Jessie Dhaliwal, Business Development Manager at Azur
Over the next decade, cybercrime will become one the most prominent threats to almost every person in the world with internet access. Already it’s estimated that a hacker attacks, on average, just over every thirty seconds, a rate that led to around 978 million consumers falling victim to cybercrime in 2017.
Moreover, with the total cost of cybercrime set to continue growing from a cost of $600bn last year to potentially trillions during the 2020s, ensuring that your clients have insurance in place to protect their assets against this growing threat is paramount.
Protection from connection
As our lives have become increasingly intertwined with connected devices, opportunities for hackers to exploit vulnerabilities have opened up enormously. In just four years, it’s predicted that the average UK household will contain as many as 50 different connected devices. This means that, for homeowners, keeping track of all these devices and making sure they are all sufficiently protected will become increasingly harder.
All of these individuals need to be aware that a virus on a single phone, or other mobile device, can spread to other appliances in an instant, without the owner even realising it. Being hacked in this way can lead to personal information being taken, bank accounts being drained of money, or even blackmail, causing potential long-term financial, emotion, and psychological harm.
The good news, however, is that insurance can often help to cover many of the losses that result from a cyber-attack, giving peace of mind to clients who may be affected by this kind of activity. With cybercrime on the rise and hackers having access to more advanced technology than ever before, brokers are likely to find that the need for this sort of insurance will increase dramatically in the next decade.
Getting in the know
Despite the serious risk that cybercrime poses, awareness of how to combat it is still quite limited, with 46% of respondents in a 2019 Ipsos Mori survey agreeing that information about how to be secure online is confusing. Moreover, the survey also found that only 15% of respondents knew a great deal about how to protect themselves online, despite 80% of respondents believing cyber security was a high priority.
As public awareness in this area grows, however, insurance brokers will have a perfect opportunity to provide expert advice and explain how cyber insurance can help clients to protect themselves in case the worst should happen. So far, the insurance industry has yet to realise the full potential of this type of cover, but as new threats emerge, it’s likely that customer demand in this area will increase significantly, particularly from high-net-worth (NHW) individuals.
Fortunately, brokers have access to all the skills and tools they need to be at the forefront of the fight against cybercrime. For example, they can arrange paid-for advice meetings to make sure HNW clients are aware of the risks involved and can also check whether their current security measures provide sufficient protection against the serious damage that can be caused by a cyberattack.
If a broker finds that an HNW client’s security measures are inadequate, which is likely to be the case for many, given the rapid rate that technology is advancing, they can then step in. In particular, brokers can help find the right insurance policy for each person’s specific needs, advising clients on the best HNW insurer to go to for this type of cover. Some personal cyber insurance policies now make it possible to file claims for fees associated with identity theft, extortion costs, data restoration expenses, as well as the repair and replacement of devices.
In some cases, personal cyber cover can even be automatically included as part of a wider home insurance policy, which can protect clients against threats such as cyber fraud, cyber bullying and cyber phishing. This is a convenient option for clients who want all their home coverage in one place, and who would feel safer with that additional layer of protection.
A growing threat
While cybercrime is already a serious threat that should be covered by insurance, over the next 10 years we’ll see attacks on consumers escalate. The more that clients interact with technology, the more areas there will be for hackers to infiltrate and cause damage, adding to the tens of millions of people around the world affected by it.
With the majority of Britain unsure how to secure the right protection, brokers must take up the mantle and be more vocal about the support they can provide in this area. By helping clients to understand the risks posed by cybercrime, as well as how to insure effectively against them, brokers can help them reduce the impact of an attack considerably.
IS PRIVATE PLACEMENT LIFE INSURANCE THE PERFECT PRODUCT FOR GLOBAL HNW FAMILIES
By Louis Zuckerbraun, Managing Director, GMG Insurance
Everyone wants to know that their family will be okay after they die and will do whatever they can to ensure that. That’s as true for high net-worth individuals (HNWIs) as it is for anyone else. But in an age where families are spread across the globe, leaving the kind of legacy you want can be incredibly complicated.
One product that could make things a great deal more simple is Private Placement Life Insurance (PPLI).
Originally conceived in the US, PPLI is rapidly gaining traction across Europe. Not only is it more efficient than traditional forms of life insurance, allowing the investments within the policy to hold many more types of assets and asset classes, it can also be a useful way to overcome specific issues such as management and control, beneficial ownership and substance.
While PPLI is gaining popularity across the globe, it’s still a relatively unknown product set, even among the HNWIs it would most benefit. It’s therefore worth looking at exactly what PPLI is.
Effectively an investment wrapped inside an insurance policy, a PPLI policy’s cash value depends on the performance of the investments within it. These investments can include hedge funds, mutual funds, and other potentially lucrative assets. Ultimately, it’s down to the policyholder to choose what kinds of investment they’d most like to have, meaning that they have a lot more freedom than they would with an ordinary life insurance policy.
Depending on the jurisdiction, a PPLI policy can also provide significant tax savings. In the US, for instance, the Internal Revenue Code treats insurance differently than it does investments. So, by packing an otherwise taxable investment in a tax- free policy, investors can reap big rewards on the investment, as well as the death benefit, tax-free.
But PPLI policies aren’t just beneficial from a tax perspective, they’re also useful for anyone with a global family.
A PPLI policy is generally by nature a globally focused vehicle. So, for instance, approved banking partners and advisors in Switzerland can work with US persons, to provide an investment vehicle that has a global focus.
The policy would purchase global funds and be managed by a global advisor who is outside the US but understands the US market. This makes it perfect for anyone who wants to diversify from traditional United States Dollar denominated investments but wants to maintain tax compliance and work with international advisors.
This solution works very well with a global family who may have, as an example, a child studying in London, or with international businesses, and who wish to build exposure globally in a tax efficient and US compliant manner. An international PPLI policy would be very beneficial to the family.
Further, the policy can be denominated in Swiss Francs, US Dollars or Euros depending on the needs and strategies of the policy owners or beneficiaries and still pay tax efficiently to the US persons.
These features also mean that a PPLI policy can be a useful replacement for, or supplement to, a family trust, especially if a tax authority is unlikely to accept the trustees as the legal owner of the assets held in the trust.
A clear choice
With more and more families living in different geographies, a PPLI policy is therefore an option that should be playing a much bigger role in the mainstream. It provides an accepted and compliant solution to the planning challenges faced by ultra-high net worth and high net worth families.
While life insurance, in general, provides a mechanism for estate tax planning, asset protection and investment flexibility that cannot be beaten by any other compliant tool, PPLI provides the flexibility and protection that informed high net worth families increasingly require.
If you’re looking a purchasing a PPLI policy, however, it must be managed by professional insurance and legal advisors who understand the product.
FINTECH IN AFRICA: WHY THIS MUSTN’T BE A DECADE OF WASTED POTENTIAL
Albert Maasland, Chief Executive Officer at Crown Agents Bank
The current COVID-19 pandemic is an unprecedented crisis of our times. As with many global disasters, emerging and frontier markets are likely to feel a devastating impact. The Institute of International Finance has already reported the largest capital outflow from emerging markets ever recorded. The extent of the effect is being debated, but efforts to reduce the impact must become an absolute priority.
One of the most important things we can do in the long term is remember how far these regions have come in the last few years and remind international players of their enormous potential. In 2019, technology startups that operate on the continent received a total of $1.3 billion in funding. Investors and financial services players alike have observed the considerable growth and adoption of fintech in Africa. Fintech is one sector that could show resilience during this crisis, as online services become essential and the use of cash is discouraged worldwide. Africa has seen its fintech industry develop and thrive of late and this must not be overlooked as we look to the future.
The fintech ‘hub’bub
According to the GSMA, Sub-Saharan Africa is still the “enduring epicenter of mobile money”. The region accounted for over 60% of the $690 billion that was transacted via mobile money in 2019 and has more than 150 million more registered accounts than the next highest region, South Asia.
The market conditions that make Sub-Saharan Africa so ripe for the adoption of mobile money range from the population being predominantly young and tech-savvy to an established history of not having sufficient financial infrastructure. Mobile wallets have brought better security and the ability to make international payments to the unbanked. Investors noticed.
Fintech became Africa’s best funded startup sector in 2019 as venture capital aimed to support and capitalise on the huge potential for growth. Visa, Worldpay and Mastercard are among those global financial players who have entered into collaborations with African fintech ventures, such as B2B payments company Flutterwave.
While Kenya saw the birth of M-Pesa, more countries are embracing fintech and becoming hubs on the continent. Nigeria saw the highest number of startup deals last year and startup investment grew nearly five fold compared to 2018.
E-commerce, financial products for SMEs and payments technology are among the areas receiving funding. As entrepreneurialism receives more support and international attention in Africa, the gaps in financial systems are being plugged.
Changing the definition
With all these developments and emerging services, traditional measurements of financial inclusion have needed to adapt. Financial inclusion metrics have previously been based on the number of adults with a bank account at a financial institution. According to the Global Findex from the World Bank, the share of adults with an account at a financial institution rose by 4 percentage points from 2014-2017, while those with a mobile money account nearly doubled—to 21%.
Mobile money accounts or mobile wallets are now a fundamental part of financial services in Africa. For investors and entrepreneurs, that translates to more information about the market, behavioural data about consumers and e-commerce possibilities. In essence, it amounts to opportunity.
These benefits also become apparent in international aid and charity work. It’s easier than ever for international development organisations to get funds directly to their aid workers and to individuals who need them safely. Remittances last year, which reached $550 billion, were three times that of official global aid volumes. 80% of these transactions were made to emerging markets, and the minutes and pennies saved in each transaction through the efficiency of mobile payments are invaluable to those most in need of these funds.
As financial inclusion makes great strides and financial technology has transformed the African startup landscape, we must not lose this progress. We must continue to value the benefits in bringing those excluded into the financial ecosystem and the unique opportunities presented in areas like Sub-Saharan Africa.
We’ve seen what real innovation looks like in the tangible changes fintech has had in Africa: doing things differently and creatively to improve the status quo. Investors should continue to watch and support these markets, and the financial services industry more widely should take heed of the lessons learned in the markets we too often believe to be behind us.
In the coming months, the importance of digital services and fintech in particular will become more palpable. Nigeria’s tech scene is already beginning to contribute to efforts to combat the COVID-19 pandemic. Africa was poised for an impressive decade and we must do what we can to remember and realise the potential of the world’s youngest population.
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