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WHY BETTER PLANNING COULD BE THE INSURANCE INSURERS NEED

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Adam Bimson, Chief Customer Officer, Vuealta

 

Insurance is predicated on the ability to plan effectively, to model accurately, and to predict the likelihood and impact of certain events. Whilst already facing significant regulatory, competitive, and customer disruption, the industry, like all others, has now been deeply disrupted by the pandemic. From an operational perspective, insurers have seen their workforces dispersed, their technologies stretched to the limit, and customers put under immense pressure – and in turn, that strain has been put on the insurers themselves.

Then there’s the increase in customers focusing on wanting to better protect themselves. Separate reports have found that the number of people making wills has risen at the same time as life insurance has seen a spike in interest. And for commercial lines, corporate customers are carefully scrutinising their current and future business disruption insurance, again with an eye on increasing their cover.

When is a growth in customers a problem? When you can’t handle each one properly. No business wants to fail due to too much success, but if insurers do not adapt rapidly, that is the risk they entertain. Whilst there may be an uptick in demand in some areas, the market is still awash with competition and tight margins.

Adam Bimson

Added to this are the demands of IFRS17, due to come into force in January 2023. That may seem a long way off, but the reporting requirements it places on insurers will require significant organisational, data and technological change, all of which needs to be started now.

 

Two challenges to overcome to achieve better insurance

This all points to the need for a fundamental shift in the way insurers operate in not one, but two areas.

Firstly, there is the need to adapt their operational model so that the effects of disruption, whether driven by the pandemic or regulation, do not impact the experience their customers receive.

Secondly, they need to reinvent their business so that the services and products they provide are both appropriate for customers and capable of withstanding future upheaval.

In both instances, technology, or rather the ability to consolidate, analyse and action data-driven insights through the use of technology, may offer the solution.

Why? Because as with so many things, the issues that insurers face are built on data. Being able to harness it gives them a much better chance of tackling those issues head-on. For instance, when it comes to operational models, better visibility (powered by data), combined with accurate scenario-based modelling and planning, will aid the development of a more agile organisation. Whether it’s adapting to a reduction in staff headcount as infections spike in different parts of the country or anticipating when customer service functions may be impacted by local lockdowns and increased restrictions. Being able to identify problems and react accordingly will be critical to delivering operational continuity and, therefore, unimpeded customer experience, and data lies at the heart of this.

Then there’s how it can be applied to evolving products and services for customers. Customers, whether consumers or businesses, are going to want to feel covered by their insurance – insurers will want to balance this with the need to not overexpose themselves to events that could appear out of nowhere. Here’s where the combination of accurate data use and the right digital tools, such as artificial intelligence-driven solutions, can help insurers take a major leap forward. Premiums can be adjusted, and more dynamic products tailored to the needs of customers can be developed.

Being able to use data more effectively is going to play a major role in complying with IRFS17, both in getting ready for its implementation and meeting its requirements in the years to come. Complying with a reporting standard will drive an investment in data and technology, but harnessed correctly, that investment can unlock wider benefits – the same commitment can be used to cover off all the challenges already covered.

In short, those that use technology effectively, and plan for scenarios appropriately, are more likely to build the types of products and services that fulfil both those objectives, and ultimately keep customers coming back.

 

Planning for the unpredictable

Much like other sectors, insurers need to revamp their business models. Technology, and the better use of data, offers a solution to both operational and customer experience challenges.

Planning for the unpredictable may seem impossible, but by using a variety of data sources, and more importantly, by being able to connect them all and read them effectively, insurers can ensure they continue to meet customer expectations while preparing their businesses for whatever comes next.

 

Top 10

DOGECOIN MADNESS

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by Nathalie Janson, Associate Professor at NEOMA Business School

 

After the unstoppable increase of Bitcoin (BTC) since January – it added 10 000$ to its price every month since January reaching 60 000$ in April 2021  – it is now the turn of the Dogecoin to be the next cryptofrenzy.

This crypto created in three hours by Billy Markus as a joke to make fun of the Bitcoin community back in 2013 had no specific use except federating crypto geeks sharing the same sense of humor. Its capitalization quickly reached 60 million USD back then. This is why until Tuesday, April 13th 2021, its price was closed to 0 since cryptos value derives from their usefulness.

The Dogecoin belongs to the family of Altcoins using proof of stake to validate transactions – more flexible and fast compare to Bitcoin and Ether based on proof of work – but essentially not as decentralized and secured.  So far Dogecoin has mainly been used for  tipping creators of content or more interestingly to noble causes. These include raising funds for the bobsleigh Jamaïcan team to send them to the Winter Olympic Games in 2014, paying back victims of Dogecoin hack in the early days after its creation,  and raising funds to provide access to drinkable water in Africa.

 

Dogecoin… a billionaire maker joke

How comes the DogeCoin price surged in such irrational manner? Is this move another proof of market madness? A sign that we might be close to the next burst of the crypto bubble? Who knows? … Why is it so difficult to understand the pricing dynamic of cryptocurrencies?  You might think that what we experienced is the paroxysm of futility. In a week, some Dogecoin holders become billionaires, the price of the Dodge coin increasing from almost 0 to 43 cents at its highest. How mad that sounds? Similar to what happened to Gamestop, we are dealing with a community with a strong identity – the Dogecoin joined by new members like Snickers – the sweet bar and more importantly by Elon Musk – who wants to set a record and claiming April 20th being DogeDay with the clear goal to push Dogecoin up to $1. They are encouraging each other to buy more of the coins. Given the limited size of the market dominated by “whales” – five “whales” are said to control 40% of the market – the increase in purchases of Dogecoin leads to significant rise in price given the low liquidity.

The Dogecoin case is an emblematic case showing how subjective value is in economics. Indeed, like Bitcoin, the price of Dogecoin only depends on its acceptance that in itself depends on the size of its network that suddenly increased.

Why now? First, Elon Musk started to show his interest in the Dogecoins by tweeting about it. Why does Elon Musk opinion matter? Because he symbolizes the success story of a man who is a visionary. After all, if Elon Musk invests in Bitcoin and supports Dogecoin it must be for a reason, and he may be right like he has been right about the industrialization of electric cars as the success of the Tesla demonstrates. He performs a role similar to leading investors in traditional financial markets like Warren Buffet.

Secondly, the Coinbase initial public offering contributed to a rally in the cryptocurrencies market, with no exception for the Dogecoin. Over the week-end, the major cryptocurrencies – BTC and Ethereum dropped for technical reasons due to a sharp decrease in the hash rate after an electricity shortage in the Xinjang province in China. When that happens, it usually benefits altcoins.

More broadly speaking, the crypto market is frenetic since the beginning of the year. This frenzy is a symptom of a global economy that is still suffering from severe restrictions in some activities but at the same time is also experimenting acceleration in others. Combined with overgenerous monetary policy feeding liquidity in search of profitability away from traditional markets because of low interest rates and over rated stock markets, this is a perfect combination for investors to try anything new to boost their portfolio return if you add on the top of that, growing concerns about the return of inflation in the US.

In this context how long will the Dogecoin rally last? This essentially relies on the determination of its fans to support it but after a while, it will need to be more than a symbol!

 

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Business

TOP TIPS FOR BOOSTING YOUR CASH FLOW AND BUSINESS IN 2021

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Ian Gass, CEO at Agitate

 

Many small businesses are still dealing with the disruption caused by the pandemic. Improving financial performance is most likely to be at the top of agenda, and a good place to start is reviewing cash flow. No matter what the product or services a company provides or the size of the business, cash flow still remains king.

Research has shown that 38% of small business owners who have suffered cash flow problems have been left unable to pay debts. With 1 in 7 small business owners having been left unable to pay employees because of cash flow issues, this equates to a huge 2.2 million people in the UK not being paid on time.

 

The importance of positive cash flow

Profit has traditionally been seen as the most important measure of an organisation’s financial performance. However, the focus is increasingly shifting from the income statement to the balance of cash inflows and outflows. Prioritising profit levels reflect long term fiscal health, but it does not necessarily mean that a business can pay its bills on time and survive in the short term.

Ian Gass

Sudden drops in demand prove how keeping an efficient cash flow balance is essential, and can expose shortcomings of currently used solutions. When reviewing your cash flow, you need to look at ways to get more money coming in and better manage the money that is going out. Here are a few ways to improve cash flow management and see positive changes in a short period of time.

 

  1. Efficient forecast

It is important to be able to compare actual income and expenses with those that are in the pipeline, as it helps to determine which area of business is under performing or generating unnecessary costs. Start by looking at your projected income and expenses for the next three months, don’t wait until you receive a bill to realise there are not enough funds to cover it. An easy way to overcome this issue is a free cash flow template available online.

 

  1. Terms and Conditions review

Making sure that T&Cs are clear and comprehensive not only provides your business with a protective layer, but also makes customers understand when and how the payment is expected, and the process and penalties for late payments. That’s why regular checks and reviews of existing agreements prevents businesses from potential loses. It is also good to use reward tactics to encourage customers for prompt or early payment such as discounts or free shipping.

 

  1. Payment terms

Payment terms that are understandable and realistic is clear T&Cs in place. As it creates a contract with suppliers and obliges the organisation to pay on time, it is important to match these terms wider operation processes. For instance, if you have 14 days to pay your suppliers, but your customers get 30 days to pay you, a problem of late payments will be inevitable. To avoid damaging relationships with suppliers, you should consider an extension of the terms or reducing the credit period for your clients. It is worth taking deposits, asking for payment in advance or on receipt.

 

  1. Invoice management

Another method that can quicky improve cash flow is sending invoices promptly and ensuring they are accurate. Any mistakes will simply require queries to be resolved and it will take longer to receive payment. In addition, it is important to remain persistent at following up late payments and moving the money to the bank as soon as possible. Some clients will always need chasing and, without a follow up, they will hold on to the cash as long as possible.

 

  1. Payment options

Making it easy for clients to pay gives businesses the best chances of being paid quicker. While accepting card payments might be common place, there is a high risk of fraud. For example, in 2019 £620.6m was lost in card fraud in the UK. Also, it can be expensive to process and often leaves an organisation to wait days to receive the funds. Using a free bank-to-bank payment app means businesses can send payment requests from mobile phone straight to customers via email or messaging app (such as WhatsApp).

In that case, the consumer will receive a message with all the information they need to make the payment instantly. They click the secure ‘Paylink’, which directs them to their online banking app and all the relevant information is displayed such as your name, the amount to be paid and a reference. The transaction needs then authorising with their bank and the money moves instantly from their account to yours.

 

  1. Cost reduction

If there is too much money going out that a company can’t afford, business owners need to think of ways to reduce those expenses. There are a few questions to help understand where money can easily be dislocated:

Is there software or equipment that you are paying for that you don’t use? Can overhead costs such as utilities and administrative expenses be reduced? Are card transaction fees putting an unnecessary pressure on cash balance? If so, it can be eliminated with a bank-to-bank payment app.

Although profit might be seen as the ultimate goal for companies of all shapes and sizes, sustaining positive cash flow provides vital foundations on which a company can grow. By using the right tools, business owners can not only get paid faster and more securely, but also improve customer experience, reducing the transaction to a quick QR scan. Making a few smart changes to the existing balance sheet can have a big impact and future-proof an organisation in no time.

 

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