By Manan Sagar, CTO for Insurance, Fujitsu UK
In Philip K. Dick’s The Minority Report, three future-gazing mutants are used to alert the police force about crimes before they are committed. The premise is, by predicting when and where crimes will happen, they can prevent them from happening at all.
While Dick’s novel is fantasy, the idea of preventing incidents from happening can be transferred to the real world. And the insurance industry has begun to use data to move from the classic ‘repair and replace’ model to ‘predict and prevent’.
In essence, this means a shift from reactive insurance policies to proactive. In being reactive, customers purchase insurance policies and nearly immediately forget about it… until an accident happens.
But by using data to predict potential incidents and damage, insurance companies could reduce the likelihood and severity of losses suffered by their customers and consequently improve their operating ratios.
Too little, too late
Currently, many traditional insurers use a system where the customer pays for a policy, which is then left or forgotten about until something happens; they then make a claim.
Take home insurance policies, for example. Generally, consumers will purchase and leave them. While everything is fine, there’s no issue; however, it becomes a very expensive problem for both the insurer and customer if something does break.
But with the massive amount of data points insurers own, they can change the way policies are not just bought, but also utilised by customers.
Water damage is the number one cause for home insurance claims, and if the customer gives the insurer access to those data points, they could help to prevent it. The insurer is alerted when there is excessive water pressure in a particular household, which would lead to pipes bursting. This activates an insurance claim, which interacts with the water company to fix the issue and the potential incident and consequent losses are avoided before the loss happens.
This is possible to do at scale with the automation technology now available and the prevention focused model could work for many different areas of insurance. It will build trust between insurers and their customers by demonstrating value and insurance premiums will begin to be viewed lesser as an “annual tax” and more as a “service charge”.
If it ain’t broke, it might still need fixing
Some may argue that the current model of insurance is working. Companies are, for the most part, remaining profitable and change could be viewed as risky by key stakeholders.
But the predict and prevent model can help insurers save in instances that have been a thorn in the side for many years.
Take fraud – it’s a massive cost to insurance companies; it was estimated by KPMG that in 2018, fraud cost UK insurers £1.2 billion.
While predict and prevent won’t completely eliminate fraud, the number of cases would drop. If someone is claiming they had a car accident, there is enough data out there to get the full picture of what happened.
Traditional insurance companies are also under pressure to buy into these services because of the cheaper alternatives that are hitting the market. As with other areas of financial services, insurance is being disrupted by a number of insuretech companies that are agile and cheaper than traditional insurance.
With all the money-saving comparison sites, consumers are savvier than ever about what company will get them the best deal. Recent research found that households could be losing up to £1,400 a year by not changing car and home insurance companies each year – meaning long-standing customers are being incentivised to change insurers.
This comes back to an important point around trust. If customers cannot trust their insurers to give them a fair price, why should they continue to pay for their services?
When there are cheaper alternatives available, traditional insurance companies need to demonstrate value by helping their customers reduces their losses by focusing on prediction and prevention.
Unlocking the power of data to foster a new relationship
The “predict and prevent” model works by analysing vast volumes of data to find patterns in the causes of particular risks. By identifying the beginnings of these patterns in real time data, interventions can be made before the pattern plays out. Think of a manufacturing business. By tracking the health of factory machines right down to individual components, insurers can not only create more accurate predictions about their likely operational lives, but actually recommend timely repairs to stop the machine from breaking down, saving not just money on both sides, but also reducing accidents at workplace. The power of data can be similarly applied to aircraft or locomotive and in maintaining railway, water and energy lines.
The focus on preventative rather than reactive activities can help to change the role of the industry as a whole. Organisations can focus on getting things right for the future, rather than addressing the mistakes of the past. That will help to create a culture based around social purpose – that is of growing importance to both employees and customers today.
SIMPLIFYING THE RETIREMENT FUND DEATH CLAIMS PROCESS
By Dolana Conco, Regional Executive at Alexander Forbes
Losing a loved one is one of the most difficult experiences a person can go through, and during this difficult time, you don’t want your loved ones to have to worry about finances.
Your family will receive a share of your retirement savings and a life insurance pay-out if you die while being a member of a retirement fund. The trustees of the fund have a legal responsibility to make sure that death benefits from the fund are paid to those who are financially dependent on you.
If your death benefit is through a policy that is separate to the fund, then the trustees will not be involved and this benefit will be paid out according to the nomination of beneficiaries’ form that you’ve completed with that specific insurer, or else your employer will decide.
What retirement fund members need to do
- Keep your ‘Who needs financial support when I die?’ form up to date
This form is so much more important than anyone thinks – even though it is not a last will and testament. The trustees must, by law, find all the people who are financially dependent on you, as well as those whom you love and would want to leave a portion of your death benefit to when you die. Those who depend on you for financial survival are called your dependants. Examples are your spouse or life partner, children (of any age), parents, people you need to pay maintenance to or anyone else in your life who depends on you financially.
If no one is financially dependent on you in any way, you can choose someone else as a beneficiary (family, friend, or even a charity). If you choose to give your death benefit to a charity when you die, the money will first be paid to your estate and then paid over to the charity of your choice. If this form is not up to date, it could take the trustees much longer to identify who should receive a share of your death benefit from the fund.
- Submit the correct documents
The most common reason for delays in paying an insured death claim is that there are missing, incomplete or incorrect documents submitted with the claim. Your employer can assist with what is needed and can check that the form has been completed fully and correctly before submission. In general, the following information is needed:
- a certified copy of the death certificate
- the identity document or passport of the deceased member
- a copy of a pension-backed housing loan (if applicable)
- proof of the extent of any financial dependency of the beneficiaries
What your retirement fund needs to do
The trustees of your fund have a legal duty when you die to distribute your death benefit from and through the fund. The trustees must find all dependants and nominees to decide how to share the retirement savings and life insurance pay-out fairly. To make a fair decision, the trustees will consider the following factors, among others:
- Age of the beneficiaries
- Relationship to the deceased
- How financially dependent they were on the deceased
- Their financial affairs
- Their future earning potential and prospects
- The total amount of the retirement saving to be distributed
The trustees can choose to give a beneficiary no pay-out, as the law doesn’t say that every beneficiary must get some money. However, they must consider the needs of each beneficiary and the amount available for distribution.
If there’s information that the trustees may not have considered when they made their decision and the draft resolution has already been prepared, your family needs to contact the trustees urgently. The fund’s administrators will pay the death claim once they get a response from all beneficiaries, or if no response has been received within 30 days of sending the draft resolution document.
There are various reasons for delays in paying a death claim from or through the fund, including the employer not completing the claim form in full, missing or incorrect documents, investigations for the trustee resolution taking longer than expected, outstanding tax issues and beneficiaries not providing their bank account details.
Make sure your family knows what can go wrong and what to do to make the process run smoothly – it all plays a part in leaving a legacy that you can be proud of.
THE COMPLETE GUIDE TO TRANSFERRING SHARES FROM ONE DEMAT ACCOUNT TO ANOTHER
A Demat Account functions like a savings bank account with the obvious difference in the fact it stores stocks instead of money. To be similar to a savings account also implies that a Demat Account can be used to transfer shares from one Demat Account to another Demat or trading account.
Shares are generally transferred from one Demat Account to another for the purpose of changing depositories. However, there can also be other reasons for transferring shares such as merging the investments in different Demat Accounts in a single Demat Account.
Whatever the reason, in order to understand how to transfer shares from Demat Account, it is important to first understand what is Demat Account.
What Is Demat Account?
The most simplified way of answering what is Demat Account is to understand it as a digital platform where investors can store all their shares and other forms of investment in an electronic form. Demat is a short form for dematerialization which refers to the process of converting physical share certificates into the electronic form. A Demat Account can only be opened with the help of a Depository Participant or DP and a depository. A DP is an agent or broker who acts as an intermediary between the depository and investor. A depository is a financial institution in which investors open their Demat Account. Read more about what is Demat Account to understand it in more thorough details.
It is necessary to know about Demat Accounts before attempting other things like transferring shares, etc.
How To Transfer Shares From Demat Account
After the meaning of what is Demat Account is cleared, it is time to understand how to transfer shares from Demat Account to another Demat Account. There are two types of transfer:
- Intra-depository transfer: In this type of transfer, shares are transferred from one Demat Account to another in the same depository.
- Inter-depository transfer: In inter-depository transfer, shares are conveyed from one Demat Account to another account which is in a different depository.
The two ways in which shares can be transferred are the manual procedure or online procedure.
Manual Transfer Of Shares
For the manual transfer of shares, investors are required to ask for delivery instruction slip or DIS from their brokers or DPs. DIS is not just an important but also an integral part of the manual transfer of shares. It contains some mandatory fields which have to be filled to process the transfer of shares.
1. Beneficiary Owner ID (BO ID)
Beneficiary owner ID (BO ID) refers to a 16-digit ID number of a broker. An investor has to mention in DIS the IDs of both the current broker and the broker to which the shares will be transferred.
2. International Securities Identification Number (ISIN)
International Securities Identification Number or as it is commonly known ISIN is a unique ID number appropriated to each share of an investor which he holds in a Demat Account. In order for the transfer to take place, ISIN has to be provided to designate which particular shares are to be transferred.
3. Inter or Intra
This is the distinctive part of DIS where an investor has to choose whether to make an intra-depository or inter-depository transfer. In the case of intra-depository transfer, the column denoted as ‘off-market transfer’ has to be selected. Whereas, in the case of inter-depository transfer, the column designated ‘inter-depository’ has to be selected. An investor should be extra careful while filling this part of DIS.
Little needs to be said about this part of DIS. Just like any other important document, DIS too needs to be signed. Once an investor has signed DIS, it should be submitted to the broker.
A broker may charge a small fee for the transfer of shares. It usually takes 3-5 business days for the shares to be transferred.
Online Transfer of Shares
Central Depository Services Limited (CDSL) has made the online transfer of shares a very easy process. All that an investor has to do is to follow these simple steps.
- The ‘Register Online’ option at the CDSL website has to be selected.
- There would appear an option called EASIEST which then has to be selected.
- A form would generate which accordingly has to be filled.
- Once the form fill-up is complete, a print out of the same has to be taken out. This print out is to be submitted to the account holder’s Depository Participant.
- The DP will verify the document and once the verification process is completed, a password will be generated.
Using this password, an investor can log in and transfer shares on his own.
Thus, the two ways in which shares can be transferred from one Demat Account to another is not at all complex and can be easily achieved through both manual and online procedure. With a proper understanding of what is Demat Account and how the transfer of shares takes place, an investor can effectively send the shares to another account either on his own or through the help of a DP.
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