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Wealth Management

THE SHARING ECONOMY AND HOW YOUNG DRIVERS GET THE INSURANCE THEY NEED

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By Graham Cutbill-White – Head of Insurance Content,Tempcover

Students and generally young people under 25 are a wonderful example of how a generation can totally adapt to a new way of doing things in a short amount of time.

Within the past 10-15 years, a whole new economy based on using products and services as and when required without the obsession with ownership has sprung up. The idea of access rather than ownership means that everything from entertainment (Spotify, Netflix) to travel (Airbnb, Uber) has a shared version that consumers can access as and when needed without long term responsibility.

Graham Cutbill-White

The sharing economy is expected to be worth an eye-watering £266 billion by 2025 by which point millennials and members of Generation Z are going to make up the majority of the workforce, these newly established buying habits are set to become the norm across all industries. 

This new approach has already revolutionised a number of industries, not least the world of insurance.

The cost of car insurance, in particular, has created a real and often insurmountable barrier for many young drivers. In the first quarter of 2019, the cost of an annual policy was more than £2,000 on average for 18-year-olds – an amount few teenagers can afford. 

A way for many to avoid having to pay these large amounts is to forgo actually owning a car and therefore removing the need for an annual policy. Instead, they’re looking for more flexible and affordable options and thanks to modern forward-thinking insurance providers, are finding the cover they need without having to pay for insurance they don’t want.

Whether this is with a pay as you go model which calculates your premium depending on the amount you drive or a temporary car insurance policy which allows you to drive whenever, wherever in the UK for the duration you need, there are now more insurance options than ever.

If you just need an hourly policy to pop to the shops, a daily policy for a road trip with friends, or a longer, 28 day policy when you’re home from university for the holidays, you get the duration you need with all the same level of protection as regular insurance.

Uni students are one group of young drivers that can hugely benefit from a more flexible, temporary approach to insurance.

Alongside the countless things you will need to take when you go off to uni, one thing you definitely won’t need as a student is your car. You’d need a pretty big box to pack it in, but that’s not the main reason you shouldn’t take your car to uni, the cost of keeping a vehicle taxed and insured when you might only use it a few weeks a year is just not worth it.

There are a few other reasons you shouldn’t take your car to uni – you’ll be a guaranteed taxi service and without fail the designated driver. You’ll also struggle to park it at most university campuses.

You will, however, want to make sure you have temporary car insurance. It’s the ideal way to ensure you can still get around when you’re home for the holidays or if you’re planning a road trip.

University can be incredibly expensive, and your student loan is only going to stretch so far. Without a car, you can save yourself the cost of parking, fuel, tax as well as annual insurance. You could save hundreds of pounds a year but ditching your car and insuring yourself as and when you need it with temporary car insurance.

Another positive of going car-free at university is the huge benefit for the environment. We’re at a very important time in the future of this planet and any change that can help stem the tide of climate change can only be a good thing.

A study in the US by researchers at UC Berkeley found that during an 18-month car sharing scheme which followed hundreds of car-sharing members, there were daily savings of:

  • 13,000 miles of vehicle travel
  • Over 3000 litres of petrol
  • 20,000 pounds of carbon dioxide emissions.

These cost savings and positive environmental impact will result in huge benefits for young people’s futures.

On a more immediate level, this type of insurance also provides the peace of mind that is often lacking when letting a young driver borrow a vehicle. Not only do you get the same, comprehensive level of insurance as annual but because temporary cover is a separate, standalone policy, it won’t impact the owner’s No Claims Discount.

As more and more young drivers and eventually drivers of all ages adopt a more flexible approach to car ownership and insurance, expect to see plenty of new and innovative insurance schemes come to market.

Thankfully though, for university students and young drivers in general there are insurance options currently available to suit their ever-changing needs while keeping the costs manageable.  

Sources:

‘£266 billion by 2025’ – https://www.forbes.com/sites/forbeslacouncil/2019/03/04/the-sharing-economy-is-still-growing-and-businesses-should-take-note/

‘£2,000 average car insurance cost’ – https://www.confused.com/car-insurance/price-index

‘A study in the US by researchers at UC Berkeley’ – http://www.urbanecology.org/environmental-benefits-car-sharing-revealed/

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Finance

SaaScada Top Five Predictions for 2023

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From BNPL for business, to sustainability and financial inclusion, 2023 is going to be a year of change as the UK’s fintech darling status comes under challenge  

SaaScada, a cloud-native core banking engine, today released its predictions for 2023, offering insights for the financial services industry.

Nelson Wootton, CEO and Co-Founder:

We will see a surge of interest in ‘BNPL for business’ or Merchant Cash Advance

Much as we’ve seen an explosion of Buy Now Pay Later for consumers, as merchants tighten their belts and the economic outlook becomes even more challenging, we foresee great demand for BNPL style models of finance for B2B in 2023 – in particular, retail. For example, Merchant Cash Advances will enable merchants to receive stock and pay it off over a period of time – as that stock is sold to customers. This helps them to avoid big upfront capital investment, while the lender is repaid as each product is sold.

This model is extremely low risk for the lender, especially for wholesalers of non-perishable products, where the lending agreement can even include the flexibility to move unsold stock to another merchant. Lenders can also check in on the velocity of sales and track daily (or even hourly) against sales projections to help them understand their risk on the loan. For wholesalers or franchise style models, offering merchant cash advances will help to build new revenue streams, while strengthening the relationships with their key retailers by essentially providing them with stock for ‘free’.

Of course, for this model to work, the lender must be able to access real-time data insights into purchases from their customers. This means using a cloud-native core banking engine to connect modern and legacy infrastructure, create real-time event streams, and generate bespoke data sets.

The UK’s fintech darling status will be put to the test in 2023

It’s been a rocky geopolitical year with the global economic slowdown, the war in Ukraine – not to mention Brexit, the pound crash, and having three prime ministers in as many months. Big fintech valuations have shrunk globally, and funding rounds have been few and far between, as UK fintech investment plummeted from $27.8 to just $9.6 billion in the first half of 2022. So, when we look to next year, many will ask if the UK can hold onto its “fintech darling” status.

But to me, any doomsday hypothesising feels like a knee-jerk reaction. Investment naturally goes in cycles, and investors are always watching closely to see which areas are getting the best returns and recalibrating before they invest more. The UK fintech scene is bursting with a wonderful blend of finance and tech innovators who are up for the challenge, so I do not think that position in the industry will be lost.

In particular, fintechs who can harness data effectively are the ones to watch. The future is all about data – being able to predict and track changing customer needs, identify areas of trapped value, and gain a single customer view; it is these things that will enable them to gain a greater share of wallet, even during recession.

UK fintechs should also keep in mind that while they will continue to see investment, they will need to be more cautious with their spending as funding rounds may be slower, valuations lower, and investments more frugal than before. So being cost-conscious will be an asset.

FS firms will miss the Consumer Duty deadline if they can’t leverage customer data

July 2023 will see the FCA implement a new Consumer Duty, which will require the financial services industry to deliver products and services to meet real customer needs at a fair price. Under the new regulation, FS firms must give people the support and information they need to make informed financial decisions, which is particularly important in the current economic climate. But, many FS firms will likely miss the July deadline because they don’t have a complete picture of their customers and how to serve them best.

To meet the diverse needs of customers, including those in vulnerable circumstances and financial distress, banks must have a comprehensive customer view. But today, many banks and wealth managers may struggle to achieve that level of customer insight because they still operate under a cumbersome product-centric data model, in which relevant information is siloed.

With a cloud-native banking platform, FS firms are armed with granular real time insights into customer spending so that they can understand customer needs, assess their financial health, and make recommendations effectively. Without this level of visibility, firms will not stand up to scrutiny from the FCA, and could even face fines in cases of serious misconduct.

Next year, cloud-native core banking providers will become the holy grail for FS firms needing to comply with Consumer Duty, by helping to re-architect how core banking services are delivered. The granular level data can be used to drive hyper-personalisation, unearth opportunities to grow accounts, accelerate the design of innovative new products, and improve the customer experience.

Steve Round, Co-Founder, expects the following core trends will shape the financial industry in 2023:

FS firms will be forced to improve transparency around sustainability commitments

The UK led the way on green finance at COP26 by committing to create the world’s first Net Zero Financial Centre. Now, a year later, the FCA has proposed a UK sustainability disclosure regime. With the rules under review until January 2023 and expected to apply from 2024, FS firms must lay the foundations for sustainability reporting now to comply with future regulations.

Going forward, any organisation delivering banking services must be able to examine the environmental impacts of business operations, as well as the impact of partners. Therefore, FS firms will feel the pressure in 2023 to become more transparent about their commitment to Net Zero targets and sustainability initiatives.

Consumers have also become increasingly focused on sustainability, and want to know how their purchase decisions affect the environment. By collecting customer payments data and tracking environmental impact, FS firms have the potential to launch greener services and help reduce environmental impact for eco-conscious consumers. For example, using transactional data from customers to analyse the carbon footprint of their purchasing decisions – allowing them to make choices about where they spend their money or even choose to carbon offset against purchases. If FS firms fail to launch sustainable products and services next year, there is a serious risk that market share and customers will be lost to more eco aware competitors.

The rising cost of living will drive a new era of financial inclusivity

As the chancellor admitted in the Autumn budget, we are now in recession. More consumers – even those on middle incomes – may find themselves falling into the financially ‘vulnerable’ category, struggling to keep up with soaring mortgage rates, energy bills, and inflation. In 2023, banks will be under pressure to provide more targeted help and support to those that need it to ensure that people don’t fall through the gaps.  Customer insight, driven by comprehensive real time data, will be essential to allowing banks to identify those who are at risk of becoming vulnerable before it happens and help put plans in place to help the customer and avoid bad debt.

There will also be a renewed focus on financial inclusivity – and it’s critical that banks look at credit with fresh eyes. Expect to see banks focusing on designing practical products and services to help those who are struggling financially. Offering advice is one thing, but banks will also be looking to offer personalised and flexible offerings, such as having multiple wallets to help manage different bills and savings. To support their customers, banks will need to leverage their customer insights and technology to deliver more flexible banking solutions that make it easier for their customers to manage their finances. Or, they risk losing customers to competitors offering more feature rich products.

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Wealth Management

Keeping Cyber Insurance Premiums Down with Deep Observability

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By Mark Coates, VP EMEA, Gigamon

There is no doubt that the cyber insurance industry has experienced something of an evolution in the last five years. As the threat landscape has changed beyond recognition, so have the risk management strategies aimed at staying ahead of cybercriminals. The result is an exponential rise in premiums: 85% of cybersecurity business decision makers saw an increase in their cyber insurance premiums over the past 12 months, and 82% of insurers are expecting these rises to continue. Given that cyber insurance makes up a key component of many cybersecurity and business continuity plans, what can organisations do to keep premiums down while maximising coverage?

The key is to improve proactive protection and to embrace deep observability – employing real-time, network-level intelligence to track activity across a network. Deep observability provides IT and security teams with the ability to amplify the power of their current log and trace-based monitoring tools, rapidly detect suspicious activity and act accordingly. Achieving this ‘single source of truth’ also helps to reduce complexity and cost – a crucial benefit as premiums continue to rise and we enter a tougher economic climate.

Where it began

Against the backdrop of increasing cybercrime, the ‘NotPetya’ attack was a landmark cyber-threat for various reason. Perhaps most significantly it signalled the beginning of cyber insurance premium rises. Launched in 2017, NotPetya was a malware launched as part of a Russian state-sponsored cyberattack campaign targeting Ukrainian IT infrastructure. Beyond financial setbacks for global organisations, NotPetya’s proliferation caused the drastic rise of premiums and lowering of coverage limits, as insurers adjusted their policies to reflect the changing cyberthreat landscape.

Since then, a global pandemic and the subsequent shift to home or hybrid working created a perfect storm for the rise of ransomware. This form of cybercrime can cause such large-scale and financially destructive consequences that insurers have had no option other than hike up prices for more vulnerable businesses in order to stay profitable.

Zero Trust is an essential

With challenges comes opportunity. This upending of the cyberthreat landscape serves as a potential catalyst for organisations across verticals to optimise their cybersecurity.

According to the recent Gigamon State of Ransomware report, phishing and malware were the top routes for ransomware attacks in 2022. Cloud applications were also cited as a common ransomware attack vector, particularly by those in the UK. Protecting against a misconfigured cloud or human error isn’t the job of cyber insurance – this should be reserved to cushion the financial blowback in the event of a breach. Instead, enterprises must proactively take steps to bolster their security posture.

This includes ensuring all access across digital infrastructure is authenticated. Trust is earned, not freely given in this threat landscape. A Zero Trust architecture – which requires authentication of all users regardless of their position in an organisation – helps prevent unauthorised access and works to restrict suspicious lateral movement across a network. Fortunately, it’s now a topic regularly discussed in Boardrooms. Across EMEA in particular there is growing confidence that organisations will be able to implement this architecture in the next few years (51% agreed in 2020, compared to 83% in 2022). To get there, however, deep observability is a critical foundation; you simply cannot manage and grant access to what you cannot see.

A single source of truth

Threat actors can bypass SIEMs and endpoint detection and response tools, yet they will always leave a metadata trail. This is why deep observability is so crucial to cybersecurity. It grants security operations (SecOps) teams the ability to analyse this metadata, spot suspicious behaviour and take the appropriate steps to mitigate an intrusion before it escalates. Such enhanced visibility and control are crucial for maximising the efficacy of Zero Trust architecture and fostering a security-first approach within an enterprise.

With premiums so high, organisations also undoubtedly want to turn to solutions that provide ROI as well as better security. As more tools come into play, cost and complexity rises. Many enterprises will not have the budget to keep adding more solutions to their technology stack in hope they will improve their cybersecurity and reduce their insurance prices. Instead, they need a single source of truth and a complete view across the entire IT infrastructure – cloud included. From here, teams can identify network bottlenecks and eliminate irrelevant, duplicate or low risk traffic. Deep observability is therefore not only a must for security, but also for making budgets go further.

Organisations need to brace themselves for a challenging economic down-turn and continued rises in cyber insurance premiums by implementing a strategy based on Zero Trust, deep observability and network-to-cloud visibility. In turn, security teams can be far more confident in their security posture, business leaders are satisfied by a lower spend and insurers become more confident when taking on their customer’s risk.

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