European Insurance Industry: Merger creates European digital insurance group - by Terry Gangcuangco

Two insurtech pioneers have completed a merger to form The Digital Insurance Group.

Digital insurance broker Knip and comparison-software provider Komparu will complement each other in hopes of further innovation in the industry. The combination consists of 70 insurance, technology, and business development experts.

“This merger is an exciting step that will bring together two transformative insurtech brands to create a major force in Europe’s insurance sector. It represents a significant milestone for this rapidly growing sector, which is using disruptive technologies to deliver innovation to a multi-trillion dollar insurance industry,” said Ingo Weber, Group CEO of The Digital Insurance Group.

Knip launched in 2014 as Europe’s first truly-digital insurance broker, while Komparu became known for its proprietary comparison platform after launching in 2013. A large share of the mobile-first insurance brokerage market in both Germany and Switzerland has been captured by Knip.

With the merger, Knip’s platform will be serving a third of the nearly €1.1trn European insurance market. Meanwhile, Komparu – which provides SaaS technology services for insurance companies, brokers, and publishers – will be able to deliver an end-to-end solution for partners while broadening the group’s reach.

Komparu chief executive Ruben Troostwijk said Knip and Komparu will be able to share expertise and geographic footprints to create bigger and better innovations. On the other hand, Knip CEO Dennis Just is stepping down as Weber heads the new parent company.

Roeland Werring, who becomes Group CTO of The Digital Insurance Group, commented: “The consumer-facing apps and CRM of Knip on the one side, and Komparu’s transactional frameworks and B2B white-labelling tools on the other, complement one another perfectly.” He said the partnership not only promises immense possibilities for innovation but supports industry transformation as well.
 
Read more: Merger creates European digital insurance group | Insurance Business

USA: Why Health Insurance in America Is Like Playing The Lottery ( "are Europe's new Privatized Insurance Schemes On Same Route?) - by Josh Sabey

Insurance has followed a similar path, and shares more than a few similarities with the lottery. The two businesses hire from the same pool of actuaries and employ them to rig similar “games.”

To survive, insurance requires the vast majority of people to lose most of the money they put into it. It’s a gamble that instead of asking people to imagine the possibility of a jackpot asks them to imagine something quite the opposite. That’s why insurance is much more successful than the lottery, causing U.S. citizens to spend about a trillion dollars a year on it instead of the relatively modest $70 billion of the lottery. In the end, people hate losing things a lot more than they like getting things. The economic term that describes this phenomena is called “loss aversion,” which means people respond disproportionately to gaining $100 versus losing $100.

If a phone company raises its monthly cost, more people leave than would join if they lowered rates instead.People just hate losing things once they have them. This is also why people tend to overvalue their own possessions—a similar phenomenon titled “the endowment effect.” Ziv Carmon and Dan Ariely asked owners of NCAA Final Four tournament tickets to predict how much they could sell their tickets for.

The predictions averaged 14 times higher than the average hypothetical buying price. So while people are much more vulnerable to the rhetoric of insurance than the lottery, both succeed by convincing us to believe in a fundamental deception. In the lottery’s case, people are willing to throw away a few dollars at a time so they can imagine the bliss of winning.

Because the average lottery user’s day-to-day stresses and dissatisfactions are generally situated around money, they believe that obtaining a vast sum of money all at once would solve most of their problems. But this does not seem to be the case.

Several studies have explored the surprising dissatisfaction of lottery winners. One study compared lottery winners with people who became quadriplegic around the same time, and found that the lottery winners were no happier and took significantly less pleasure in simple beauties.

A lot of people are buying tickets just for the chance to imagine a happiness that does not seem to actually exist. The lottery doesn’t succeed because people aren’t good at calculating probabilities; they know they have almost no shot at winning. It succeeds because it convinces us to believe in an inaccurate equation: lack of money causes stress, stress drains happiness, therefore more money will mean more happiness.

A similar miscalculation takes place with health insurance. The average person assumes good health equals medical care, and medical care means access to care, which equals health insurance. Or, in the other direction, health insurance means access to care, which means good health because it mitigates the risk of disease and injury.

 But this also does not seem to be the case. People with health insurance are no more likely to be healthy than people without it.

The vast majority of health is the result of personal lifestyle, genetics, and environment. Health-care services account for less (possibly much less) than 10 percent of your actual health. This means access to health care has very little to do with what we think it does. The national debate about health care has focused around what Brent James calls “rescue care,” or the imperative we feel to save a life no matter the cost.

This is the dramatic rush to the hospital and end-of-life care. This sort of care has not actually increased life expectancy for several years. It is miraculous and wonderful, but it won’t make us live any longer or any more healthfully.

But, as with the lottery, Americans continue pouring their money into a system that does not actually perform. If, instead of focusing on a few rare cases, we spent our money improving our lifestyle—buy a better chair, change unhealthy habits, or (as some studies suggest) even meditating—our overall life expectancy would dramatically increase.

 But instead we continue to believe a false equation. In 2014, U.S. lotteries raised more than $70 billion. This number is astounding because it suggests the average person spends $220 a year on the lottery. But that’s assuming the price is evenly distributed across all people. We know children aren’t participating, and in certain states the lottery is still prohibited. So for those who play, the average is much higher. Several studies have also shown that poorer counties spend twice as much as wealthier counties.

In North Carolina the poorest counties produced $400 per person per month. That’s $4,800 a year. If those same people invested that money in any number of ways, they could have more than a million dollars by the time they retired. That’s winning the lottery. So just imagine what could be done with the much larger amount of money that is now being pre-allocated (before it’s needed) to a host of medical services.

Over time, lotteries have had the same basic story line, and health insurance now fits right in: "The state legislates a monopoly for itself; establishes a state agency or public corporation to run the lottery (as opposed to licensing a private firm in return for a share of the profits); begins operations with a modest number of relatively simple games; and, due to constant pressure for additional revenues, progressively expands the lottery in size and complexity, particularly in the form of adding new games. (National Gambling Impact Study)"

Insurance has followed a similar path, beginning as “friendly societies” and ending in nationalization—Obamacare. The nationalization is natural and even necessary. In England, early insurance agencies offered fire insurance, which meant homes were monetarily and physically protected because the insurance agency also ran the fire department.

But insurance companies drew criticism when they refused to put out the fires of homes whose owners had not previously purchased the insurance. This is an example of market failure. If the insurance company did put out the fire, then no one would buy the insurance.

The way to make sure all the fires are fought is to pay for a fire department through taxes. This way everyone pays into the insurance and every fire is extinguished. Today the same thing has happened with hospitals. A lot of people won’t pay for insurance if they can go to the emergency room and still get help, help that the hospital is required to give whether they’re paid for it or not. 

So we turn healthcare, like the fire station, into a “tax” that stops people from getting a free ride. There is certainly some utility here, so insurance ought to exist and it probably ought to be governmentally run, but the chance of you ending up ahead is about as likely as your house catching fire. A good health insurance system would be like a good fire station.

You call them when you need them, but most of the time you get your own cat out of the tree. That means low premiums and high deductibles. But that’s probably not what will happen. If this progresses like any other lottery, we can expect it to just get bigger, advertising higher and higher “jackpots” (bigger, all-inclusive packages) because as the government gets involved in the business it will be under pressure to sell ever-increasing and ever more inclusive health-care packages.

They’ll be tempted to insure more and more services, “to invent new games,” and “additional revenues.” But if our goal is to encourage actual health improvements, we will need to devalue insurance, cut down traditional health-care spending, and create policies that turn people away from doctors and towards things that have a much larger impact on health. We have to find ways to, as Dr. David Blumenthal says, “Invest our health-care dollars in ways that will allow us to live longer while enjoying better health and greater productivity.”

The biggest lie health insurance tells us is that it’s a way of mitigating risks. Bad habits, low exercise, poor hygiene, genetics—those are your largest risks, and health care has proven to be very ineffective at dealing with those risks.

If we want to encourage people to live longer, healthier, and happier lives, the best thing to do is convince them to eat well, sleep enough, and go to the gym rather than pumping their money into a system that will only produce yet another ineffective doctor visit. But we want to believe doctors can take care of us. It’s sure nice to imagine, so we commit to buying another ticket tomorrow.

Note Insure-Digest: hopefully some of Europe's "new" privatized insurance schemes are not taking the same route as that of the US Insurance Industry?

Insure-Digest
For the complete report go to : Why Health Insurance Is Like Playing the lottery /

European Insurance Industry - Germany: Friendsurance brings P2P concept to insurance

Since crowdsourcing became popular, the concept has been adapted to purchase real estate, lend money, and even fund tuition.

These ideas flourished because the pioneers in each space saw inefficiencies that could be removed to create a better, more affordable process. Trim the unnecessary to leave the truly important.

One area where we do not always see bang for our buck is insurance. Many pay premiums for decades but never file a claim.

That got a group of people in Germany thinking. Was there a way to use the power of the crowd to create a better insurance product?

The team at Friendsurance thinks so. Leveraging the power of the peer group, Friendsurance rewards small groups with a claims-free bonus each year no member files a claim.

Friendsurance Co-Founder and Managing Director Tim Kunde explains the concepts behind the company and why it works.

Describe what led the founders to create Friendsurance. What were the experiences that shaped your desire to solve this problem?

In 2010, the founders of Friendsurance realized that many people own insurance that they don’t or only rarely use.

However, insurers don’t reward caution and fair play – even though this means less work and lower costs for them. We don’t think this is fair.

This is why we have developed a revolutionary peer-to-peer insurance concept, which rewards small groups of users with a cash-back bonus at the end of each year they remain claimless: the claims-free bonus. Currently, the claims-free bonus is available on a range of retail products in Germany: private liability, home contents and legal expenses insurance.

Our concept can also be added to existing contracts very easily, creating the most convenient way of saving insurance premiums – without any change in coverage, premium or provider.

With our P2P insurance model we have created a worldwide trend. Currently a new insurance segment is rising.

Purchasing insurance can be a difficult process. What were some of the areas in that process you believed you could improve?

The insurance industry has not seen much digital innovation over the last decades because traditional insurance companies lack digital knowhow. Traditional players can learn a lot from Fintech companies such as Friendsurance as we are very customer-focused and have the ability to iterate quickly.

Our claims-free bonus creates value not only for customers but also for insurance companies. Without any additional costs, the claims-free bonus allows policy owners to get back up to 40 percent of their premiums if no claims are submitted. Therefore insurance not only becomes cheaper for the consumer but also provides a clear financial benefit for careful and fair behavior, which in turn reduces fraud.

Accordingly, Friendsurance records a claim frequency below market average.

At the same time Friendsurance helps insurance companies. Improved behavior reduces claims and processing costs. Additionally, the claims-free bonus helps to increase customer satisfaction as well as customer loyalty. Our idea was already awarded as one of best digital innovations in Germany in the “UN World Summit Awards.”

How did you come up with the idea to have small groups of people linked together? Is it accountability? The concept seems to have similar aspects to the use of affinity groups in crowdfunding and accessing peer groups in money pools and similar concepts from Latin cultures.

Based on a shareconomy approach, policy owners with the same insurance type form small groups. A part of their premiums is paid into a cash-back pool. If no claims are submitted, the members of the group get some of their money back at the end of the year.

In case of claims, the cash-back decreases for everyone. Small claims are settled with the money in the pool. In the event of bigger claims, the standard insurance company covers any amount that exceeds the coverage through the group. In case there is insufficient money left in the pool to cover a claim, a stop-loss insurance covers the rest. As a result, policy owners always enjoy full coverage and never pay more than they would without Friendsurance.

How are people grouped together? Do they know each other before hand?

The groups have between four and 16 members – depending on the insurance type. New customers are connected automatically online with other policy owners with the same insurance type (e.g. home contents). However the insurance can be by different providers and include different services.

Customers who prefer to create their group individually can connect with people they know: They can invite friends and family or match their Facebook and LinkedIn contacts with the Friendsurance members.

Insure-Digest

European Insurance Industry: How well prepared is the European Insurance Industry for the Solvency II rules?

British insurer Prudential PLC may shift its headquarters from London to Asia to escape new European Union regulations, the Sunday Times reported citing people familiar with the matter.

The so-called Solvency II rules, which take effect in January 2016, aim to ensure that insurers hold enough capital to honour policyholder commitments even when markets turn sour.

The paper, citing analysts, said Solvency II could slash Prudential’s reserves from 9 billion pounds ($13.66 billion) to 3 billion pounds.

This may prompt Prudential to sell its British operations or spin them off into a separate listed company and shift its headquarters to either Hong Kong or Singapore, the Times reported.

Asked by Reuters for comment, Prudential said: “We have always said that, as a large, international group, we regularly look at the structure of our business to ensure that it remains optimal. Solvency II will affect less than one fifth of our operations.”

Britain’s top insurance regulator said in July the country would not use the new EU insurance rules, as the system already has an appropriate amount of capital.

In September, Dutch insurers ASR, Aegon and Delta Lloyd warned that their capital buffers would fall sharply under the Solvency II rules, raising concerns over how well prepared the broader European industry is for the rules.how well prepared the broader European industry is for the rules.

Insure-Digest

European Insurance Industry: Financial Assessment of the European Insurance Industry

The European insurance industry is struggling with the volatile macroeconomic environment and regulatory changes while also incorporating changes in technology and business model to be at par with its global peers.

While premium growth is accelerating, pressure on profitability continues due to low investment income and the uncertain economic environment. Growth in premiums is different for different countries in Europe, but is led by emerging economies in Eastern Europe.

 The European insurance industry has remained somewhat resilient to the 2008 financial crisis, which did not have much impact on its returns statistics.

Threats of deflation are rising in Europe and can have a negative impact on this industry. Changes in the preferences and demands of the consumer; corporate and technology developments creating new areas of risk to be insured; and industry consolidation in search for better distribution network (online or physical) are some factors that are likely to drive industry growth.

Life and health (L&H), and property and casualty (P&C) insurance revenues are growing at a steady pace despite the challenging macroeconomic situation. However, as situations are expected to worsen in the near future, decreased premium growth and lower investment income are expected unless insurers use diversification as a strategy to enhance returns.

Operational costs have decreased due to investment in upgraded technology, and the cost-effective online distribution structure has led to increased profitability in the industry. Underwriting ratios have witnessed improvement but the industry is not well placed in terms of policy holders surplus to cover future claims.

Overall, the insurance industry is well positioned financially and ready to face the challenges that lie ahead.

Insure-Digest.

Solvency II: A new risk-based regime for Europe

From 1 January 2016 Europe’s insurers will be governed by a new set of rules called Solvency II. These rules aim to ensure that policyholders throughout the European Union enjoy the same level of protection, no matter where they buy insurance. 

Europe’s insurers have played a significant role in the development of these new rules and welcome their aims. However, insurers remain concerned that certain elements within Solvency II will produce unintended consequences, which could ultimately harm both insurers and their policyholders.

For example, the new rules unnecessarily increase the cost of making long-term investments. This reduces insurers’ ability to make such investments, which are crucial for providing good returns to our policyholders, and which underpin economic growth and stability in Europe.

Through engagement with policymakers and supervisors, however, Insurance Europe is working to ensure that the rules are adjusted so that Solvency II works as planned and unintended consequences are avoided. It is hoped that some of these improvements will be included in actions related to the Capital Markets Union project, and that others as part of Solvency II's reviews processes.

Insure-Digest