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    BNP Paribas, Societe Generale and Credit Agricole could be disproportionately hurt by the direct and indirect effects of a proposed Europe-wide financial transactions tax (FTT), analysts and tax experts on the matter said.

    Three credit analysts, an economist and a legal expert on taxation said French banks stand out not only because they operate large investment banking operations whose customers are in the crosshairs of the new tax, but because their investment banking operations are more reliant on Europe than peers’. Moreover, their ownership of domestic life insurance activities brings with it additional exposure to the impact of the tax on final demand.

    The tax, which will be imposed on banks’ customers, is likely to come at a time of shrinking demand due to France’s poorly performing economy. One credit analyst said it could speed consolidation of the sector or force the closure of activities that become subject to such a tax.

    The FTT, sometimes called the Tobin tax after the US economist James Tobin, received backing from EU finance ministers last month and is set to be introduced as a levy on share, bond, foreign exchange and derivatives transactions in 11 European states, including France, Germany, Italy and Spain. The UK, which already applies a stamp duty of 0.5% on shares and securities held in certificate form, is not currently planning to participate in the new FTT.

    Adoption of the FTT has gained momentum on the Continent, most notably in France, where President Francois Hollande and his Socialist-led government have pushed efforts to impose transaction taxes as a way to curtail excessive risk-taking by investment banks, and to lower price volatility due to high-frequency trading.

    The tax could also raise tax revenue for European governments by up to EUR 35bn if applied as intended across EU-member states where the financial institution or the client is headquartered. But this revenue, while not coming from the investment banks, comes from their customers, and the higher cost could suppress demand for their products and services in France, which is already serviced by more investment banks than any other country in Europe.

    What’s worse, said the first credit analyst, is that all three of the large French investment banks have long been heavy users of derivative products in their portfolio strategies.

    Last August, the newly installed French government imposed a 0.2% tax on the purchase of shares in French firms with a market capitalisation above EUR 1bn. This level was also applied to CDS against sovereign debt, while a smaller 0.01% levy was imposed on high-frequency transactions. But there was no FTT applied to derivative transactions, creating a tax loophole for banks and their counterparties that structure ETF products using swaps contracts.

    The FTT plan that European lawmakers are considering signing into law by mid-March will no longer allow for that exception. Under the new plan, each side of a securities transaction involving secondary market trading of equities, bonds or currencies would incur a tax rate of 0.1%, while for each side of a derivatives transaction a tax rate of 0.01% will be applied. Primary listings of equities and all trading of government bonds would be exempt from the tax.

    The European FTT, like the existing FTT in France, will also target high-frequency traders, and in the process raise costs for brokers, inter-dealer brokers and exchanges, according to the economist. Moreover, because the new tax would be levied across Europe, there would be no easy way to avoid paying it, as occurred in the 1980s when efforts to implement an FTT in Sweden quickly led foreign investors to move trading offshore.

    Amid weakening volumes, Societe Generale this week announced it had written down the value of its Newedge 50/50 brokerage joint venture with Credit Agricole. But while brokerage is broadly considered a business in decline, key growth segments of Societe Generale’s investment banking activities are also likely to suffer significantly due to the tax, according to the economist and a second credit analyst.

    Lyxor, a fast-growing asset management business at Societe Generale that specializes in the use of derivative-heavy financial engineering tools, exemplifies part of the problem. The economist said that the Tobin tax, when applied to intermediaries “boosts the costs of market making”. When this added cost is passed on to end users, it raises the cost of capital and suppresses demand.

    “At a high level, you do create a differential impact” by adding FTT-related costs to the complex and heavily used engineered instruments in Lyxor products, he said. This, in turn, will make them either less competitive versus simpler products.

    A banker familiar with the activities of Lyxor agreed that in Europe, at least, it could undermine the business model. Lyxor had assets under management of EUR 75.4bn at the end of 2012 and is Europe’s third-largest ETF provider. Even so, it represents only a small proportion of Societe Generale’s businesses that could be affected by the FTT.

    According to dealReporter analytics, EUR 6.189bn of the corporate and investment banking revenue booked by Societe Generale in 2012 could be affected by the tax. That represents 27% of group revenue and 39% of net income from core businesses.

    Besides the equity and equity derivative products in which Societe Generale is considered a global leader, the corporate and investment bank’s highly profitable fixed income and currency trading operations are likely to be significantly affected by changes in demand that result from the new tax. The bank’s security services activities could also be affected.

    A spokesperson for Societe Generale declined to comment. But a person familiar with the bank’s thinking on the matter said that the top-line impact of an FTT is difficult to quantify for the bank because it affects the client rather than the bank.

    At BNP Paribas, the analysis found that EUR 9.715bn of the bank’s corporate and investment banking revenue booked in 2012 could be affected by the tax. That represents 25% of group revenue and 29% of group pre-tax income.

    Credit Agricole, which has yet to report full-year results for 2012, had EUR 5.176bn of revenue from its corporate and investment banking business in 2011 that could be affected by the tax. That represents 14.7% of 2011’s revenues.

    Spokespersons for both BNP Paribas and Credit Agricole declined to comment on the possible impacts of a Europe-wide FTT.

    Beyond the anticipated impact on complex financial products, the economist outlined a “uniform shock” across the financial landscape from a Tobin tax and a cascade of secondary impacts, including reduced re-investment, hedging and savings activity among both corporate and pension funds.

    And French banks are exposed to these effects more than most in Europe, according the economist and a second analyst. Credit Agricole, which owns Predica, is the second-largest domestic insurer, and BNP Paribas is the third. Societe Generale is the fourth-largest bancassurer in France.

    The second analyst said the impact of the FTT would be mitigated by the fact that insurers do not have a high-portfolio turnover due to their mostly buy-and-hold strategies. But the economist said there could be other, as yet unpredictable consequences for banks that provide insurance services. In an increasingly open European market, the option may soon exist for customers to buy insurance from non-French or non-European suppliers able to avoid the FTT.

    By contrast, noted the legal expert, the Tobin tax would have “only a limited effect on Germany, with its banking system much less reliant on investment banking”. A third analyst noted that Germany’s Deutsche Bank [DBK GR] has the advantage of being far more global than any of the French banks, giving it the ability to shift activity more widely to regions where clients may be able to avoid the tax.

    By Henry Teitelbaum and analytics by Eoin Mullany

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    In the wake of unprecedented health care market changes and rising health care costs, new survey findings from Aon Hewitt reveal that the way U.S. employers offer, manage and deliver health care benefits to employees is likely to change significantly in the coming years.

    According to Aon Hewitt, the amount employers spend on health care has increased by 40 percent in the past six years to approximately $8,800 per employee. Over this same period, employee premium and out-of-pocket costs have increased 64 percent to almost $5,000 per year. Aon Hewitt estimates that health care costs for both employers and employees will continue to rise 8 percent to 9 percent per year for the foreseeable future. Worsening population health issues, including obesity, smoking and failure to comply with medications, are expected to significantly contribute to the rapid rise in health care costs.

    Despite these challenges, Aon Hewitt’s survey of nearly 800 large and mid-size U.S. employers covering more than 7 million employees found that 94 percent of those surveyed will continue to offer health benefits to their employees in the next three-to-five years. However, of those employers, almost two-thirds plan to move away from a traditional “managed trend” approach to one that requires participants to take a more active role in their health care planning.

    “The health care marketplace is becoming increasingly complex. New models of delivery, new approaches to managing health, and new compliance requirements are challenging employers to think differently about their role in ‘owning’ health insurance responsibilities for employees and their dependents,” said John Zern, executive vice president and the Americas Health & Benefits practice director for Aon Hewitt. “Employers are staying in the game, but they are taking bold and assertive steps to achieve more effective results—and they are doing so at a faster pace than we’ve seen in prior years.”

    Adopting “Pay for Performance” Philosophies
    Aon Hewitt’s survey found that in the next three-to-five years, almost 40 percent of employers expect to migrate toward a “house money/house rules” approach. Under this model, employers may reserve a portion of their health care dollars for those employees who exhibit good health behaviors or who can show measurable progress toward their health goals. For example, participants who take health risk questionnaires and biometric screenings may be rewarded in the form of lower premiums or access to broader health coverage. Other employers may waive prescription drug co-pays if an employee demonstrates they are following their doctor’s orders with regard to a chronic condition. Lastly, some leading-edge employers are working with health plans to incentivize participants to use a small provider network of high quality, cost-efficient providers.

    “Over the past decade, employers have reserved an increasing portion of their cash compensation program to pay-for-performance bonus programs,” said Zern. “We see similar approaches emerging with health benefits, which reward those employees who actively participate to achieve improved health outcomes.”

    Growing Interest in Private Health Care Exchanges
    While still an emerging trend, private health care exchanges are quickly generating interest among employers. In this model, employers continue to financially support health insurance, but enable employees to choose from multiple plan options and insurance carriers via a competitive, fully insured health insurance marketplace. The exchange model assumes many of the health benefits responsibilities that employers historically manage—including plan design, insurance carrier selection and management, user experience and behind-the-scenes administration.

    “Private health care exchanges allow employers to re-create a competitive marketplace for health insurance based on consumer choice, which will encourage insurance companies to drive the system toward greater efficiency,” said Jim Winkler, chief innovation officer for the U.S. Health & Benefits practice at Aon Hewitt. “While this option may not be a fit for every employer, it is increasingly attractive to those organizations that want to offer employees health care choice while lowering future cost trends and lessening the administrative burden associated with sponsoring a health plan.”

    According to Aon Hewitt’s survey, about 28 percent plan to move into a private health care exchange over the next three-to-five years. In January 2013, for example, more than 100,000 U.S. employees enrolled in their health benefits through Aon Hewitt’s Corporate Health Exchange, the nation’s first and only operational fully insured, multi-carrier health care exchange.

    Employers’ Current and Future Health Strategies

    Now 3-5 Years
    Manage risk via “House Money House Rules” approach 57% 37%
    Move to a private health exchange 2% 28%
    Exit health care completely 1% 6%
    Maintain traditional trend mitigation approaches 37% 27%

    Exiting Health Care Completely
    Aon Hewitt’s survey shows the vast majority of employers do not view the emerging individual insurance market as a replacement for the employer-based system in place today. Just 6 percent of employers said they plan to exit health care completely in the next three-to-five years.

    “The allure of exiting completely is strong until you look at the numbers,” said Winkler. “Between the Affordable Care Act penalties for failing to offer coverage and the ensuing talent flight risk, most employers believe they need to continue to play a role in employee health, but want a different and better outcome.”

    “Regardless of the role the employer plays in managing health benefit plans, every organization needs to be committed to maintaining a healthy, high performing workforce that is engaged and ready to work every day,” added Zern. “This is increasingly true in the global, mobile workforce of tomorrow.”

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      With an average of only 30 per cent of customers globally reporting having positive customer experiences with their insurers, insurers will need to address multi-distribution and customer experience concludes the sixth annual World Insurance Report 2013 (WIR 2013) released today by Capgemini and Efma.  The report also finds that mobile and social media channels are gaining traction with insurers in terms of early adoption rates.  These distribution channels can help insurers provide better customer experiences as well as capture operational efficiencies. The WIR 2013 is based on 16,500 customer surveys, research data from 41 markets, and interviews with 114 insurance executives.

      According to the WIR 2013, the insurance industry’s focus is shifting from pure cost reduction and operational efficiency initiatives to revenue building and brand loyalty strategies while lowering mounting customer acquisition costs.  Heavy emphasis is on multi-channel distribution strategies with keen interest on how to leverage lower-cost sales channels like mobile, internet, and social media.  Mobile and social media are a priority for more than 50 per cent of insurers surveyed globally over the next two years.

      Positive Customer Experience is More Meaningful than Just Measuring Customer Satisfaction

      Customer experience reflects the entire customer lifecycle while customer satisfaction is just a one-time measure of how products and services meet or surpass customer expectations.  On average, the WIR finds that approximately only one in three customers across 30 countries studied in the report’s new Customer Experience Index (CEI) had a positive experience with their insurance company, while 62 per cent registered positive customer satisfaction levels.   Additionally, the WIR finds that nearly two out of three customers are at risk of retention with only a neutral and/or negative customer experience. “When customers have neutral or negative experiences with an insurer, opportunities are created for insurers to ‘court’ other carrier’s customers, and customers may switch even for minimal extra benefits,” says Jean Lassignardie, Chief Sales and Marketing Officer, Capgemini Global Financial Services. “Even in the US, the country with the highest customer experience ratings, insurers still face a risk of retention rate of 50 per cent meaning no one is immune.”

      Mobile and Social Media are Opportunities to Increase the Customer Experience

      A majority of insurers are viewing mobile as an important access point for supporting the overall customer experience (especially in areas like quotes, claims, and relationship management) rather than just as an additional sales channel.  And while insurance customers prefer online for activities like finding best price and comparing policy coverage, they still prefer physical distribution networks (agents and brokers) when it comes to gaining brand trust.  The top five reasons for insurers to invest in the mobile channel are: anytime/anywhere/any device demands; keeping up with the competition; customer service costs; increased smartphone adoption; and cross-selling/up-selling opportunities.

      The report explores four key mobile focus areas from insurers categorized as: ‘early winners and must haves’ (areas with high ROI potential) to evolving areas such as ‘must watch’ and ‘wait and see.’ Among insurers surveyed, the leading mobile services offered today and those with high ROI potential over the next two years include: product information via mobile (43 per cent today/91 per cent by 2015), claims services (16 per cent today/73 per cent by 2015), quotes (23 per cent today/70 per cent by 2015), Straight through Processing (9 per cent today/55 per cent by 2015), and policy changes (9 per cent today/52 per cent by 2015).

      Similarly, social media offers insurers new ways to increase their market penetration and increase the effectiveness of their customer retention/acquisition strategies.  According to the WIR, a majority of global insurers (59 per cent) are already leveraging social media but very few have integrated it into their overall enterprise-wide CRM strategies leading to sub-optimal results.  The report suggests integrating social media strategies with traditional CRM will create “social CRM” enabling enhanced positive experience for customers’ and insurer branding propositions.  Patrick Desmarès, Secretary General, Efma adds “Another possible way for insurers to improve their customer experience ratings would be to look at the banking industry model.  Even though banks have many more interactions with customers, their high customer experience ratings indicate best practices in data analytics, market segmentation, and cross-channel integration are being implemented.”

      Ongoing industry efforts to improve Operational Efficiency

      2011 was a year of many catastrophic events such as the tsunami triggered by an earthquake in Japan and extreme weather conditions in the US and Australia resulting in a total economic loss of US$370bn of which US$116bn was insured. These external events had a negative impact on operational efficiency in the insurance industry overall. However, insurers in geographies not affected by these market events have continued to make significant headway in making operational improvements in areas like underwriting and claims. These operational improvements efforts are working and should continue. Areas that have paid off in operational improvements include: systems and technology investments; realigning distribution channel strategies, claims transformation, and productivity improvements.

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      People approaching retirement will get clearer help and information to get the best possible pension deal under an initiative to be implemented on 1 March by the ABI.

      The ABI Code of Conduct on Retirement Choices will help the 400,000 people who buy an annuity each year better understand their options at retirement, choose the right annuity for their circumstances and shop around for the best deal, through clear and consistent information provided by insurers. While most people approaching retirement are aware of their options, one in four people feel they do not fully understand their retirement options, with one in three not feeling informed enough to compare quotes from another provider.

      The Code will improve customers’ confidence in getting the right pension by:

      – Providing clear, timely information to help people approaching retirement understand what their options are. At least two years from retirement the insurer will encourage the customer to consider their retirement options. Six months from retirement and at least six weeks from retirement the insurer will send details explaining the various options, such as combining small pots, and shopping around for the best annuity.

      – Explaining the different ways to take retirement income. This will include providing for dependants, lifestyle or medical conditions that may mean they are eligible for an enhanced annuity and protecting against inflation.

      – Encouraging shopping around for the right pension deal. The benefits of shopping around among other providers will be clearly highlighted along with sources of further advice. Insurers will no longer include annuity application forms so there will be less chance the customer will buy from the current provider without first shopping around.

      To monitor the effectiveness of the Code the ABI will conduct consumer research to assess changes in people’s retirement awareness and pension purchasing. The impact of the Code will be reviewed in 2014.
      As part of the industry’s commitment to greater pension’s transparency, the ABI will in the summer publish specimen annuity rates across a range of different products offered by members.

      Otto Thoresen, ABI Director General, said:  “This Code is the latest initiative in the industry’s commitment to helping meet customers changing pension needs. Increasing life expectancy means that many people will be receiving a pension for longer than they were paying a mortgage so the need to make the right decisions at retirement has never been more important. The timely, clear and relevant information provided under the code will significantly increase the number of people reaching retirement with the confidence to make the right pension decision”.

      Economic Secretary to the Treasury, Sajid Javid, said: “Raising awareness of the crucial decisions people need to make about their retirement has benefits both for individuals and for the industry as a whole. I welcome the ABI’s Code of Conduct in giving customers clearer information and helping people get the best pension deal possible.”

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      Speaking at the 1st Asia Insurance Brokers’ Summit in Singapore, José Fonseca, Chairman of BrokersLink and CEO of MDS Group, told delegates that independent brokers can become the powerhouses of the global insurance industry if they treat their clients as true partners, invest in the future and join forces with their peers from around the world.

      He explained that despite the current challenging environment, smaller specialist or territory focused brokers unencumbered by stifling corporate inflexibility are well positioned for growth.

      “All brokers are trading in a fast changing and increasingly complex market, but entrepreneurial spirit, a strong work ethic and agile decision making capabilities are making independent brokers look very attractive to client businesses facing similar trading issues,” said Mr Fonseca.

      He told the broker and (re)insurer audience that being a specialist broker based in a single country was no longer a barrier to handling global accounts: “10 years ago trading internationally without a network of offices was very difficult, but advances in internet based communications and trading platforms have created an entirely new ball game.  By joining forces with their peers across the world, embracing new technology and adopting a global co-operation mind-set, many groups of brokers handle accounts as large as the established international brands.”

      “It’s all about having the right attitude and long-term outlook,” he concluded.  “Clients are looking for their brokers to become true partners and, if you can instil this in your team, global expansion will become a viable strategy for growth.”

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      Surprising research from travel insurance specialist Columbus Direct has found the younger generation are more cautious when it comes to safety on the slopes, with younger skiers and snowboarders being more mindful of safety and more likely to wear a helmet.

      The Columbus Direct ski survey for 2013 found two thirds (66%) of 16-24 year olds will always wear a helmet on the slopes and, in comparison, almost half (48%) of those aged 55 and above said they would never wear a helmet.

      In total, only 20% of Brits say they would wear a helmet if their insurer insisted. The worst again are the older generation with only 4% of those aged 45 and above saying they would wear a helmet only if their insurer insisted, compared to 26% of those aged 16 to 34.

      Interestingly, over 90% of those aged 45 and above do not wear a helmet because they ‘never have’, which may mean this age group thinks they are experienced enough not to worry about safety gear.

      Greg Lawson, Head of Retail at Columbus Direct says: “Like most insurers, cover under a Columbus policy is not based on a compulsory requirement to wear a helmet. However, we would encourage all skiers to take appropriate safety precautions when on the slopes and recommend wearing helmets and other protective gear. Falling onto compacted snow on the piste at speed can be like landing on concrete so it’s worth the investment.

      Almost two thirds of those aged 16 to 34 say they are cautious on the slopes compared to only 37% of those aged 45 and above. 60% of those aged 45 and over will snowboard as aggressively as their ability level allows compared to 35% of those aged 16 to 34.

      Lawson continues: “Many skiers often fail to purchase the correct level of cover for their needs. A standard single trip travel insurance policy is unlikely to cover winter sports automatically, so I recommend skiers check that they have included a Winter sports add-on and that this provides the specialist cover that suits their planned activity.

      Many travel insurance policies often exclude more spontaneous activities such as going off-piste (especially outside of the resort boundaries or without a guide) but also perceived low-risk activities such as tobogganing, ice-skating and even reindeer sleigh rides! Many leisure skiers are also unaware that too much mulled wine over lunch at the mountain restaurant may render their policy invalid, so the inevitable corny conclusion is to stay off the wine but on the piste.”

      The survey also found that half of Brits do not wear or carry any safety gear while skiing or snowboarding. Over 60% of those aged 45 and over say they do not wear any safety gear compared to 42% of those aged 16 to 34, again showing that the younger generation are more safety conscious. When it comes to the gender divide, the research found 61% of women do not carry any safety gear compared to 39% of men showing men are maybe more aware of the risks they are prepared to take.

      The top 3 pieces of safety equipment carried on the slopes by Brits:

      – Wrist guards – 26%

      – ABS system – 18%

      – Avalanche transceiver – 16%

      Lawson concludes: “There are a variety of safety items that skiers should consider when going on the slopes in addition to a helmet. These can include standard protection such as wrist guards to protect you from fractures or, for those who venture off-piste, avalanche airbags and snow shovels should be considered.

      Skiers tend to be creatures of habit, wanting the adrenaline rush that the sport can deliver time after time. Consequently, there is a greater accident risk on the slopes than on the beach so travel insurance is an essential trip purchase, even for the fittest skier. We want our customers to have a great holiday but also to be aware of the potential risks so that they maximise their time on the slopes and not in a hospital bed.”

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      Simon Lee, RSA Group CEO comments on full year results :

      “These are a solid set of results demonstrating strong progress in challenging market conditions. We’ve seen good growth in premiums up 5% to £8.4bn. Operating profits of £684m have been impacted by the Italian earthquakes, extreme wet weather in the UK in the first half of the year and falling bond yields.

      “We are continuing to execute our strategy of global growth while maintaining profitability and underwriting quality. In 2012 over 65% of our premiums were from outside the UK and as we move more of the business towards higher growth and higher margin markets, we are optimistic about our future growth prospects.

      “We are confident that we can deliver sustainable and ongoing improvements in the combined ratio and return on equity through management actions and we are not dependent on economic or market recovery to deliver these plans.

      “We have leading market positions in Scandinavia, Canada, Latin America, Ireland and the UK.  These are attractive general insurance markets where we are either already delivering or will deliver strong returns on capital.  Where we do not see a route to achieve target returns on capital we will take decisive action.

      “The Board’s decision to rebase the dividend is a prudent move that will enable us to invest in the opportunities we see for growth and is in the best interests of our shareholders. It is absolutely the right thing to do for the business given the prospect of prolonged low bond yields. The new dividend is appropriate for the business today, sustainable into the future and will allow a progressive dividend policy going forward.”

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      A new service for adjusting third-party motor collision claims has been launched by specialist loss adjuster SSL Claims.

      Using highly-trained Chartered Surveyors making on-site visits for every claim, rather than the more usual desktop-based systems, operated by general adjusters, instead of qualified surveyors, the Northampton-based firm says its product will produce dramatically more accurate assessments, leading to significant savings for motor insurers. This is further enhanced by the new video capability rolled out earlier this month.

      The firm is so confident of its approach that its fee scale is entirely based on the saving that it makes the insurer.

      Julia Hewett, joint managing director of SSL Claims said: “Over recent years, many adjusters have developed a very commoditised approach to adjusting third-party collision claims. We think this is flawed, and want to focus on delivering a skilled service to insurers that will compete on cost because of the savings we can make. Based on our philosophy of using real experts to assess face-to-face, we know that it is possible to cut costs for insurers, boosting their bottom lines.

      “It’s an approach that’s worked for other areas of our business and we think it will do the same for this type of claim.”

      The company is able to take each claim through to fulfilment via their network contractor, Nimbus.

      SSL specialises in adjusting Crown property damage and third party motor impact damage.

      Initially offering its services to Lloyd’s syndicates writing motor business, SSL Claims now works for all of the UK’s major insurers.

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      Novae Group is pleased to announce the launch of its first industry survey, which provides direct insight from the market on the market about what the future of the insurance industry holds.

      The report is based on original research done within the London insurance industry, drawing on the insights and first-hand experience of many of the leading figures from the insurance market.  A central tenet of the research was that “the future may not be easy to predict, but it is not impossible to prepare for”. The resulting publication is the cumulative wisdom of some of the industry’s greatest minds on everything from the context of the global economy to innovation, regulation and scale. Some of the key themes to emerge from the research are as follows:

      1. “Bigger, Faster, Scarier”:  the future of the industry is ‘big’ and competitive…not only the companies within it, but the nature of the risks they will be asked to insure.

      According to one market participant: “There will be more consolidation; the three large brokers will consolidate down into two. There will be significantly more consolidation in the US and globally amongst small brokers because of the cost of capital and cost of regulation. Insurance companies don’t welcome this loss of competition. But it is a given.”

      2. “New products, new markets”:  in terms of both geography and product, areas of growth in the future will be different from those in the past – and profitability will be hard won

      According to one market participant: “People need to be more innovative and write more business and create relationships in emerging markets and use their brains. It’s a challenge but it’s a challenge for all of us that we have to work out. If you are struggling to write one line of business only, you will either get taken over, or no-one will want to do business with you.”

      3. “Regulation”:  regulation was made for Man, not Man for regulation. The insurance industry had a ‘good crisis’, and it should be more assertive in telling the regulators what works

      According to one market participant: “Increased regulation is the biggest factor – it is more and more intrusive and completely bloody relentless. It particularly impacts on new companies.”

      Commenting on the survey launch, Matthew Fosh, Chief Executive Officer of Novae Group said: “In an industry built on having eyes on future risk, how often do we look into our own future? This was one of the reasons for carrying out the research, and one of the first questions we asked the market. With this research, we also felt it was right to tease out recognition of the importance of the industry, which is often seen in the media in a negative way. The truth is that the insurance industry, as a major contributor to the economy, is central to the financial services sector, not only in the UK, but worldwide. Hopefully this survey reinforces that reality.”

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      Aon Global Risk Consulting, the risk management consulting arm of Aon, launched a report finding a statistically significant link between a higher risk maturity rating and lower volatility in stock price.

      Researchers at Aon and the Wharton School at the University of Pennsylvania conducted analysis of data collected by the Aon Risk Maturity Index Report. Working with annual financial results for more than 100 global publicly-traded companies across more than 25 industries, researchers confirmed that during a two-year period from 2010 to 2012 stock price volatility was 50 per cent lower for organizations with high risk maturity ratings than those with lower ratings. Between 2011 and 2012, when markets were marginally down and particularly volatile, organizations with more advanced risk management practices performed significantly stronger. Only organizations with the two highest ratings closed the year with a positive return while lower-rated organizations ended the year with a 17 to 30 per cent loss.

      “We are pleased that in less than two years after the launch of the index the data confirms what we intuitively have always believed regarding the link between risk maturity ratings and stock price as well as financial performance and risk management,” said Theresa Bourdon, group managing director of Aon Risk Solutions. “This is an incredibly valuable tool that facilitates transparency and provides a benchmark on risk management. It enables organizations to shape their risk management processes to improve financial performance.”

      The Aon Risk Maturity Index Report was developed by Aon Global Risk Consulting, in conjunction with the Wharton School at the University of Pennsylvania and Aon’s Centre for Innovation and Analytics. An award-winning tool for its innovation, the Aon Risk Maturity Index Report is increasingly being recognized globally for its success in understanding and assessing the link between risk management and financial performance.

      Additional Aon Risk Maturity Index Findings
      The Aon Risk Maturity Index respondent group includes 500 organizations on five continents, representing 25 countries and more than 28 industries. Following are additional findings, identifying global risk maturity trends:

      – Industry averages overall mirror the global average Risk Maturity Rating, which reveals that most organizations are in the middle-of-the-road on the complexity of risk, agreement on strategy and action and alignment to execute risk management programs

      – Size of an organization measured by annual revenue does not appear to play a major role in influencing risk maturity

      – Chief Financial Officers scored slightly lower risk maturity ratings, on average, than other respondent groups; this may reflect the increased insight of a senior leader into risk and governance processes, or focus on the financial impact of risk

      – Chief Risk Officers scored slightly higher risk maturity ratings on average than other respondent groups; this may reflect the level of risk management maturity at an organization that has established a titular CRO role

      – There appears to be little difference in the level of consistency of North American and EMEA region operations with their organizations’ global risk management strategy, regardless of whether the organization is headquartered in either of those regions

      The Aon Risk Maturity Index Report is open for participation to senior risk and finance executives as well as senior legal and additional business leaders regardless if they are an Aon client. Upon completion of a questionnaire, participants receive an immediate risk maturity rating along with commentary for potential improvements. Results are then further analyzed by the Aon Centre for Innovation and Analytics as well as consultants from Aon Global Risk Consulting’s Enterprise Risk Management Practice. A comprehensive and complimentary rating report is delivered to the participant.

      The index will continue to capture data that can be used to drive insights, benchmark to industry and global standards as well as assist businesses in the development of their risk management frameworks.

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      Despite the need to overcome mounting competition and diminishing consumer loyalty, the online customer experience provided by UK insurers has deteriorated over the last year, with less than half (48%) of basic online questions answered satisfactorily, according to a new study released. As well as failing to answer questions asked online or sent via email, insurers are still ignoring the social media channel, according to the Eptica Multichannel Customer Experience Study. The research found that the online performance of insurers is worsening – with the number of questions answered online dropping by 2% from 50% in the previous year. Insurers responded successfully to just 30% of emails.

      The research, carried out by multi-channel customer interaction management software provider Eptica, evaluated 10 insurers active in the motor, life, travel, pet and household sectors. They were tested on their ability to provide answers to 10 routine questions via the web as well as their speed and accuracy when responding to enquiries sent via email, and links to social media.

      UK insurers face pressing challenges. The rise of the internet and price comparison sites have slashed margins, competition is growing, customer loyalty is at an all time low and claim costs and regulation are both increasing. Hampered by legacy systems and paper-intensive, manual processes, many insurers are struggling to adapt to this new, multi-channel, customer-centric, low margin world.

      Moving to cheaper channels such as email is key to increasing efficiency while improving choice for customers. But while insurers recognise this, there are still issues with providing timely responses that actually answer customer questions. 80% of insurers provided email contact details, but only 60% responded to messages, and just 30% of the replies actually answered the question that was asked. This seems to show a haphazard approach, rather than having a well-planned, efficient process in place.

      Poor email performance continued when it came to response times. On average it took insurers 30 hours, 6 minutes to answer emails, double the 14 hours of previous research. The study uncovered huge differences in performance – one insurer took over 2 days (49 hours) to reply to an email – although another responded in just 1 hour 18 minutes, delivering a real competitive advantage.

      There was a growing gap between best and worst when it came to online customer service. The two highest scoring insurers answered 7 out of 10 questions asked on their websites, while the lowest score was just 2 out of 10. With over 80% of consumers researching insurance online[1] and loyalty at an all time low failing to provide basic information online will simply drive customers to competitors.

      “The insurance industry is at a critical juncture, faced by diminishing margins, rising costs and vanishing customer loyalty,” said Dee Roche, VP, Global Marketing, Eptica. “Efficiently providing a superior customer experience across multiple channels is at the heart of succeeding in such a difficult market. However our research found that overall performance has got worse over the last 12 months, and that there is an increasing chasm between best and worst. Given the competitive pressures facing insurers they need to look at where they can improve their processes to increase customer retention and improve efficiency.”

      Social media is now a growing channel for customer service – but insurers are still wary of Facebook and Twitter. The study found that social media use has increased dramatically – 50% of insurers now provide links to their Twitter accounts and 30% have Facebook pages (up from 10% on both networks in 2011). However this lags behind other sectors. Overall 70% of the 100 companies surveyed in the Eptica study had Twitter links and 64% have Facebook pages.

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      Around 12% parents surveyed said they would insure their child’s car on a policy in the parent’s name in an attempt to reduce the premium their child would have to pay.  

      The practice, known as ‘fronting’, is done by some parents in the hope of sparing their children from expensive premiums.

      Fronting is when a lower risk – usually older – driver, insures a vehicle in their name, but the actual main driver falls into a higher risk category, such as a young or inexperienced driver. Though the idea behind fronting is to save the young driver money on their premium – in actuality it is fraud and could invalidate their insurance and even land them with a criminal record.

      In the Gocompare.com study, 1 in 10 (13%) parents confessed to having lied on their own insurance applications. And a quarter (24%) would consider lying to their insurer if it meant saving money on their premiums. Furthermore, 1 in 5 (20%) parents said they considered car insurance to be ‘a complete rip-off and would gladly tell a white lie if it reduced their premium’.

      Despite this, the research showed that parents are generally aware of the consequences that might arise from lying on their insurance application.

      The study showed that 9 in10 (87%) acknowledged that they knew they could have their insurance claim rejected as a result of lying to their insurer, but 1 in 20 either doubted insurers would ever find out or believed their mistruths would bear no consequence.

      Scott Kelly, head of motor at Gocompare.com, commented; “Our research seems to show a general lack of understanding of insurance by parents, which they could be passing on to their children. For instance, 17% of parents said they would advise their child to downgrade their cover to third party fire and theft to reduce their premium. However, there is often little or no difference in the cost of a comprehensive or third party fire and theft policy. So far from saving them money, this advice could just leave their child with a poorer level of cover

      “We can’t stress enough the importance of telling insurers the truth, as any deviation from the facts may result in any future claims being refused. There are plenty of perfectly legal ways to reduce premiums for young drivers which don’t result in them being underinsured or criminally liable.”

      “Instead of ‘fronting’, parents should consider adding themselves as a named driver on their son or daughter’s policy. Having a more experienced driver on the policy should lower the premium and would still allow the younger driver to gain No Claims Bonuses (NCB) which will help lower future premiums significantly.”

      For example, the cheapest quote for an 18-year-old driver with a 1.0 Vauxhall Corsa; came from Endsleigh at an annual premium of £1,625.11. However, by adding an experienced driver to the policy as a named driver, the cheapest quote was £1,516.92 a saving of £108.19 from the same insurer!***

      Scott adds; “Another way for both inexperienced and experienced drivers to lower their premiums is to consider a telematics policy. This involves having a GPS-enabled ‘black box’ fitted to your car to track the way you drive. A telematics policy could be an ideal way for young, new or low millage drivers to prove to their insurer that they deserve to be rewarded with a cheaper premium and – especially in the case of younger drivers – encourage good driving habits. In the study, 30% of parents said that they would recommend that their child consider one.”

      “The best way to save money on your car insurance is to do your homework and shop around. Using a price comparison site, like Gocompare.com, is a great way to make sure you’re getting the cover you need at the best possible price.

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      Members and students of the Chartered Insurance Institute (CII) looking for quick, convenient access and the added benefits of up-to-date technology will now be able to study for their qualifications on their portable electronic devices as the CII launches study texts in ebook format.

      These brand new CII ebook study texts are compatible with the majority of portable electronic devices including Android Windows tablets/smart phones, Kindle and iPad/iPhone. Ebooks can also be viewed on desktop and laptop computers.

      Ebook study texts give learners access to all the benefits of the printed CII study text, including the same enrolment period, updates and access to RevisionMate (the CII’s online study tool) where available, whilst reducing paper use. There are also a number of useful features such as annotation tools, easy navigation, quick web link access, in-built dictionary and read-aloud – the latter available on the majority of devices allowing the student to listen and learn at the same time.

      Niall Boyd, head of product marketing at the CII, said: “The launch of the CII’s ebook study texts is a major step forward for the professional body in terms of members’ access to study material and represents the growing popularity of digital content over printed material. It also reflects how consumers’ preferred method of study has evolved over recent years as tablets and smart phones have taken off in a big way.

      “We took members’ lifestyles and study habits into consideration whilst developing this format – for example an ebook study text is especially handy for someone commuting or travelling, and needing fast access to course information. We hope that those studying for CII qualifications will get a lot of value out of these new ebooks.”

      Other benefits to the new ebook format include that there is no postage fee as they are delivered electronically through RevisionMate and fast delivery (same day delivery if purchased before 16.00 GMT Mon-Fri).

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      Whilst there is optimism in the sector, most see the prospects for the overall economy as tentative at best, with only 15% of insurance CEOs believing that it will improve over the next twelve months. Nearly a quarter expect the economy to decline, though this is a much less pessimistic outlook than last year, when nearly half anticipated worse times ahead. Recession in the US and falling growth in China are now seen as more likely and damaging scenarios than a break-up of the Eurozone, though the prospects for growth in Western Europe are still seen as limited compared to other regions.

      Jonathan Howe, UK insurance leader said: “The insurance industry is facing significant challenges and opportunities. Trajectories of growth in different parts of the world are diverging; customers are demanding more transparent and accessible products; technology is revolutionising risk analysis and customer profiling; and, the speed of change is putting existing business models at risk.

      “The insurers that come out on top will focus keenly on the customer and have a superior capacity for innovation and reinvention. They’ll be able to anticipate change and how it affects them, as well as be nimble enough to quickly capitalise on emerging opportunities.”

      Existing insurance business models are at risk…        

      While many insurance CEOs have fixed their sights on the immediate challenges of low interest rates, slowing demand in mature markets and the resulting pressure on share values, they can’t afford to ignore the following transformational changes on the horizon:

      – Diverging trajectories of growth in different parts of the world;

      – Customer demand for more transparent and accessible products;

      – A technological revolution in risk analysis and customer profiling;

      – Rapid change that is putting existing business models at risk; and

      – A heightened threat of new entrants picking off profitable business.

      As a result, existing business models are at risk. The insurers that adapt effectively will focus keenly on the customer and have a superior capacity for innovation and reinvention. They’ll also be able to anticipate – not just react to – change, and be nimble enough to quickly capitalize on emerging opportunities. Businesses that fail to respond could find themselves priced out of the market, falling short of customer expectations, and under threat from aggressive new entrants.

      Jobs and the search for talent

      Insurance CEOs see the availability of talent as the biggest threat to their growth prospects although it is surprising that less than 30% see filling talent gaps as a key investment priority.

      Competition over pay is still strong, with nearly three-quarters of industry leaders believing that they need to match the rewards their peer organisations offer to retain top talent. However, sustaining this compensation model will be difficult as returns continue to come under pressure and tax demands in many markets increase (nearly 60% are concerned about the increasing tax burden).

      More than 80% of insurance CEOs believe that risk should be factored into performance evaluation and pay, while a third has changed the way they set executive pay in response to shareholder and public pressure. The challenge for insurers is how to create a coherent compensation framework that can attract and retain talent, while reflecting risk considerations and leaving sufficient funds to meet investor expectations.

      Rebuilding public trust

      55% of insurance CEOs are concerned about lack of trust in the industry, a higher proportion than banks (54%) and asset managers (44%). Ongoing success is likely to require a cultural shift as insurers seek to rebuild public trust. Over 60% of survey respondents are looking at how to strengthen their culture of ethical behaviour. This includes defining the right behaviours, as well as reinforcing mechanisms such as changes in hiring practices, organisational design, development programs, performance management, and rewards.

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      NTT DATA announced that short and long-tail reinsurance specialist; Tokio Millennium Re has successfully completed the migration of its IT infrastructure to a privately hosted environment to deliver increased flexibility and a platform that would grow in line with the business needs.

      To create further value for its clients by providing robust security with sophisticated quantitative expertise, TMRUK set out to redesign its entire IT infrastructure into one that was closely aligned with the company’s revised operating model. A partner with deep technical expertise was needed to support the small in-house IT team at TMRUK. Following a competitive tender, NTT DATA was awarded the contract to design and implement the hosted private infrastructure, server and network hardware as well as a telephony solution. This requirement was delivered in conjunction with NTT DATA’s sister companies NTT Communications, Dimension Data and Integralis.

      Jonathan Birch, EMEA Practice Head of Infrastructure and Architecture, NTT DATA commented: “For businesses today, having an IT infrastructure that maps to your business operating model can make a marked difference to efficiency and the ability to service the demands of the organisation and its customers. Often, a blend of hosted and on-premise solutions can offer the best combination of control and scalability, as well as a manageable total cost of ownership. The private hosted infrastructure we built for TMRUK is a prime example of this.”

      With both companies based in the City of London, a close working relationship and strategic planning ensured that the project ran smoothly and implementation was successfully completed ahead of the start of TMRUK’s busiest renewal period. To prevent any disruption to the business, the new environment was built and all systems tested extensively before any critical applications and data were migrated to the new, hosted infrastructure.

      Steve Perkins, Senior IT Manager, Tokio Millennium Re said: “We recognised that implementing a flexible and scalable infrastructure would be key to meeting the increasing demands of the business as it grew and adapting quickly to changes in the market to retain a competitive edge. NTT DATA offered the perfect mix of technical expertise in the areas where we needed support and a depth of skills that was required to successfully execute a project of this nature.”

      “It was important for us to find the right balance between retaining control and relying on experts to handle specialist areas such as data centre hosting. The TMRUK team handles day to day IT management while NTT DATA’s experts provide the architectural intelligence and data hosting offering the business the high level of service it demands”

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      Pulling from a deep bench of talent, XL Group insurance operations promoted Matthew V. O’Malley, CPCU, ARe, CRIS to lead its Environmental business. Mr. O’Malley previously served as head of Environmental Underwriting Operations, overseeing the business’ field operations and sales and marketing activities. In his new role, he will lead all underwriting, field operations and sales and marketing and guide the growth of XL’s Environmental business. He reports to Seraina Maag, Chief Executive of North America Property & Casualty for XL’s insurance operations.

      Commenting on the appointment, Greg Hendrick, chief executive of XL Group’s global insurance operations, said: “XL Group has been writing environmental coverage for nearly three decades. We’re one of the pioneering environmental markets and we’ll continue to take the lead in this market, now under Matt’s guidance. Over the last few months, despite today’s competitive conditions and new market entrants, we’ve seen our environmental team thrive under his operational leadership. We’re looking forward to building on that success.”

      “Our longtime success in this market has been built and reinforced by the creative solutions and unwavering service that Matt and his team are dedicated to delivering day after day,” said Ms. Maag. “Environmental insurance protection is more important than ever. When our customers are ready to acquire new businesses, buy and develop new property or take on growth opportunities in new countries, we’ll be helping them break down any environmental liability concerns that may try to stand in their way.”

      Mr. O’Malley joined XL Group in 2004. In addition to his Planning and Administration role, he also managed the Environmental group’s Commercial Business Unit (CBU). During his 17-year tenure in the insurance industry, Matt has held numerous underwriting and management positions, He earned his BA in Economics and MBA with a specialization in Finance from Villanova University. Matt also holds the Chartered Property Casualty Underwriter (CPCU), Associate in Reinsurance (ARe), and Construction Risk and Insurance Specialist (CRIS) designations. He also serves as a member of the Board of Overseers of the Graduate School of Education of the University of Pennsylvania.

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      NIG has appointed Rob Smart as its new Head of Commercial Claims. 

      Rob will not only play a central role in ensuring that NIG supports and builds relationships with key brokers but will also look to build on the significant investments that NIG has made in enhancing its commercial claims service.

      Rob has over 20 years’ experience within the claims environment.  Most recently, he held the position of Senior Claims Manager at Travelers Insurance, a role with responsibility for Property and Public Liability Claims.

      Reporting to Jon Greenwood, Managing Director at NIG, Rob will have operational responsibility for the Commercial Property, Liability and Motor Damage Claims team, which handles all commercial and broker brands, and, in addition, the insurer’s agricultural offering under Farmweb.

      Rob Smart, Head of Commercial Claims at NIG, said: “NIG is looking to lead the way when it comes to claims, offering a flexible and efficient solution for our brokers.  I’m looking forward to helping build on the achievements made so far in delivering service excellence to brokers.  I’m delighted to be joining a great team and I’m excited to have the opportunity to develop a very strong proposition in the competitive commercial insurance market.”

      Jon Greenwood, Managing Director at NIG, said: “Rob brings with him a significant amount of experience and will help NIG continue to deliver an efficient and effective claims experience for all stakeholders.  NIG understands the importance of a first-rate claims service in today’s competitive environment and Rob will ensure our broker partners understand our commitment to them and their clients.”

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      Arc Legal Assistance (Arc Legal) has become a member of the Managing General Agents’ Association (MGAA).

      Commenting on the decision to join the MGAA, Richard Finan, Director of Arc Legal, said: “Our aim is to use our expertise to allow insurers to participate in this specialist class of insurance, and to provide services to distribution channels which are not within an insurer’s usual capability. On this basis, Arc Legal’s business model represents an excellent example of a Managing General Agent.

      “We believe our membership of the MGAA will further help strengthen the industry’s understanding of the diverse role and range of expertise that MGAs provide, and help to demonstrate the benefits of Arc Legal’s business model for the distribution of Legal Expenses Insurance products.”

      MGAA chairman Reg Brown said: “It is important for the MGAA to represent all classes of business that MGAs operate within. Legal Expenses Insurance is an important niche class of business, and so we are delighted to welcome Arc Legal to the Association.”

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      Risk Management Solutions (RMS) has announced the appointment of Brad Nichols as senior vice president, global customer service. In this pivotal role, Mr. Nichols is responsible for pioneering and implementing programs designed to enhance the customer experience. Based in Hoboken, New Jersey, Mr. Nichols reports directly to RMS’ chief platform and services officer, Bobby Soni.

      Commenting on the appointment, Mr. Soni said: “Brad’s extensive experience and ability to combine people skills, technology, process, and metrics in a way that optimizes client satisfaction makes him perfectly placed for this strategically important role.”

      RMS is currently developing a new analytic platform that will fundamentally change the way insurers and reinsurers manage their risk exposures, with real-time access to all exposures, all in one place.

      Mr. Soni continued: “As we revolutionize our risk management solutions, Brad’s knowledge of the financial services industry coupled with his commitment to client satisfaction, will be instrumental in ensuring RMS continues to meet the needs of our client base worldwide.”

      Brad Nichols said: “This is an exciting time to join RMS. As we transform the insurance industry’s use of catastrophe risk models and risk management solutions, we are focused on advancing our customer service model to a structure that can support the platform and continue to deliver a very high standard of customer support services.”

      New to RMS’ global client support services is the Knowledge Center, a 24/7/365 system for receiving, tracking, and managing customer inquiries to complement the advice on value and usage optimization provided by the account management teams.

      Mr. Nichols joins RMS with extensive senior level experience gained in the financial services industry. His experience of developing and delivering successful customer support projects across complex solution portfolios includes 15 years at Thomson Reuters, where he held senior roles including global head of customer experience & services. Mr. Nichols graduated with a BA in Economics and Political Science from McGill University, Quebec, Canada.

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        The European Insurance and Occupational Pensions Authority (EIOPA) published its annual Report on the Functioning of Colleges of Supervisors and the Action Plan 2013. 

        According to the Report, by the end of 2012, 91 insurance groups with cross-border undertakings were identified in the European Economic Area (EEA). Colleges of supervisors were organized for 78 groups against 69 groups in 2011. For at least 20 large groups, college meetings were organised more than once a year. 17 national supervisory authorities acted as Group Supervisors.

        In the course of 2012, EIOPA attended almost all college meetings for 75 groups. The Authority contributed to the work of colleges by developing a catalogue for regular information exchange and by providing specific presentations in colleges about EIOPA’s regular assessment of risks faced by the EEA insurance industry, including the explanation of EIOPA Risk Dashboard results.

        The Report concludes that despite the uncertainty over the exact date for the Solvency II implementation, supervisors involved in colleges are making great efforts to prepare for the implementation of the new framework and in particular, during the pre-application process, to prepare for the use of internal models under Solvency II. Nevertheless, EIOPA observed differences between colleges in the scope and frequency of information exchange as well as in the approaches taken towards risk assessment and analysis.

        In this context, the main targets of EIOPA’s Action Plan for 2013 are to develop in each college a common understanding on risk assessment and analysis, to assess the development of a coordination arrangement between supervisors for the interim period and to further align the work on the pre-application of Internal Models.  Gabriel Bernardino, Chairman of EIOPA, said: “The strategic goal of EIOPA’s college work is to set up consistent, coherent and effective EEA-wide supervision of cross border insurance groups for the benefit of both group and solo supervision. National supervisors and EIOPA have made relevant progress in 2012 and the Action plan for 2013 aims to improve further the work of colleges in a challenging and demanding environment”.

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