Warren Buffett urges more insurance underwriting discipline…


Is this just another opportunity for UK insurers to determine that such warnings, obviously, DON’T apply to them!?

“At bottom, a sound insurance operation requires four disciplines:

(1) An understanding of all exposures that might cause a policy to incur losses

(2) A conservative evaluation of the likelihood of any exposure actually causing a loss and the probable cost if it does

(3) The setting of a premium that will deliver a profit, on average, after both prospective loss costs and operating expenses are covered

(4) The willingness to walk away if the appropriate premium can’t be obtained,”

the letter states. “Many insurers pass the first three tests and flunk the fourth. The urgings of Wall Street, pressures from the agency force and brokers, or simply a refusal by a testosterone-driven CEO to accept shrinking volumes has led too many insurers to write business at inadequate prices. ‘The other guy is doing it so we must as well’ spells trouble in any business, but none more so than insurance.”

via Warren Buffett Urges More Insurance Underwriting Discipline, Fewer “Testosterone-Driven” Decisions.

This is a much bigger issue than even WB appreciates

When “the Oracle” speaks he tends to worth listening to and this pearl is no different. However, the dire warnings of, such as PwC and Citi have previously been ignored and there is little evidence to suggest that this is about to change! Have insurers (and the wider industry) failed to learn anything from their (rightly) vilified “cousins” in banking?

Do they not realise that, whilst Banking institutions were deemed TBTF (see below), insurers most certainly are not.

I wrote, recently, about the differing views of insurance and systemic risk on the two sides of the Atlantic. For my money the UK view is dangerously naive and has little basis in evidence. The precarious state of global FS and the, tightly-coupled, national economies that rely upon them, are such that the failure of an insurer or, for example, a major consolidator in the broking sector, could trigger a new financial collapse.

As we know from recent economic history, systemic risk in FS moves at lightning pace. BUT, when (not if) the impact of a new and avoidable crisis cascades into social and cultural domains  – adding to the existing financial burden WE are having to live – this could prove to be the “death knell” for FS greed-mongers and inept Political Klepocrats.

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USA on the Edge of Chaos!?


I always thought I had a good idea what Tainter and (to some extent) Beck were alluding to when referring to “elites”, essentially, bringing the house down rather than give up what they have grown so accustomed to viewing as theirs to do with what they liked. But this piece is mind-blowing and so blatant SOMEONE needs to call a halt to it all now or the dollar won’t last until 2015 and I dread to think of the implications for US citizens….WikiLeaks exposing some truths should be the least of their worries.

Noam Chomsky has recently talked of the “profound hatred for democracy on the part of our Political leadership” and, more controversially drew comparisons with late Weimar Germany

Government Says No to Helping States and Main Street, While Continuing to Throw Trillions at the Giant Banks

If you can spare an hour (or so) please listen to what Prof Ferguson has to say. Initially I was on really interested to hear what he said about the relationship between Empires – Complexity Theory – Economics but I was unable to drag myself away. BUT do yourself a favour, skip the intro (it’s torture), click to “Watch Full Program” and, at least, spare 8mins to absorb Chapter 4. Unless you are pressed for time…or already know everything…you WILL … Read More

via Get “fit for randomness” [with Ontonix UK]

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2010 Report Updates: FS cannot function without trust


This is a “headline” so obvious that it may well be a contender for non-news item of the decade…

image

So you would be entitled to assume that strategists within major banks and insurers would be busily scurrying around frantically innovating new products and services that simply ooze customer value. Frankly, anything that rebuilds trust and engenders loyalty, in an effort to undo the reputational damage done in recent years.

Yeah right. Customers aren’t really that important…yet!

I commented upon Edelman Trust Barometer & “Which?” reports earlier in the year – found at the following link:

Transparency – Trust – Trends – TRANSFORMATION

I know I have been going on about this for a long time now BUT, from the distinct lack of any change of attitude or strategy, it appears that the customer message has not been taken on board. Further evidence of the arrogance of FS and, in my humble opinion, a very serious mistake. As we enter, what will be, a difficult and painful period for UK (and beyond) the realisation that the perpetrators of so much of the financial misery have “escaped”, unscathed –  apart from a lot of Governmental and Regulatory rhetoric, will lead to a public backlash! Of course this has most serious implications for Government as society suffers.

FS firms who wait before offering truly innovative solutions and reintroducing customer value – instead of stripping it our for themselves and for their distributions channels – will only confirm, to the informed observer, that they have failed to learn any lesson from past, inglorious, failure.

To adapt the words of Warren Buffett “If value is what you take price is what you will pay

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Financial Sector: Stop selling [and start listening]…for success


I understand why there is a fear of transparency BUT if you have heard the name Warren Buffett you may already be aware of this, abridged, little “gem” from is considerable stock of ready wisdom in quip form:

“Be fearful when others are greedy and greedy when others are fearful”

The cost of social media is paid in a currency called transparency. But it is a price worth paying. Forming the basis for a strategy that can deliver, secure and sustain a strategy with competitive advantage through differentiated products and services.

How else is a financial institution ever going to cultivate 2 million “fans”?

Banking and financial

JPMorgan Chase went from an unpopulated community with little to no member activity to very active (more than 2 million fans) by using a tight focus, such as using the community to determine where to “invest” its charitable donations. The communities that do well tend to focus on a very specific segment, such as small businesses or support CSR initiatives.

Transparency and transformation:: Being Open Without Giving Away the Store


If you aren’t already aware of Alimeter Group, Charlene Li or Joseph Owyang it may already say all that needs said about your social media strategy!

Whether you dismiss social media as a fad or are waiting for the right time to consider or  implement an SM strategy is, to a certain extent, irrelevant because THE ISSUE is the…understandable…public clamour for TRANSPARENCY.

It is a word that strikes fear into the very heart of institutions so, if Warren Buffett knows anything (and I reckon he does!), there is a HUGE opportunity for those who can afford transparency to “get greedy”.

“What’s often missing when leaders try to decide how open they should be is a coherent open strategy, something I call ‘open-driven objectives.’ With an open strategy, decision shifts from if you should be open—because social technology demands a certain amount of openness—to how open you need to be to accomplish your overall strategic goals. In today’s world, organizations and their leaders must be open or suffer the consequences—distrust, leaks, resentment, and institutional sclerosis.”

via Change This – Being Open Without Giving Away the Store: The Secret Is a Sandbox Covenant.

The term “sandbox covenants” is a new one on me. I get it and I like it! Then again I am a fan of transparency. Primarily because of the number of firms to whom the concept is entirely alien and which, if they are delivering value to their customers, they should be in a position to adopt a strategy with wider market appeal. Of course there are also firms whose model cannot afford transparency and others whose outward appearance belies financial frailty. There are too many examples of collapsed companies whose financial standing has been independently rated &/or certified based upon “unreliable” or outdated information.

Put another way, the need is for more than a common language and platform. In turbulent economic times there  is a need for a reliable,  quantitative, objective and cost effective means of verifying the CURRENT financial credentials of “interested parties” without disclosing sensitive information.

Ontonix Complexity analysis and rating services offer, not only a “common language” but the means to build trust through mutual transparency.

Is YOUR business

Find out  ON-LINE! !cid_part2_01060409_08020107@ontonix