The State of Innovation in UK Insurance

Bought by Many

Today, we’re delighted to welcome Steven Mendel, Co-Founder & CEO of Bought By Many to the FundingKnight blog.  Here’s his guest post taking a look at the state of innovation within the UK insurance industry.

You might think the competitive insurance industry would embrace innovative insurance products such as peer to peer insurance to demonstrate its commitment to financial innovation.  However, evidence suggests that the sector is resting on its laurels.  It has mainly demonstrated a slow response to the evolving needs of customers, despite technology offering new ways to service customers and access data to provide more sophisticated and personalised premium options.  Marketing on the basis of price sensitivity is no longer enough.  Consumers are increasingly looking for excellent customer service and convenience.

PWC’s recent Future of Insurance report supports this view.  Customers are demanding ease of interaction through technology and greater flexibility from the insurance sector.  It suggests that data trawling of social networking sites can give the industry new knowledge on the behaviour, desires and buying power of existing and potential customers.  In fact, the report even goes so far as to say that sensor technology could help to evaluate the health of policyholders and identify problems earlier, leading to reduced liabilities and lower premiums.  So where is the big debate on these potential developments within the insurance industry?

As insurance companies are essentially in the business of using data to calculate quotes, it is easy to conclude that social networks would offer a tantalising opportunity for them to drive a personalised marketing strategy.  Many other businesses have already harnessed the power of Facebook.  The question is: why has the insurance industry largely ignored its potential?  The travel industry has already embraced booking apps, online day itinerary services and social media integration to encourage consumer demand in an economically challenging market.

Friendsurance, a small company in Germany, is innovating in the area of shared insurance, where small policies can be shared among a circle of friends, thus reducing the cost.  Granted, Germans are renowned for the level of insurance that they have but this represents a novel way of groups of, say, students or neighbours, getting better value on parts of their insurance.  However, there is no sign of the insurance industry embracing this idea in a cash poor consumer market or taking advantage of shared networks across the internet. This is where Bought By Many comes in, through linking collaborative consumption with social media, to try and update the insurance world – which should benefit insurers, through the creation of grouped risk, and consumers, with better value offerings. Their intention is to make insurance social, no small task.

Another route for innovating in the insurance world is through smart phones.  Given their pace of evolution in every day working lives, it is inevitable that customers will want to start the claims process for scenarios such as car accidents or minor home contents damage on their mobile phones.  There is some sign of a shift in this direction, although not across the board.  It looks as if the US insurance industry is pushing the boundaries of technology more, with the likes of State Farm’s Pocket Agent and American Family Insurance’s My AmFam.

In the UK, Aviva offers an app for the iPhone that allows car insurance customers to start their claim on their phones but another huge player, Axa, currently only gives customers one option – an 0844 phone number.  More insurance companies need to adapt apps such as MotorMate, devised by Confused.com to deliver data on a driver’s behaviour, for the purposes of offering personalised car insurance quotes.  Given that the newspaper and music industries – not exactly known for their embrace of the digital era – have transformed the way they deliver their products to the smart phone audience, the insurance industry seems to be lagging behind.

Price comparison websites have brought the issue of transparency to the fore in the insurance sector but companies themselves are coy when it comes to comparing their prices with competitors.  Perhaps some of the larger insurers should learn from a feature on the Esurance website, another US based company, that provides a quote and compares it against rates from other insurers.

The industry’s constant focus on physical damage and loss situations is frequently criticised.  As the commercial world becomes increasingly dependent upon the value of information and knowledge, it is time for the insurance sector to adapt and provide new emphasis on financial and information risk management.  New ways of thinking are needed if the insurance industry is to be able to call itself innovative.

If the insurance industry fails to adapt, the development of new technology could open up opportunities for small, niche companies to offer products to consumers.  Think about how the publishing world is being cracked open by self-published authors who need little more than their talent and access to Amazon’s Kindle store to build their name and income.  The same thing could happen, albeit it to a lesser extent, in the insurance industry.  The industry is famous for its risk-averse nature so, while it has become more efficient within its existing markets, it has failed to develop new ways of doing business.

Although the prospects appeared to be mixed, I am optimistic for the future of the industry.  A survey by Gartner in late 2010 on IT development in the global insurance industry revealed that investment is low but that senior managers are expecting huge changes in IT over the next five years to create that all-important competitive edge.  There is a sense, however, that insurance companies have been driven into these changes rather than because of a desire to offer a different experience to their customers.  The time has come for the sector to look at the travel and leisure industries, then, to see what their future could look like.

Steven Mendel is Co-Founder & CEO of Bought By Many, a start-up enabling communities to club together to buy insurance. Twitter: @stevenmendel

Cash is King: Understanding the cash cycle in your small business

old fashioned cash register

Peer to peer lending is all about sharing and collaboration, so today we’re delighted to have a guest article on the FundingKnight blog.  We want to make the blog interesting for all members of the FundingKnight community, including businesses looking for funding or those who have already used us for a small business loan and today’s guest author certainly has plenty of good advice for small businesses hoping to improve their financial management.

 

Steve Bicknell is the Group FD at SCA Group www.sca-group.com.  He’s held a number of Directorships and created Accounting 4 Business.  He’s a fellow and Panel Assessor for CIMA and his blog and You Tube videos hold a wealth of tax and accountancy advice. Today, he’s talking about understanding cash flow, we hope it’s useful.

As the saying goes, Sales are Vanity, Profit is Sanity and Cash is King. The Cash Cycle also known as the Working Capital Cycle helps you to quickly understand how much cash you need to run your business.

Here is a great example from Steve Grice for an average business

Average time to collect payment from customers           60 days            plus..

Average days sales held in stock                                   25 days            less..

Average days taken to pay suppliers                             35 days            equals…

Cash cycle                                                50 days

This means that you need enough cash in your business to finance 50 days worth of sales. If your sales are £1,000,000, you will need cash of £136,900. In practice, your business will probably need more cash available than this to pay for rent, rates, wages etc. You may also get cash spikes at the quarter end if you pay VAT.

http://stevegrice.wordpress.com/2012/02/06/working-capital-cycle/

Here is a brilliant Cash Flow Improvement Tool from NAB http://oms.nab.com.au/media/10/power_of_one/CF.html

This model quickly and easily calculates your cash cycle but also shows the effect of making improvements.

Click here to read the rest of Steve’s post on find links to his other material.

This article was first published on www.stevejbicknell.com and is re-posted with permission.

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