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How insurers benefit from digitalisation

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Oliver Werneyer, CEO & Founder, Imburse

 

Insurers need to embrace digital transformation to stay relevant. Customers nowadays are well-informed and expect user-friendly experiences and smart solutions that meet their needs. They are also more demanding than ever, so being able to gain their attention and trust is key to boosting customer loyalty and guaranteeing sales. Delivering an excellent omnichannel customer experience is only possible through the adoption of technology and the optimisation of processes.

Insurers have been facing the pressure to digitalise for a few years now, and it continues to increase. Technology is here to stay, and customers are likely to continue using it for their everyday tasks. The traditional insurance industry as we know it is undergoing a disruptive evolution, driven by customer demand and the rising competitiveness of the industry. To be customer-driven, however, insurers need to place focus on improving customer experience from end to end. This goes from the moment that customers are searching for policies online, to the moment customers file a claim and expect a quick and seamless reimbursement process.

This may not be news to insurers, who are well-aware of the need to embrace a digital transformation journey. However, they are faced with challenges that make it incredibly difficult, if not impossible, to compete with newer, innovative companies that place the customer at the centre of their business proposition. For instance, when it comes to payments, insurers must be able to integrate with various payment providers and technologies so they can offer their customers a wide variety of payment methods, as well as the payment methods that best suit their unique needs.

Oliver Werneyer

While some customers may prefer to receive a voucher for their favourite shop, others may be happy with a bank transfer or a push-to-card payment. Being able to meet customers’ individual needs is crucial to gaining their loyalty, and even more important now that hyper-personalization has become so popular across industries. Integrating with various providers is a complex process, mostly due to insurers relying on old and outdated IT systems that power their entire operations.

These integrations are incredibly time-consuming and expensive and require a lot of internal resources. Insurers don’t typically have these resources available, because they don’t have a dedicated payments team nor the in-house expertise to leverage payments. Equally, the length of these integrations makes it difficult to swiftly adapt to continuous market changes. Speed and flexibility are crucial elements of success and elements that most insurers don’t have.

These challenges can only be solved through partnerships. Thankfully, the Insurtech market is packed with innovative solutions that can enable insurers to solve their most pressing problems. Such companies, for instance, enable end-to-end connectivity to the whole payments world. This means that insurers are able to connect to any payment provider or technology they want, in any market, for both collections and payouts.

Instead of having to deal with lengthy and cumbersome integrations processes, insurers can focus on other key business areas while solutions like Imburse take care of all the heavy lifting. Another key element that insurers must consider outsourcing is expertise. Payments is a niche area and, while crucial to the success of the business, it isn’t considered a core department. Being able to access agnostic payment experts that help insurers navigate the payments world and make the best business decisions is a stepping stone for the successful optimisation of payment operations.

Some of the benefits of embracing digitalisation for insurers include streamlining customer experience and ensuring that customers go through a seamless and quick journey from beginning to end. According to PwC, 80 percent of companies are now investing in omnichannel experiences, powered by the need to ensure customer retention and satisfaction. Customers expect everything to be instantaneous, whether that is finding the most suitable policy for them, making a claim or receiving a payment. Digital insurance makes it possible for insurers to meet and exceed their customer’s expectations, and boost retention and satisfaction. Digitalisation also enables insurers to reduce costs. According to a McKinsey report, automation can reduce claims costs by as much as 30 percent. Insurers can improve their underwriting processes, improve speed to market and generate new revenue streams by, for instance, adopting embedded insurance and partnering with other companies. This will boost sales conversions and lower the costs of distribution.

Large incumbents can more than double profits over 5 years just through digitalisation (McKinsey). These benefits are both in the short and long-term. In the long run, having future-proof systems and processes in place will enable insurers to continue to adapt as the market changes – and it will change. Being able to have this flexibility will prove invaluable.

 

About the author

Oliver Werneyer is the founder and CEO of Imburse. Oliver spends most of his time overseeing the overall operations of the company, but with a strong focus on powering international growth. Before founding Imburse, Oliver held various roles in the insurance industry, with the likes of Liberty Life, Swiss Re and Genworth. He also founded Flynrate, an innovative flight tracking and flight delay insurance app, and became a leading member of London’s startup ecosystem, sharing his industry knowledge and passion for entrepreneurship with London-based startups.

Finance

Mini-Budget 2022:

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Tax giveaway is a boost for business, but will it drive growth or fuel inflation?

 

Chancellor Kwasi Kwarteng has announced a comprehensive wave of tax cuts and other incentives for individuals and businesses, as well as confirming some of the announcements made earlier this week.  The measures are part of a new Growth Plan, which is aiming to boost economic growth. However, only time will tell if they will curb inflation and temper recession concerns.

Richard Godmon, tax partner at accountancy firm, Menzies LLP, said:

“With another fiscal statement to follow, this mini-Budget is a defining moment for the new Government and tax cuts are firmly back on the agenda.

“The biggest surprise was the decision to simplify Income Tax by moving to a single higher rate of tax for high earners of 40%, with effect from April next year. This will encourage a spirit of entrepreneurialism by incentivising work and putting money back into the economy. The flip side is that the Government might also be hoping that the move increases the tax take, as it could help to draw people back to the UK who may have previously chosen to live and work elsewhere, while encouraging others to stay put.

“The reduction in dividend tax rates and the abolition of the additional rate of tax from April 2023 means that business owners will need to consider carefully the timing of dividend payments over the next few months.”

Up to 40 new Investment Zones

The Chancellor also outlined plans to create up to 40 new ‘investment zones’ in England, with the potential for more in Wales, Scotland and Northern Ireland. Businesses in these zones will benefit from wide-ranging tax breaks including 100% tax relief on investments in plant and machinery, and no National Insurance Contributions will be payable on the first £50,000 earned by new employees.

Richard Godmon, tax partner at Menzies LLP, said: “The new Investment Zones are reminiscent of the former Enterprise Zones, but they will provide a much more favourable tax environment for businesses and they promise to become a magnet for inward investment. There are currently 38 areas in England on the list for consideration and we look forward to finding out which ones will be selected.”

Incentivising business investment and Corporation Tax rise ‘cancelled’

The limit of the Annual Investment Allowance (AIA) will not revert to £200,000 as planned in April next year, it will now permanently stay at £1 million.

Richard Godmon, tax partner at Menzies LLP, said:

“Capital allowances are highly valued by businesses and they will be pleased that this one in particularly is going to stick at £1 million and that this is no longer being described as a temporary measure, but is to be made permanent.

“The decision to cancel the planned increase in Corporation Tax (due to tax effect next April) will be a relief to many small and medium-sized businesses who have been concerned that this increase would erode profits further and make it even more challenging to remain viable.”

Incentivising entrepreneurial investment

The Chancellor highlighted plans to increase the cap on investments that can be made under the Seed Enterprise Investment Scheme (SEIS) from £150,000 to £250,000. Individuals making investments in start-ups up have had the limit doubled to £200,000, with the 50% income tax relief remining the same. The Government also gave its commitment to continuing to back the Enterprise Investment Scheme (EIS).

“These announcements send a signal to entrepreneurial investors that tax should not be a barrier and the Chancellor wants to expand incentives in this area,” added Richard Godmon, tax partner at Menzies LLP.

Stamp Duty Land Tax

The threshold at which Stamp Duty Land Tax (SDLT) becomes payable on residential property purchases in the UK has been raised to £250,000, double its previous level in a bid to boost the property market. In addition, first-time buyers will not have to pay SDLT on property purchases up to a value of £425,000 (up from £300,000). Both measures will take effect from today.

Richard Godmon, tax partner at Menzies LLP, said:

“The decision to raise the SDLT threshold is designed to build consumer confidence and boost the housing market generally. For property developers it will fuel activity by creating demand, particularly from first-time buyers, and help to free up finance to front-end development projects.”

IR35 Changes

Richard Godmon, tax partner at Menzies LLP, said:

“The repealing of the 2017 and 2021 IR35 changes will be hugely welcomed as it will remove an administrative burden, risk and cost, enabling businesses to devote resources to furthering their growth strategies.

“It is important to recognise that IR35 has not been abolished and the result of the changes is that the risk and compliance costs are being returned to the individuals and their personal service companies.  HMRC will no doubt redirect their focus towards the contractors, which will bring challenges and make enforcement more difficult.”

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Anyone Can Become an R&D Tax Expert with the Right Foundations

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Ian Cashin is a Customer Success Manager at Fintech company and R&D tax software provider WhisperClaims

 

For accounting firms, R&D tax credits offer a substantial opportunity to boost revenue and strengthen client relationships. According to Ian Cashin, Customer Success Manager at WhisperClaims, perceived complexities can be overcome with the right approach and support. Indeed, by embracing a few simple practices, any company can become an expert in R&D tax.

Building Confidence

Growing revenue through new business is far more challenging than unlocking revenue from an existing client base. However, a significant number of accounting firms are losing out on value-added opportunities as a result of their lack of confidence or knowledge in R&D tax relief.

Yet, advisors who follow best practice are now in an ideal position to use their extensive client knowledge to mitigate their clients’ risk of and potential exposure to interrogation over fraudulent claims, ahead of HMRC’s introduction of more stringent R&D tax processes in April 2023.

So why are firms reluctant? There is no doubt that the R&D tax credit procedure is different. Compared to other areas of tax regulation, it leaves greater room for interpretation. But it is readily understandable by a qualified accountant – even an unqualified trainee. Understanding what HMRC considers to fall under the scope of research and development is key. Astrophysicists and Formula 1 manufacturers are not the only people who employ science and technology to overcome business challenges. Every day, UK firms of all sizes engage in R&D activities, from civil engineers to food manufacturers, yet far too many have not yet filed claims, losing out on critical cash.

The most important thing to keep in mind is that, as an accountant, you already have a far deeper relationship with your client compared to any other service provider. Once you have raised your level of understanding, you are in the perfect position to optimise this.

Leveraging  Insight

Accountants already have a unique understanding of their clients’ operations –  insight which,  as professional advisors, will help to highlight companies most likely to qualify for an R&D tax rebate. Furthermore, with access to tools like R&D tax claim preparation technology, developed by R&D tax professionals, they are able to significantly speed up the process. This technology enables accountants to easily determine the top targets within their client base, indicating where to focus the efforts of their emerging R&D tax service.

Using this priority list in conjunction with their understanding of the criteria HMRC stipulates, an accountant can leverage their client knowledge and relationship to engage in a conversation regarding daily R&D activities and unlock potential tax relief opportunities.

Moreover, facilitated by a specialist R&D tax claims preparation platform, accountants can be assured of a structured process that prompts the right questions to ask clients during these conversations, and highlights answers that are either in sync with, or fall outside of, the HMRC parameters. For instance, ca restaurant owner adding vegan alternatives to the menu is not on the same level as a food producer starting the development and manufacturing of a fully plant-based product line. The latter will undoubtedly be eligible for R&D tax assistance, but not the former. Accountants should use their position as “professional advisors” in this situation to push back against clients, especially those who may have previously been unwittingly misled.

Best Practices

For the last twenty years, since the introduction of R&D tax rebates in 2001, best practice has been the provision of a detailed report, complementary to the CT600 form, to mitigate the chance of HMRC asking supplementary questions. The technical purpose of the claim as well as the business context must be covered in this report, e.g. the challenges faced; how science and technology were used to overcome these; and the professionals employed who overcame them. Simply put, if the challenges weren’t difficult to solve, it wasn’t R&D.

It’s also critical to keep in mind that R&D claims cannot simply be copied and pasted from year to year. R&D is not necessarily a constant; demand for it changes in line with the evolution of the business’ activity or stage of development. as businesses change and go to the next stage of development.

The accountant’s already solid client relationship and interpersonal abilities come into their own in such situations. Particularly if the appropriate course of action is to suggest that the client should not submit an R&D claim, an accountant must feel comfortable advising the client accordingly. The claim belongs to the client; if it is contested, the client will be the one facing an HMRC investigation. An advisor must be self-assured enough to refuse to input erroneous claims without endangering the client relationship.

Conclusion

Recent years have seen accountancy firms strengthen their position as dependable, trusted business advisors. Discussions regarding a business owner’s long-term objectives, succession and exit plans, as well as pensions and investments, have become commonplace. It should be natural to include R&D tax into these conversations . Asking a customer about their investment in R&D should be a common practice – business as usual –  just as it is to inquire about investment in infrastructure or buildings.

The only thing preventing accountants from successfully adding R&D tax to their suite of services  is a lack of confidence. Yet, any reservations can be addressed with a straightforward ‘back to basics’ R&D training course, as well as using technology to gain access to a completely new revenue stream with their current clientele. Now that HMRC is openly calling for a much more rigorous, trusted, and evidence-based approach to R&D tax from 2023, accountants hold all the cards they need to gain confidence and give clients the trusted service they desire.

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