and they were entirely preventable. TSB rushed into an upgrade by hastily initiating the update across its entire system. For a technical reason that we will likely never know, the update tanked the entire bank and left it at a standstill while it tried to pick up the pieces. Even when it managed to get everything back in place, TSB is now permanently scarred by the event, with its reputation still reeling. The prevention for this would have been a gradual rollout, as opposed to a sweeping installation. If the upgrade was initially piloted with non-essential systems, then the bugs would likely have been spotted early, with little fuss and no media spotlight.
Likewise, the Visa incident came as a result of a single faulty switch and that betrays a lack of understanding of its own systems. It is shocking how few companies have carried out any form of disaster recovery testing on their infrastructure. Administrators are incapable of having a full understanding of the systems they are responsible for without testing them in a controlled and simulated environment. With a controlled disaster test, that faulty switch would have been highlighted and those 5.2 million transactions would have been completed. It’s similar to a car – the reason that MOTs are essential is so that any issues can be highlighted well ahead of them having a serious effect on the vehicle’s performance. Banks must carry out a cyber MOT in order to keep their systems in check and to give IT teams a full working knowledge of any potential issues.
But this is all in the case of preventable issues, and in the modern day accepted wisdom is not if, it’s when outages will happen.
Thus far we’ve only addressed routine operations, but cyberattack is of course an omnipresent threat. Ransomware has spent the past couple of years as the ‘big bad’ in cybercrime, and it is an even bigger threat to the financial sector. Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%. If a bank were to be hit by a ransomware attack, all online systems for banking and insurance transactions will need to be taken offline, rendering that organisation unable to operate. According to a report from Osterman Research, there is a 50% chance of employees in this industry suffering productivity loss, a 30% chance that the financial and insurance services will shut down temporarily, and a 20% chance of revenue loss and adverse effect on customer perception. In cases of ransomware, data recovery can be very difficult as there is a large amount of customer information stored in a variety of disparate systems. As such, many organisations may feel they have no choice but to pay the fee demanded of them to regain access to the data.
Over the past 12 months, the financial services and insurance sector was attacked by ransomware more than any other industry, with the number of cyberattacks against financial services companies in particular, rising by more than 80%.
Equally as unpreventable are environmental factors. Areas like the Southern States of the USA are frequently dominated by hurricanes and tropical storms which can cause large disruptions to everything from schools to banks. Many of these buildings have to be built with this in mind, and network operations should be created with the same mindset. In the UK, by contrast, we don’t have to deal with such extreme weather conditions, but environmental considerations must be made with the potential for freak accidents. A burst pipe in a shared building or road workers drilling through electrical or network cabling, for example, could see a bank offline for an indeterminate period of time outside of its control. One example of this in action was with National Australia Bank, which suffered a power outage that downed ATMs, Eftpos and online banking across the country for five hours in May.
In all of these situations where outages can occur, banks must make sure they have the capacity to get their systems back online and fast. The best way to do this is by adopting a zero-day approach to architecture. Zero-day architecture won’t prevent an outage, but it will mitigate the effects. It allows organisations to minimise downtime and recover from backups without having to worry about lost data.
A zero-day recovery architecture is a service that enables administrators to quickly bring work code or data into operation in the event of any outages, without having to worry about whether the workload is still compromised. An evolution of the 3-2-1 backup rule (three copies of your data stored on two different media and one backup kept offsite), zero-day recovery enables an IT department to partner with the cyber team and create a set of policies which define the architecture for what they want to do with data backups being stored offsite, normally in the cloud. This policy assigns an appropriate storage cost and therefore recovery time to each workload according to its strategic value to the business. It could, for example, mean that a particular workload needs to be brought back into the system within 20 minutes while another workload can wait a couple of days.
Without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes.
As it begins its massive investment in digital transformation, Lloyds could very easily sink its budget into exciting features that promise to improve the lives of customers and employees. However, without learning the lessons of the high-profile outages that have come before it from banks that have undergone their own transformations, Lloyds is doomed to repeat the same mistakes. You can promise all the features in the world, but without a solid foundation the bank will essentially be a house of cards, ready to collapse at the slightest sign of danger. All banks, regardless of size, must prioritise the minimisation of downtime by having common sense policies in patch management, full knowledge of a system gained through disaster testing and a recovery strategy in place that enables it to get back online at speed.
John Kissane is the NY Area President and a Health & Welfare practice leader at Arthur J. Gallagher & Co. - one of the world’s largest insurance brokerage, risk management and consulting services firms with operations in 34 countries and client-service capabilities in more than 150 countries. Founded in 1927 by its namesake, Gallagher fosters a differentiated culture that reflects the company’s roots as a family business and the focus on delivering top-tier capabilities to clients. Below, John speaks to Finance Monthly about the employee benefits services that the company offers and tells us how employers can succeed in an increasingly difficult labor market.
Tell us more about the employee benefits services that Gallagher provides?
At Gallagher, we work hard to understand our clients’ industries, the markets in which they operate, and the unique constraints and opportunities that can affect their success. Rising healthcare costs, workforce issues, hiring challenges, legal risks, competitive positioning, financial strategy, compliance requirements—all of these factors impact employers’ ability to reach their full potential.
We are driven by a desire to help our clients - it’s something that all insurance companies strive for; better outcomes from better performance. That’s why we’ve developed Gallagher Better Works℠, our holistic approach to employee and organisational wellbeing. A better workplace attracts, engages and retains top talent at the right cost. This approach centres on strategic investments in employees’ health, financial wellbeing and career growth. It utilises data to gather insights and apply the best practices that promote productivity and growth.
Through the delivery of Gallagher's comprehensive approach to benefits, compensation, retirement, employee communications and workplace culture, our clients can optimise their annual talent investment, mitigate organisational risk and maximise profitability. Best of all, they gain a competitive advantage as a workplace that simply works better.
What trends are you seeing in the current health insurance and benefits landscape and how do you intend to keep up with these?
Healthcare costs continue to rise and we have seen an increase in creative funding mechanisms focused on bending the trend. Reference-based pricing, gap plans and split-funding products are a few examples. The need to control the cost of care and manage the health risk of employee populations has led to an explosion in solutions over the years. Gallagher is a trusted adviser to our clients. As such, our focus is on solving their challenges and recommending solutions that make sense for their specific organisational goals and objectives. This allows us to be entrepreneurial, and through our global network of professionals, we are connected to a vast array of vendors that can help meet our client’s needs.
What is the biggest challenge that employers face today? What would be your solution?
Attracting and retaining employees is a huge challenge, made more urgent due to the strong economy. Cultural and technological dynamics add to this – younger employees resist the idea of building a long career at one company, while at the same time they require proper skills and training to be productive while there.
How can employers succeed in an increasingly difficult labor market? You start by building a better workplace – one that truly engages key talent. Organisations must align their people strategy with their business goals. By focusing on the full spectrum of organisational wellbeing – and supporting their employees’ physical and emotional health, talents, financial health and career growth ‒ employers are able to realise a better return on their benefits investment.
What do you find businesses commonly fail to consider when it comes to employee benefits?
Far too often, companies fail to take a holistic, long-term approach to their benefits and compensation programs. In the struggle with managing healthcare costs, the “just get through the next renewal” mindset still exists. A recent survey of employers shows that 68% consider benefits and compensation cost management a top priority, yet 64% don’t have an effective strategy in place to achieve that goal. With multiple priorities, competing for employers’ attention, many turn to familiar tactics that no longer work.
A multi-year strategy that encompasses the entire total reward proposition and leverages insights, data analytics and best-in-class tools can lead to reductions in costs without sacrificing the value of the benefits offered to employees and their families.
New research from MoneySuperMarket reveals that a third of Brits (33%) currently use a smart device to monitor their health, capturing data that could help identify health issues and affect the way life insurance premiums are calculated.
With the number of connected wearable devices set to rise further in 2019, MoneySuperMarket research reveals that millennials are most likely to use werable tech to monitor their health, with just under a third of 18-35 year olds using their mobile phones alone. As the trend for fitness tech continues, some insurance providers such as Vitality are already utilising the data gathered – a move which would be favoured by millennials, with three in four (61%) stating they would be comfortable with sharing their data with a life insurance provider.
The research also shows that half (50%) of those surveyed have both a life insurance policy and a health monitoring device. In fact, when looking at the way future life insurance premiums are calculated, over one in 10 Brits (12%) would happily take out a life insurance policy based on the data received solely from a wearable health monitor. For example, Apple watches now include ECG montiors[1]. Those in the West Midlands (15%) and London (12%) are most likely to opt in for this type of policy, with those in the South West being the least likely (five%). However, despite advances in technology, the majority of Brits (65%) would still prefer to take out a life insurance policy via the traditional methods of questionnaires and forms.
An individual’s lifestyle can also play a big part in how much they pay for life insurance. Smokers, for instance, can pay up to 50% more than a non-smoker for their policy[2]. Wearable tech could reduce premiums for those who demonstrate a healthier lifestyle and also provide rewards and incentives for healthy behaviour, such as reaching a specific step count.
Consumer affairs expert at MoneySuperMarket, commented: “Wearables are beginning to have a significant impact on the life insurance market. They build on the well-established premise that a person’s lifestyle and habits play a big role in determining how much they will pay for cover. The logic is simple: use a device to demonstrate your healthy lifestyle and get lower premiums in return.
“Anything that increases the uptake of life insurance has to be a good thing - it’s vital financial protection for family members in the event of a person’s early death. Understandably, many of us shy away from something that confirms our own mortality, but it is crucially important to have cover in place so that bereaved dependants at least have financial resources to call upon.”
(Source: Money Supermarket)
We speak with thought leader Andrew Morris - a wealth transfer expert who’s dedicated his career to helping clients plan, grow and protect their assets. For over 25 years now, he’s been passionate about helping families with setting up charitable remainder trusts and assisting families with special needs to secure their future through the use of insurance. As a Social Security Analysts, Andrew helps clients maximise and understand their Social Security benefits to optimise their retirement planning.
What trends are you seeing in the current insurance landscape and how do you intend to keep up with these?
The current trend I see in the industry is the tremendous need for an alternative form of guaranteed lifetime income in addition to social security for the aging baby boomer population. Since many major corporations no longer offer a defined benefit type pension plan, many retirees are looking for ways to have a guaranteed lifetime income stream which can only be offered through insurance companies and their living income benefit riders. The recent DOL (Dept. of Labor) legislation regarding the fiduciary rule has made the return of guaranteed lifetime benefit riders popular again, since many companies have now lowered fees and have simplified the benefits to adhere to the new rules.
Another trend that I see in the insurance industry is the need to make sure that older whole life policies are upgraded to make sure that the aging 76 million baby boomer population has adequate life insurance coverage. With the increase in American retirees living longer and the standard life expectancy numbers increasing from age 78 to age 85, life insurance mortality tables had to be updated a few years ago to reflect these longer life expectancy rates. This increase in the mortality tables has left many old policies old and ‘underinsured’. Clients can now enjoy receiving larger coverage increased face values for old permanent life policies for a lower cost or the same amount due to the recent change in mortality tables. The only way I can keep up with the amount of new service for these older policies and aging clients is through the use of technology.
What is the biggest challenge the US insurance sector faces today? What would be your solution?
The biggest challenge the insurance industry faces today is technology and the ability for insurance companies that are considered old and antiquated to keep up by updating their systems for servicing and cybersecurity. As a result, I anticipate that there will be further consolidation within the insurance industry over the next couple of years. With the baby boomer population turning 65 at a daily rate of 10,000 per day, it is an enormous number to keep up with. So, the companies that are not up to speed technology wise will fall by the waste side and will be acquired by larger insurance companies.
The only solution for companies that are currently behind in their technology would be to establish a new strategic alliance or joint venture, where they partner up with a third-party vendor and potentially outsource the work. Very few insurers have all the resources they need to become truly cutting edge. Technological advances are changing business and operating models, which is challenging to an industry that is accustomed to slow evolution.
What do you find businesses commonly fail to consider when it comes to insurance?
Businesses commonly fail to consider the fact that that they are ‘underinsured’ in relation to price. Many businesses will value good price as opposed to the proper amount of insurance for their business. Having a good insurance adviser or consultant can help business owners who are underinsuring themselves to start saving them money. Insurance is one of the most important needs for a small business, yet it is something that many owners skimp on. People don’t reevaluate their insurance needs as their companies grow and numerous small businesses don’t have business interruption insurance in addition to property and casualty coverage, even though it is something that can put their companies and livelihoods at risk. I think that it is vital for company owners to consider and be mindful of the damaging impact that an emergency incident can have if your business is not properly insured.
