It would appear that the penny is finally beginning to drop with the management of Life Insurance Companies, that all is not well with the way they sell their products. In the past 10 days we have seen Irish Life attempt to undo the unprofitable practice of changing Term Insurance product providers every so often, and the Sales & Marketing Director of Friends First calling for reform of the ‘sales model’, under Government supervision.
To be honest, the Irish Life action does not go far enough and the comments from Friends First smack of desperation. Why would a Life Insurer need Government input on changing the way it sells its products? If the sales model is messed up, surely it is up to the product providers to reform the model that they are complicit in facilitating; unless, of course, there is a fear of offending a certain distribution channel and they want to be able to put the onus of change on Government.
If Life & Pension Companies are serious about reforming their industry then they need to consider the following :
● The interest of the consumer should be put to the top of their agenda
● Accept that Financial Advisors should work in the interest of their clients, not product providers
● Different pricing/remuneration for different distribution channels does not add up
● Products with 20 to 30 different commission options are not designed with the end consumer in mind
● Simplifying product charging structures so that there are [at most] two types of charges on a product
● Charging 1%pa to ‘manage’ a Cash/Deposit Fund is a rip-off
● Create an external fund, with input from the NCA and Financial Regulator, to pay for the Education of consumers on financial products/issues so that the public perception of bad value is negated
● Stop telling the market that Term Insurance is not profitable and then keep reducing your rates
● If you continue to deny reform you are leaving the door open for niche players to chip away at your book of business.There’s obviously enough 'fat' on the product for others to offer same products (more efficiently) and profitably
● Measuring the company’s success, and rewarding management and sales staff, by dubious ‘new’ business figures is all going to end in tears
● The notion that chasing the large corporate broker to fulfill your hunger for‘new’ business is folly. Treat every intermediary the same ie no special treatment.
● Devising a business plan that extends beyond 1 year
● Be more flexible in their approach to intermediaries who want to offer low-cost versions of their products and stop hiding behind the 'fear of offending your supporting brokers' line. If I want to sell it at a lower cost, by reducing my margin, so bloody what?
● Ban rebates on Term Insurance as it does nothing for retention of business. Instead,allow the intermediary to offset saving so that cost of product is reduced to consumer
● You would love for someone else to ‘impose’ fee based advice only but it’s not the solution to your woes
● Have a serious look at service issues to lower your costs as the amount of duplication is remarkable.
These issues should have been attended to before now. It is ironic that Life & Pension Companies are now ‘forcing’ the issue because it’s not working out the way they planned it. If I were a shareholder of any of these companies I would be very disappointed that they have let it go this far.
Thursday, July 22, 2010
Thursday, July 15, 2010
Criminal Justice (Money Laundering and Terrorist Financing) Act 2010
The above act comes into effect on the 15th July 2010. Life Assurance Companies and Financial Advisors are deemed to be ‘designated persons’ under the Act, so that means that they have procedural obligations to comply with. The bulk of the new changes that apply will be in relation to Single Premium Investments (Bonds).
Up to now ‘Customer Due Diligence’ was carried out by the Financial Advisor in the form of a Certificate of Identification. He/She held this documentation for identifying the client on file, but there was no requirement to send it to the Life Assurance Company unless it was requested by them.
From today, certified copies the identification documents will have to be sent to the Life Assurer and they will also have to satisfy themselves under the headings of ‘Sources of Wealth and Funds’. These should be incorporated into the proposal form along the basis of ‘how the money was acquired’ and ‘what is the combined income of the applicants’. Details of your ‘Occupation’ were not a requirement prior to today but this has also been included at proposal stage.
Up to now ‘Customer Due Diligence’ was carried out by the Financial Advisor in the form of a Certificate of Identification. He/She held this documentation for identifying the client on file, but there was no requirement to send it to the Life Assurance Company unless it was requested by them.
From today, certified copies the identification documents will have to be sent to the Life Assurer and they will also have to satisfy themselves under the headings of ‘Sources of Wealth and Funds’. These should be incorporated into the proposal form along the basis of ‘how the money was acquired’ and ‘what is the combined income of the applicants’. Details of your ‘Occupation’ were not a requirement prior to today but this has also been included at proposal stage.
Saturday, June 26, 2010
A World Cup of Economics
Guest Blog Post by Ronan Lyons
We all know the 2010 World Cup is on and at this stage we're down to the last sixteen. But what would a World Cup of economics look like? How would the sixteen countries that are left fare, if they were competing on economic factors, not football ones? Below is the Last 16 with a twist... each match is decided by a country's economic defence, midfield and attack.
Defence is getting the basics right, the platform for the rest of the performance. In economic terms, that's inflation. A quick review of economic history will show that in a world with fiat currencies, getting inflation down to a steady 2% or thereabouts is the equivalent of having a world-class defence. Too far above that and you're essentially giving things away for free. Too much below that and you start stifle yourself.
Midfield is the engine and a good economy, like a good football team, needs balance: enough both going forward and getting back. In economics, that means looking at a country's current account balance. This is essentially a measure of how much a country is in balance and living within its means. A large current account deficit is a big warning sign that an economy is unbalanced.
Attack is all about going forward. Economically, going forward means looking at a country's growth prospects. The higher GDP growth, the greater a sense of opportunity and adventure an economy has. To measure the strength of a country's attack, IMF estimates of GDP growth over the period 2008-2015 have been used. For the inflation rate and the current account balance, the same source and time period are used. And with that out of the way, let the games begin...
1. Uruguay vs. South Korea
In defence, this is no contest really. The Uruguayans still suffer from relatively high inflation (averaging 6% over coming years), while the Koreans at 3.2% are much closer to the "dream rate" of 2%. In midfield, While the Uruguayans are quite close to having a balanced account, the South Koreans have a very desirable current account balance, the average balance for 2008-2015 being just over 2%.
It's only up front where the Uruguayans start to shine. From 2000 to 2007, the Koreans grew three times as fast, but out to 2015 the Uruguayan economy is expected to grow by 4.6% on average, compared to a still very respectable 3.5% average growth in Korea.
Result: A strong attack is not enough for Uruguay. 3-1 to Korea.
2. USA vs. Ghana
The Americans have a strong advantage in defence, with Ghana still grappling with double-digit inflation while the US is expected to have the dream rate 2% on average. Neither midfield is up to much, to be honest. Both countries have large current account deficits - an average of 3.6% in the US and 8.8% in Ghana, so the edge goes to the US.
Up front, however, Ghana have by far the best attack in the competition. Average growth in Ghana is expected to top 7% over 2008-2015, compared to less than 2% in the US.
Result: Weak at the back, delightful up front, Ghana go out in style. USA win 3-2.
3. Argentina vs. Mexico
At the back, perhaps it's Mexico's membership of NAFTA but it looks to be in a different league. Inflation rates in Mexico of 4% are far better than the 9% or more predicted for Argentina.
In the middle of the park, Argentina have the edge, though, with a surplus of 2% compared to a small deficit in Mexico. Up front, things are tighter but again Argentina has the slight edge. It is expected to grow by an average of 3.3%, compared to 2.8% for Mexico.
Result: A very tight game, with Argentina's midfield and attack eventually unlocking Mexico's defence. 2-1 after extra time to Argentina.
4. Germany vs. England
Two teams that give practically nothing away at the back. England, with inflation at just 2.2%, are top drawer, but Germany, averaging 1.4%, take it to a different level. With defence like that, it's probably not a surprise that neither sets the world alight with their attack. England have the slight edge, with growth prospects of 1.3%, a little bit above Germany's 0.8%.
Therefore, this is a match that's decided by the midfield battle - and, in the middle of the park, it's not really much of a contest. England have a small deficit, 1.5%, which just can't match Germany's huge surplus of 5%.
Result: Not particular exciting. 0-0, with Germany winning on penalties.
5. Netherlands vs. Slovakia
Netherlands are almost a carbon copy of Germany, with a very tight defence (inflation of just 1.4%), world-beating midfield (surplus of 5.2%) and a relatively dull attack (growth of just 1%).
All this makes it tough for a Slovakian side with a solid defence (2.4%) and great attack (growth of 3.4%) but a soft middle (deficit of 2.8%). Nonetheless, the rate at which Slovakia is improving, plus the paucity of the Dutch going forward, means a shock may just be on the cards.
Result: One for the underdog - 1-1 after 90 minutes, and in extra time the Slovaks sneak a winner.
6. Brazil vs. Chile
Easily the most entertaining for the neutral. Here are two sides with cavalier defences (average inflation of 4.8% and 3.4%) and very potent attacks (both are expecting growth to average 3.9%), meaning lots of goals. This is probably helped in the middle of park by relatively weak midfields, with both countries facing a current account deficit (2.8% for Brazil, 1.6% for Chile).
In each of the three areas, though, Chile has the slight advantage, while add up to prove decisive.
Result: Great fun to watch, and Chile just about have the edge. 4-3 after extra time.
7. Paraguay vs. Japan
Two very different teams again. At the back, Japan are so tight as to be stifling themselves, let alone the opposition (0% inflation). As a result, they don't have much up front (growth of 0.6%), even if they're solid enough in the middle (surplus of 2.4%).
Facing them are Paraguay, a typically Latin American side with weak defence (inflation of 4.1%) but a very strong attack (3.9%) and a midfield that's not too shabby (a 1% deficit).
Result: Against a team happy to pass to themselves at the back for 90 minutes, Paraguay have to take their chances - but once they take their lead, Japan can't recover. 1-0.
8. Portugal vs. Spain
The Iberian clash features two very similar economies. Both with defences that are getting better - inflation of 1.3% and 1.5% respectively - and attacks that are getting worse (growth set to slow to 0.4% and 0.6%). Both also with hopeless midfields, thanks to large current account deficits.
Nonetheless, that said, Spain has the edge in all three departments.
Result: Probably the dullest of the fixtures. 1-0 to Spain.
Which leaves the quarter-final line-up looking like:
Slovakia vs. Chile, the winners of whom play the winners of...
S. Korea vs. USA
Germany vs. Argentina, the winners of whom play the winners of...
Paraguay vs. Spain
Guest Blog Post by Ronan Lyons
We all know the 2010 World Cup is on and at this stage we're down to the last sixteen. But what would a World Cup of economics look like? How would the sixteen countries that are left fare, if they were competing on economic factors, not football ones? Below is the Last 16 with a twist... each match is decided by a country's economic defence, midfield and attack.
Defence is getting the basics right, the platform for the rest of the performance. In economic terms, that's inflation. A quick review of economic history will show that in a world with fiat currencies, getting inflation down to a steady 2% or thereabouts is the equivalent of having a world-class defence. Too far above that and you're essentially giving things away for free. Too much below that and you start stifle yourself.
Midfield is the engine and a good economy, like a good football team, needs balance: enough both going forward and getting back. In economics, that means looking at a country's current account balance. This is essentially a measure of how much a country is in balance and living within its means. A large current account deficit is a big warning sign that an economy is unbalanced.
Attack is all about going forward. Economically, going forward means looking at a country's growth prospects. The higher GDP growth, the greater a sense of opportunity and adventure an economy has. To measure the strength of a country's attack, IMF estimates of GDP growth over the period 2008-2015 have been used. For the inflation rate and the current account balance, the same source and time period are used. And with that out of the way, let the games begin...
1. Uruguay vs. South Korea
In defence, this is no contest really. The Uruguayans still suffer from relatively high inflation (averaging 6% over coming years), while the Koreans at 3.2% are much closer to the "dream rate" of 2%. In midfield, While the Uruguayans are quite close to having a balanced account, the South Koreans have a very desirable current account balance, the average balance for 2008-2015 being just over 2%.
It's only up front where the Uruguayans start to shine. From 2000 to 2007, the Koreans grew three times as fast, but out to 2015 the Uruguayan economy is expected to grow by 4.6% on average, compared to a still very respectable 3.5% average growth in Korea.
Result: A strong attack is not enough for Uruguay. 3-1 to Korea.
2. USA vs. Ghana
The Americans have a strong advantage in defence, with Ghana still grappling with double-digit inflation while the US is expected to have the dream rate 2% on average. Neither midfield is up to much, to be honest. Both countries have large current account deficits - an average of 3.6% in the US and 8.8% in Ghana, so the edge goes to the US.
Up front, however, Ghana have by far the best attack in the competition. Average growth in Ghana is expected to top 7% over 2008-2015, compared to less than 2% in the US.
Result: Weak at the back, delightful up front, Ghana go out in style. USA win 3-2.
3. Argentina vs. Mexico
At the back, perhaps it's Mexico's membership of NAFTA but it looks to be in a different league. Inflation rates in Mexico of 4% are far better than the 9% or more predicted for Argentina.
In the middle of the park, Argentina have the edge, though, with a surplus of 2% compared to a small deficit in Mexico. Up front, things are tighter but again Argentina has the slight edge. It is expected to grow by an average of 3.3%, compared to 2.8% for Mexico.
Result: A very tight game, with Argentina's midfield and attack eventually unlocking Mexico's defence. 2-1 after extra time to Argentina.
4. Germany vs. England
Two teams that give practically nothing away at the back. England, with inflation at just 2.2%, are top drawer, but Germany, averaging 1.4%, take it to a different level. With defence like that, it's probably not a surprise that neither sets the world alight with their attack. England have the slight edge, with growth prospects of 1.3%, a little bit above Germany's 0.8%.
Therefore, this is a match that's decided by the midfield battle - and, in the middle of the park, it's not really much of a contest. England have a small deficit, 1.5%, which just can't match Germany's huge surplus of 5%.
Result: Not particular exciting. 0-0, with Germany winning on penalties.
5. Netherlands vs. Slovakia
Netherlands are almost a carbon copy of Germany, with a very tight defence (inflation of just 1.4%), world-beating midfield (surplus of 5.2%) and a relatively dull attack (growth of just 1%).
All this makes it tough for a Slovakian side with a solid defence (2.4%) and great attack (growth of 3.4%) but a soft middle (deficit of 2.8%). Nonetheless, the rate at which Slovakia is improving, plus the paucity of the Dutch going forward, means a shock may just be on the cards.
Result: One for the underdog - 1-1 after 90 minutes, and in extra time the Slovaks sneak a winner.
6. Brazil vs. Chile
Easily the most entertaining for the neutral. Here are two sides with cavalier defences (average inflation of 4.8% and 3.4%) and very potent attacks (both are expecting growth to average 3.9%), meaning lots of goals. This is probably helped in the middle of park by relatively weak midfields, with both countries facing a current account deficit (2.8% for Brazil, 1.6% for Chile).
In each of the three areas, though, Chile has the slight advantage, while add up to prove decisive.
Result: Great fun to watch, and Chile just about have the edge. 4-3 after extra time.
7. Paraguay vs. Japan
Two very different teams again. At the back, Japan are so tight as to be stifling themselves, let alone the opposition (0% inflation). As a result, they don't have much up front (growth of 0.6%), even if they're solid enough in the middle (surplus of 2.4%).
Facing them are Paraguay, a typically Latin American side with weak defence (inflation of 4.1%) but a very strong attack (3.9%) and a midfield that's not too shabby (a 1% deficit).
Result: Against a team happy to pass to themselves at the back for 90 minutes, Paraguay have to take their chances - but once they take their lead, Japan can't recover. 1-0.
8. Portugal vs. Spain
The Iberian clash features two very similar economies. Both with defences that are getting better - inflation of 1.3% and 1.5% respectively - and attacks that are getting worse (growth set to slow to 0.4% and 0.6%). Both also with hopeless midfields, thanks to large current account deficits.
Nonetheless, that said, Spain has the edge in all three departments.
Result: Probably the dullest of the fixtures. 1-0 to Spain.
Which leaves the quarter-final line-up looking like:
Slovakia vs. Chile, the winners of whom play the winners of...
S. Korea vs. USA
Germany vs. Argentina, the winners of whom play the winners of...
Paraguay vs. Spain
Guest Blog Post by Ronan Lyons
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