Connect with us

Business

HOME INSURANCE WILL CHANGE FOREVER POST-COVID

Published

on

Matt Poll, CEO and co-founder of Neos

 

During the coronavirus crisis, insurers have seen varying claim levels, with those involved in business interruption, travel insurance, wedding policies and school trip cancellations being expected to pay over £1.5 billion in claims. Conversely, on the home insurance side, claims have plummeted as crime reduces and people are on hand to quickly react to any at-home disasters. Neos alone has seen loss ratios drop by around 40% which anecdotally seems to be the case across the board.

But how will this impact the long-term? Life as we know it will never be the same again, and as insurance is all about protecting “business as usual”, it will have to flex to suit the ‘new normal’. It will have to innovate and this innovation will no doubt come from the global insurtech market, worth $5.48 billion.

Narrowing in on home insurance, a drop in loss ratios may at first seem positive for insurers, but in the mid to long-term, this will mean we see claimants abandoning old-school home insurance. This is because:

  1. with more people at home and domestic incidents going down people may start to feel that basic insurance doesn’t provide the value it used to and will be looking for insurers that offer additional benefits
  2. pricing models are too rigid to reflect a post-COVID way of life that will likely see more WFH

In this article I’ll discuss how home insurance may evolve post COVID. Specifically I predict that insurers will work to satisfy consumer demand for insurance “beyond the basic” which brings them added value, both in the forms of new benefits and fairer, data-driven pricing models. This way of working also applies to small business insurance, as owners will be looking for new ways to protect their work space and livelihood.

 

Matt Poll

Fairer data-driven pricing

Recent insight showcases that pricing rating questions like “Occupied During Night” are not a true reflection of policy holders’ actual occupancy habits and lifestyle. For example 31% of people who were actually always at home had pricing ratings marked “occupied overnight” and 66% of people who were out at night were marked as “occupied day and night”. This was ahead of lockdown.

During lockdown, people were of course at home more often than not (unless they were key workers) so may have felt that their home insurance didn’t reflect their way of living. Post-lockdown, this sentiment will likely continue as people find they are living more flexible lives – half of workers expect to work more remotely post lockdown.

Consumers will be looking for insurers that can provide a bespoke model and smart home technology can help to facilitate this. Using geo-fencing technology, insurers can non-invasively measure when people are home, utilising user occupancy insights to offer more personalised pricings based on individual risk assessments and occupancy levels.

Cost as a differentiator is valued highly in insurance and will enable certain insurers to stand out from others post-COVID. The next section goes into more depth about the value that tech and services can bring to consumers on top of traditional insurance and these solutions are highly valuable to insurers as well, as an ancillary revenue stream.

 

Benefits beyond the expected

Insurtech’s purpose is to add new value through the use of technology to traditional insurance and while the sector remains relatively old fashioned, certain large insurers have already shifted their propositions to embrace innovations from the insurtech space. Post-COVID, we expect to see this happening on a much larger scale.

Smart home insurance is a great example of this as it promotes a new form of proactive insurance, which empowers the consumer to feel more in control of protecting their home rather than just being reactively reimbursed when an incident occurs. We surveyed the UK public and found 58% of people who have smart technology in the home value it highly because it enables them to proactively monitor for potential disasters like flooding or fire, and 80% love the peace of mind it gives them with the ability to monitor their home.

 

What does this mean in practice?

As lockdown starts to lift we are seeing law enforcement warn that opportunistic burglaries will increase, so having measures in place, like smart security cameras or motion sensors, is a smart move to make as we start shifting back to normalcy. As well, internal damage such as leaks could be occurring as people use their plumbing more frequently. However, with the right tech in place (such as leak sensors) people at home should be able to react more proactively than ever to quickly remedy any problems, preventing large insurance claims.

The “prevention rather than cure” objective of smart home insurance was poignant ahead of the pandemic. But now that many people are preparing for a life where they are home more, it is more relevant than ever as people are able to take a more hands on approach to protecting their homes.

Additionally, aside from protecting the home, the same research revealed 35% of people with a smart security camera use it to also keep an eye on their pets, 28% on their kids and 11% on their elderly parents when out or in a different room or property. It also creates daily user interactions, offering insurers a platform to engage with them as well as a superior experience for customers, resulting in longer-lasting relationships and a 7 to 9% higher retention rate.

Home insurance providers are also introducing benefits including 24/7 monitoring, home protection plans and on-demand emergency repair. What this means is that smart insurers are moving away from just giving money away when something goes wrong, to playing an active role in preventing incidents and helping to rebuild if anything does go wrong. This evolution of the insurance model is meaning insurers can achieve real incremental growth through this extended service-based model, which is a very important value generator.

In sum, insurance is going to have to adapt to remain relevant. Innovation takes time and money, but the insurance industry is lucky to have a rich ecosystem of insurtechs to join forces with – this is the fastest and most efficient way to stay relevant now as the industry continues to evolve into a future which may be more different than any of us can predict.

 

Business

FINANCIAL MARKETS IN 2022: INFLATION, ENERGY PRICES, AND THE CONTRASTING PERFORMANCE OF STOCKS

Published

on

Bob Jenkins, Head of Research, Refinitiv Lipper

 

Anyone hoping for a reprieve from the chaos and uncertainty of the last couple of years is likely to be disappointed. The pandemic will continue to have an impact on global economies, both directly (such as ongoing lockdowns and restrictions to combat the disease) and the exhaust effects we’ve seen in areas such as the production of goods, supply chain challenges, labour shortages and rising energy prices.

At the same time, the digital disruption of the financial world continues apace, with assets once overhyped becoming increasingly mainstream.

To make specific predictions in such an environment might seem like a fool’s errand, yet it is possible to discern some themes that will shape the course of financial markets in the coming year.

 

  1. Global inflation gets stubborn: Inflation is not transitory, and we are seeing a foundation for higher prices being put in place thanks to the supply chain and labour issues previously mentioned. In major developed markets, I think we’ll see stubborn inflation regardless of whether Covid remains a pandemic or begins to enter an endemic phase. The situation is slightly more positive in the US; while inflation will remain at a 3.5-4.5% range, a reduction in supply chain bottlenecks, increasing labour force and improved unemployment rates will serve to reduce the impact of primary inflation forces. We should bear in mind that households are estimated to have around $2 trillion in savings, which will maintain consumption levels and keep up the pressure on labour and supply chains.
  2. Rates will rise: Rates are likely to rise, with discussions in several major economies indicating a tapered end to the period of low rates we’ve seen since the 2008 financial crisis. This will probably be achieved in fits and starts as central banks navigate virus outbreaks and any resulting economic shocks. For instance, both the Fed and the Bank of England have indicated there will be hikes, but it is likely that they will rely on tapering at first to slow stimulus while also trying to navigate sentiment swings and volatility arising from waves of infections and/or new variants.
  3. China to lead economic growth, but not by much: China’s growth is likely to be around the 4-5% mark, with the US just slightly behind at 3.5-4%, off its 6% pace from the first part of 2021. The European Union and United Kingdom will likely trail the US, even if they have been exhibiting similar economic issues, while emerging markets could be hit by a combination of the Fed tightening up and challenges dealing with Omicron and other COVID waves.
  4. Higher energy prices are here to stay: Multiple forces will provide support to higher energy prices: supply chain issues, political posturing, demand for heating/cooling due to climate change, but Covid will occasionally step in to disrupt and counteract these forces. Even carbon neutral efforts could cause overall energy prices to rise in the near term as energy producers shift to renewables, with many of these alternative sources remaining expensive. Oil will stay in the $70-$80 range, with the occasional dip towards $60 as intermittent Covid concerns influence energy consumption in the travel sector.
  5. Underperforming stocks with a positive finish: In general, slower growth and lower rates help Growth and Tech stocks while faster growth and higher rates benefit Value and Cyclicals and I believe the economy will tend to lean towards the latter scenario. That said, growth and value leadership will change hands throughout the course of the year as the economy reacts to Covid waves and switches between lockdown and reopening. I suspect Value and Cyclicals will outperform Growth and Tech at the margin, but the dominate capitalization size of the latter two will pull down overall stock market returns. Of course, as with consumers, there is a lot of money being held back at the moment. Businesses have significant cash reserves and self-directed traders continue to shovel money into markets, which, when combined, can help buoy stocks.
  6. Flattening the bond yield curve: I think we will see some retrenchment as a result of rising rate programs by central banks that will largely result in negative to flat returns across core fixed income. Any selling in longer term bonds in reaction to either economic or central bank activity will be mostly offset by buying due to the global desire for yield, thus keeping a lid on longer term rates. Rising short term rates in this environment will serve to flatten the yield curve. High yield bonds could provide for pockets of opportunity as they are potentially tied to cyclical areas of the economy that could show leadership.
  7. The contrasting futures of ESG and digital assets: In the coming year I think we’ll see digital and tokenized assets become almost as popular as Environmental, Social and Governance (ESG). However, whereas ESG is a permanent shift that will eventually encompass the evaluation of all mutual funds, digital currencies still look a little more niche. We could well see them proliferate over the next few years, potentially even becoming a new quasi-asset class, but they will remain a satellite allocation in risk tolerant portfolio strategies. They are unlikely to achieve the status of being included in mainstream portfolios such as defined contribution retirement plans where assets can flow in large, consistent amounts – unlike ESGs, which could well reach that point in the coming years.
  8. A more defined ESG: It is looking increasingly likely that ESG funds will begin to splinter into more thematic offerings as investors eschew the combined “ESG” mandates in favour of more targeted strategies that enable them to better assess stocks aligned with fund objectives. This will also help avoid those securities jumping on the ESG bandwagon.
  9. The continued rise of the Big Five: Of course, in an era of unpredictability, there are always going to be trends or themes that run counter to accepted wisdom. Despite the aforementioned attempts of central banks to raise rates, the Big Five stocks (Microsoft, Alphabet, Apple, Amazon and Nvidia) will continue to show leaderships. While technically falling into the camp of richly valued Growth, these stocks have begun to also acquire a status as a safe haven, with generally strong earnings demonstrating a consistency and dependability that attracts investors. They also populate immense amounts of passive and retirement plan assets under management, equating to steady flows into them in almost any economic environment.

 

All this plays out against a backdrop of our changing stance on COVID. While there are some commonalities in how different regions tackle the pandemic, the continued uneven nature of our global responses makes it hard to determine what state we will be in this time next year. If most major economies can move to an endemic setting, then we should have the tools in place to make ‘living with Covid’ a reality. However, the continued emergence of other variants will cause volatility, and with it a predictable jostling of market leadership. Perhaps the only predictions anyone can truly make is that life will continue to be unpredictable for some time to come.

Continue Reading

Business

FINTECH TRENDS TO LOOK OUT FOR IN 2022 WHICH WILL CHANGE THE WAY WE DEAL WITH FINANCE!

Published

on

  • Embedded Finance is estimated to be a $3.6 trillion market opportunity (Matt Harris, Bain Capital Ventures)

Embedded Finance means it’s embedded in an existing ecosystem, it complements the customer experience already there with i.e. ‘one click finance/insurance, it’s the dashboard, app or POS where your customers already interacts.

To put this opportunity in perspective, it is larger than the mobile, cloud and the internet value creation over the last 25 years! Embedded lending is expected to account for nearly a third of the opportunity and some of this impact we already see today. Think about the embedded payments, you book and pay your taxi, food delivery, groceries delivery or Amazon delivery in one simple click.

Rob Straathof

Klarna is one of the leaders in embedded consumer lending with their Buy Now Pay Later proposition, you purchase your fancy new pattas (Dutch slang for shoes) in 3 instalments from your favourite webshop without having to think about payment or repayment. It’s all automated in one-click from your bank account, whilst Klarna does the KYC, credit and bank account checks in less than a second. Other applications will be the ‘checkout free’ shopping experience that Amazon is pioneering, which will come to the hospitality sector soon. And for SMEs, we will likely see the large market of leasing / hire purchase disrupted by instant financing offers on equipment, that is traditionally still majority done manually through broker networks.

 

  • Revenue Based Finance is celebrating it’s 150 year anniversary, and is making a rapid return to become the standard for Small and Medium Business funding

Yes – you read that correct… the rumours are that Revenue Based Finance dates from the late 1800s where oil wells were funded with this construct. High upfront cost to develop an oil well required creative structuring for repayment through a percentage of their future revenues. Over the years, this construct has been around as the Merchant Cash Advance and is now rapidly becoming main stream for funding fast growing eCommerce merchants to purchase inventory and high ROI marketing so they can double down on growth without diluting themselves with expensive venture capital equity raises.

Liberis has been pioneering Revenue Based Finance since 2007 and funded over $800m in more than 40,000 transactions. Small and Medium size business owners love the construct as it doesn’t dilute their equity, the outstanding amount repayment flexes as a percentage of their daily sales so they don’t ever have to think about making the monthly payments, and pricing is typically a flat fee so throughout the pandemic, Liberis’ impacted customers weren’t hit with increased fees or ballooning interest. That’s truly fair and flexible for the business owners!

 

  • Buy Now Pay Later will become a true challenger to the credit card but regulation is looming

Buy Now Pay Later has been around for many years by banks and store credit, though the embedded finance version of BNPL started off in the late 2000s with players like Klarna, Affirm and Zilch having made the mainstream public embrace the term BNPL and as a result they have shown record breaking equity raises and valuations! This trend is here to stay, it’s easy and fast checkout journey and merchant revenue boosting features mean it’s liked by both sides of the transaction. We will see a rapid advancement in the number of players with banks and credit funds looking to take a slice of those consumer debts, and commercial BNPL startups are likely the trend of early 2022.

But regulators are moving in to review customer impact of BNPL as they fear there are negative consumer impacts especially by young adults who don’t realise you have to repay this over time (!) and get themselves into trouble due to the easy availability of credit and BNPL players not having to report their debts to the credit agencies. My view is that the UK, US and other regulators in Europe will look to regulate BNPL similar to other consumer credit with stringent affordability checks, credit limits, credit agency reporting and regulated debt collections. In Sweden the regulator has already moved in, and in the UK the FCA is reviewing the sector. And as they showed with High Cost Short Term Lending and Guarantor loans, the FCA moves in quickly and with no mercy if players aren’t having the customers’ best interest at heart.

By no means will this imply that BNPL is just a fad which will disappear in the next years. It will grow rapidly because of consumer preference, ease of use and rapid online adoption. Though over time, the regulators will imply the same framework on BNPL as it has done on credit cards and personal loans. This means BNPL players will have to conduct appropriate affordability checks, and regulators will ensure sufficient consumer protection which will likely reduce the amount of BNPL players in the market. And reporting outstanding balances on peoples credit files will help reduce consumer over-indebtedness or long term indebtedness if people lose track of the many different credit solutions they’re using.

 

  • One Click anything will become the defacto way of interaction for all embedded finance

I’m probably not the only one who facepalms when I have to fill in all my details for the 3rd time when buying something online or when applying for insurance/cards/loans/online payments etc. With the pre-population features by Google Chrome / Apple Safari / Edge, online payments and address details are made much simpler, but what really makes it stand out is the experience by i.e. Amazon Payments, Shopify and Paypal Checkout on websites. Though you still have to log in with your email and password (or face scan for Apple).

In 2022, many fintechs and hopefully several banks as well will roll out one click checkout for their products, including one-click finance, one-click insurance and for existing Liberis business customers, one-click funding that will hit your bank account in as little as 5 minutes. So Small Business owners don’t have to wait weeks for finance to buy that bargain discounted inventory, pay for goods that won’t be delivered until 3 months from now, or launch a great marketing campaign!

 

  • Will Crypto lending become mainstream?

Crypto is here to stay, even the ‘never crypto’ crowds can’t deny that blockchain and crypto will become mainstream over the next 10 years, crypto is here to stay in one way or another for both the Decentralized Finance (DeFI) world as well as in traditional finance. This can be money transfer, financial exchanges, insurance, healthtech, identity, lending, etc. What it’s really great at, is reducing the ‘cost of trust’ between 2 or more parties. Over the past year, we’ve seen many companies who have launched ‘lending’ features for crypto to allow for speculation on crypto and mostly hedge funds to borrow crypto through middlemen, which allows high interest rates to be paid to retail crypto investors.

So far, the SEC has shut down several of these programs such as Coinbase’s Lend program, and deems them ‘securities’. There is a huge appetite for higher interest rates, especially in the light of high inflation, and savvy adopters of crypto will look to monetise their considerable crypto deposits. It’s a high risk, potentially high return strategy though if there is one key learning from the pandemic and the enormous amount of ‘free money’ pumped into the economies, is that consumer demand will drive rapid innovation and the FinTech platforms will find a regulated way to offer crypto lending products to stay ahead of the competition.

 

Continue Reading

Magazine

Trending

Banking14 hours ago

Bringing Automation to Banking

Ron Benegbi, Founder & CEO, Uplinq Financial Technologies   Automation is everywhere you look these days; from supermarkets to warehouses...

Finance14 hours ago

Why financial services is stepping into a new era

by James Mingard, Head of Retail & Finance at Maintel   When comparing industries, financial services has arguably fallen behind when...

Business1 day ago

FINANCIAL MARKETS IN 2022: INFLATION, ENERGY PRICES, AND THE CONTRASTING PERFORMANCE OF STOCKS

Bob Jenkins, Head of Research, Refinitiv Lipper   Anyone hoping for a reprieve from the chaos and uncertainty of the...

Business3 days ago

FINTECH TRENDS TO LOOK OUT FOR IN 2022 WHICH WILL CHANGE THE WAY WE DEAL WITH FINANCE!

Embedded Finance is estimated to be a $3.6 trillion market opportunity (Matt Harris, Bain Capital Ventures) Embedded Finance means it’s...

Business3 days ago

THE GREEN REVOLUTION IN INVESTING

It can’t be denied how quickly environmental sustainability has become a focus among everyday consumers, whether they’ve become noticeable through...

Business3 days ago

INVESTMENT IN INNOVATION: 2022 TRENDS AND OPPORTUNITIES

Author: Michael Kodari, Founder and CEO of Kodari Securities (KOSEC)   Moving into 2022, while COVID is still front of...

Business3 days ago

HOW TO CONSOLIDATE INVESTMENT REPORTING OPERATIONS AFTER A MERGER OR ACQUISITION

By Andrew Sehulster and Abbey Shasore   The reason why senior management make an acquisition is to compete better or...

Business3 days ago

FUNDING R&D IS STILL A PRIORITY FOR COMPANIES DESPITE THE PANDEMIC

By Emma Lewis, Myriad Associates   HMRC regularly releases statistics that look at the numbers of R&D Tax Credit claims...

Business4 days ago

Mitigating the insurance risks of climate change through geospatial data visualisation

Richard Toomey, Senior Manager, Commercial Insurance at LexisNexis Risk Solutions UK and Ireland   In the lead up to the...

Top 104 days ago

From compliance to the metaverse: Investment trends to look out for during the year ahead

By Rami Cassis, Founder and CEO of Parabellum Investments   In the investment world, the old saying, knowledge is power,...

News4 days ago

NutreeLife triples production with finance from Siemens Financial Services

Plant-based snack manufacturer NutreeLife has massively increased its production capacity with the help of a hire purchase solution from Siemens...

News5 days ago

HYDR DEVELOPS INVOICE FINANCE PLATFORM TO INTEGRATE WITH MAJOR CLOUD ACCOUNTING SOFTWARE PROVIDERS

MANCHESTER – UK – 17th January 2022 – Fintech start-up, Hydr has developed its proprietary invoice finance platform to integrate...

Business5 days ago

What should you be know about PAN data in PCI DSS?

Narendra Sahoo (PCI QSA, PCI QPA, CISSP, CISA, CRISC) is the Founder and Director of VISTA InfoSec   Introduction PAN...

Finance5 days ago

GET READY FOR A LARGER-THAN-EXPECTED INTEREST RATE SPIKE IN 2022

By Nicholas Sargen As investors assess what is in store for 2022, they should not lose sight of what has transpired...

Banking5 days ago

MYTH BUSTING THE ROLE OF OPEN SOURCE IN FINANCIAL SERVICES

Nigel Abbott, Regional Director North EMEA, GitHub   There is no denying the financial services (FS) industry is under pressure to...

Business6 days ago

How Crypto Traders Can Avoid Unexpected Expenses

Have you been dabbling in cryptocurrency in 2021? Are you still relatively new to the world of crypto and feeling...

Finance6 days ago

Looking Ahead: 2022 Fintech Predictions and Reflections

Will Marwick, CEO of IFX Payments   2021 was the year of recovery and opportunity for many, following months of...

Business6 days ago

A systematic approach to stock selection finnCap’s Slide Rule

Raymond Greaves, Head of Research at finnCap   As an engineer by background, I love data and using it to...

News6 days ago

The UK’s Crypto and Digital Assets Group will be welcomed, but it needs to reach out to the industry

by Jennifer Clarke of regtech CUBE   The advent of the Crypto and Digital Assets Group will be welcomed with...

Finance6 days ago

EMBEDDED FINANCE EXPERIENCES, THE BIG MOVE IN 2022

By Louisa Murray, Chief Operating Officer UK & Europe at Railsbank Over the past year, we have seen some fundamental...

Trending