Pushing Financial Innovation

I felt the need to revisit this blog post from October 2009 for a couple of reasons. Neither of which were that I had nothing else to say!!!

Mainly because very little has changed despite the fact that the back catalogue of – justified – criticism of financial services has grown considerably in the intervening months. Also, since that time, it has become apparent that it would be extremely unwise for anyone to “judge a (financial) book by its cover”. THAT IS WHY WE NEED TO HAVE TRANSPARENCY TO REBUILD TRUST…AND MORE!transparency(1)      


The need for innovation in the financial services industry is growing. Why? Because consumers’ deeply held financial beliefs are evolving rapidly.

Article: Progress or Perish: Pushing Financial Innovation

Unsurprisingly I agree and I think that the point is reinforced by the writers comment "Because the last batch of innovative financial products and services were formed with faulty, outdated insights, they inevitably failed." Failing moreso than failed I feel. Why?

The dangers of judging a book by its cover…

The products were priced and designed to look (and sound) like they offered genuine customer value. In truth, that was ONLY about getting the marketing and distribution "right" to capture adequate QUANTITY to satisfy the insatiable appetite for financial results.

In recent years innovation within the insurance industry has rarely been about improving the "customer experience". Much of the back office, process and IT development has helped reduce combined operating ratios. Add to that outsourcing &/or off shoring and redundancies when times are tough and you would think that the customers would see the benefits…not so! But it has made senior management look better in the eyes of their shareholders and peers. Pretty handy when it comes to salaries and bonus.

Abandoning underwriting discipline and compromising the integrity of an insurance product to fund (1) insurer growth (2) price-led marketing (3) distribution costs – broker growth, is a clear indication that the vanity of turnover (marketshare) is the corporate goal.

Not much scope for QUALITY, customer "peace of mind", consistency of service or pricing. 

We all know how important PRICE is in any marketplace but, patently, not at the expense of customer VALUE.

Of course there is still scope for an insurer to "turn" a profit from a results driven approach BUT it cannot be called a "strategy" when underwriting profit is more a matter of luck than judgement, investment returns have dried up and your customers demand a level of integrity, protection, transparency and pricing sustainability that you simply cannot afford. Of course the brokers who have been allowed to leveraged and become dependent upon unsustainable remuneration deals are no better placed.

Of course this isn’t all good news for those customers who would only be satisfied by turning contracts from "win/lose" to "lose/win". That isn’t going to happen so the best that they can do is register their disapproval by identifying and supporting firms that structure "win/win" contracts that come with the peace of mind that should come as standard!

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