Doing Business in Financial Services Nowadays

(Posted by David Schapiro)

It has been barely two months since Lehman Brothers went under and sometimes it feels like we are living in a different century. Like many of us, I have been through a number of crises of different types – financial, industrial, geopolitical – and they all have at least one thing in common: they go away in the end.  The question is what happens in between…

As the CEO of a software company providing solutions to banks and insurers, the current financial crisis is of special interest to me, to put it lightly. As we offer products that help these companies improve their profitability, our business is going strong. But just like everybody else these days, we need to look into our crystal ball and plan for a potentially very different future.

Over the last few weeks (that seem like years) I have spoken with my customers – leading insurance and banking executives in the US and Europe – trying to build a model of what lies ahead for us in the future. It was intriguing to see how each individual had a unique insight about where we were heading.  But uniqueness is the problem; I was looking for a common ground on which to build a model.

Mastering Insurance Pricing: An Interview with Graham Masters

Graham Masters served as Head of Pricing for the Winterthur Insurance Group, now part of the AXA Group. In this capacity, Mr. Masters was responsible for formulating pricing policies, instituting best practices, and implementing innovative solutions throughout the group’s non-life subsidiaries worldwide.

Prior to Winterthur, Mr. Masters was Head of Pricing for Schemes and Corporate Partnerships at Norwich Union, where he took an important role following the merger between Norwich Union and CGU, including the creation of a single database and the forging of a single corporate culture. Mr. Masters also played a major role following Norwich Union’s acquisition of the London and Edinburgh Insurance Company, where he was responsible for all aspects of the Personal Lines business.

Following are excerpts from our conversation with Graham.

Banking Crisis: The Party is Over, Time to Clean Up!

(Posted by Guest Blogger Elizabeth Macnair)

Much has been made of the eerie similarities between the current banking crisis and the economic conditions leading up to the great depression: speculative bubbles in today’s commodity markets (oil, real estate), extensive margin trading, and an administration urging federal regulatory agencies towards “free markets” and deregulation.

Economists have warned for years that we are due for a correction. These warnings were taken as well as an undertaker who shows up to a really good party, unwelcome! Every party comes to an end. All that is left to do is to clean up the mess and figure out who has to pay for it. History shows us that political and economic climates tend to swing like a pendulum. As unrealistically jubilant as analysts and financial newsies were before the crisis became widely publicized, they are now just as unrealistically filled with predictions of doom.

Thankfully, we learned a lot from the great depression. We understand the factors that worsened an otherwise normal recession into a depression and have empowered federal agencies to avert economic disaster. Here are a few of the lessons and how we will take our next steps towards recovery.

Insurance as a Commodity: Interview with Kevin Sinclair

 

Kevin Sinclair, an insurance veteran with a track record of over twenty five years of industry leadership, has recently assumed the position of Managing Director with underwriting agency iPrism. Founded by well-known insurance professionals, iPrism offers brokers an alternative channel for commercial lines SME business.  Prior to joining iPrism, Mr. Sinclair was Managing Director of AA Insurance, Great Britain’s largest independent home and car insurance broker, leading to the company’s £6bn merger with Saga.  Prior to AA, Mr. Sinclair was Director of Marketing and Underwriting at AXA and Director of Underwriting at Guardian Direct.

 

Kevin Sinclair has recently joined the advisory board of Earnix, and sat down with us for an interview on his view of the insurance industry.  Following are excerpts from our conversation with Kevin. 

 

 

Consumer Power: Sit Back and Watch the Banks Fight for Your Deposit

(Posted by David Schapiro)

MoneyAisle.com is a new phenomenon in the financial services marketplace that has been generating some buzz and media attention.  Going a step further than rate-comparison sites such as LendingTree.com or Bankrate.com, MoneyAisle turns consumers into auctioneers, as banks bid in real-time to offer customers the best rates on CD’s and savings accounts.

 

Seeing the rates offered go up in front of your very eyes is definitely a nice gimmick that can make any consumer feel like a winner, but MoneyAisle seems to really work.  I used the site’s test drive option to check the rates against the best I could find elsewhere on the Internet and in local papers, and MoneyAisle consistently offered the better rates. 

 

Thoughts from Madrid #2: Pricing and Customer Value Optimization – Is it Fair?

(Posted by Guest Blogger Barak Melnik)

Another popular topic at the Madrid conference was the question surrounding the fairness of differentiating prices, services, and offerings based on customer characteristics. “I am not sure I would like it if my bank offered a lower loan price to someone who has the same exact risk level as me.” “Once customers will find out there is price discrimination between regions in the same bank they will rebel”. Needless to say, I received many questions about the regulatory compliance of price optimization.

Thoughts from Madrid

(Posted by Guest Blogger Barak Melnik)

I recently participated in the Retail Banking in Europe conference, which was held this year in Madrid. It was a very good conference, not to mention the great Spanish food and wine and the lovely weather. The program provided a good dose of visionary thinking but was anchored in real-life experiences and lessons learned. I was honored to share the podium with some of the most knowledgeable figures in the banking industry.

 

It was interesting to see the different ways in which banks look at pricing. On the podium, bank executives presented two very different business philosophies which translate to different pricing strategies.

Close, But Not Enough

(Posted by Guest Blogger Dan Dolberger) 

Insurance Technology published an extensive feature last week describing how insurers nowadays are seeking a competitive edge through underwriting and pricing analytics.

Sexy Insurance (.com)

(Posted by Guest Blogger Dan Dolberger)

Is something beginning to stir in the insurance industry’s rock-solid public image as the most boring industry on earth? Is it the sound of spontaneous discussion, hot argument and honest exchange coming out over the media? Are insurers finally actually permitting themselves to seem, not just be, passionate about what they do?  

From Add-on Analytics to Enterprise-Wide Decision Management

(Posted by Guest Blogger Dan Dolberger)

As someone who has patiently followed the slow percolation of predictive analytic methodologies into the financial services over the past five years, I couldn’t help noticing the relative surge of recent articles and posts on the subject.