Archives for May 2009

The consequences of printing money

When reading recent financial analysts’ comments and listening to politicians’ opinions around the world, it seems that the worst of the financial crisis and the economic downturn is behind us. Of course, nobody forgets that the international financial system was about to collapse in October last year but according to the most powerful US policymakers, the world economy will be probably growing again at some point between Q4 2009 and Q2 2010. Some indicators tend to confirm this statement, the first one being the impressive rebound of equity markets around the world. For instance, the S&P 500 has gained a bit less than 30% since it reached its lowest level back in the beginning of March 2009. In other words, most economists, finance professionals and politicians are confident that the urgent measures implemented last year in order to tackle the financial crisis were just the perfect ones. The constant injection of new liquidity into the financial system during the past 18 months, the multiple bail-out plans as well as the low interest rate policy were the necessary ingredients of a miraculous cocktail to save the financial industry and help the economy recover fast. At least, it is what policymakers are now claiming. After a difficult period in all fronts, it seems that the period of self-congratulations has come and that the last 18 months period was just a bad dream we must forget as quickly as possible. Personally, I am not so optimistic and I think there is still plenty to worry about. In a report published in December 2008 called “Flawed Assumptions about the Credit Crisis: A Critical Examination of US Policymakers“, Celent reviewed the credit market in the light of figures provided by the Fed and other central banks in Europe and Japan. More than questioning if there is really a credit crisis, what appears to me to be an issue of high importance for the future is the money aggregate in circulation in the economy (click to enlarge): Economies worldwide are struggling and have been experiencing an important slow down in terms of GDP recently. In Europe for instance, certain countries have double-digit GDP decrease rates resulting in higher unemployement and lower investments. On the other hand, beside this tough and cruel reality, there is a huge amount of money available to spend and to invest. What a strange and unsound equilibrium! As a result, we might end up with a period of high inflation, which will require specific actions in the short term on interest rates by central bankers. Taking into consideration the sudden and drastic slow down of GDPs around the world coupled with the equally sudden and unprecedented increase of money supply (as depicted in the figure above), the financial crisis might have been the earthquake, whose tsunami could be a certain form of hyper-inflation. In the long run, the world leaders will have to address the real cause of the problem: the definition of a new international monetary system. But by now, I really believe it is not the right time for self-congratulations!

7.9.09: Celent Insurance Webinar: Reaping the Benefits of Web 2.0: European Insurers’ Strategies that Work

Celent senior analyst Nicolas Michellod This event is only open to Celent clients. Please click here for more information.

Where's My Junk Mail?

My wife and I had our first baby one month ago. The excitement and awe are slowly giving way to pragmatic concerns. Like, what’s the downside of using a pacifier? Is it really necessary for Baby Weber to live in organic cotton clothing? Isn’t it time to start a college funding plan? And where are we going to buy the extra life insurance that we ought to have?

While random thoughts on pacifiers and baby clothing are now—somewhat incredibly—interesting to me, the issues most relevant to this audience are the latter two. And my perspective on them in Week 4 of my newborn’s life is that insurers are strangely absent in helping me to think about financial products.

While the insurers sit idly by, my wife and I have received direct mail offers from photographers, clothing stores, umbilical cord blood banks, and even a local private school. (He’s a month old, and I’m supposed to enroll him in private school already!?) Babies R Us emails me weekly specials. I’ve put myself on some of these mailing lists, so I’m not mad. I appreciate the attention, for once.

I’m thinking insurers must be able to access the same databases as everyone else, in which my name now has a checkbox in the NEW PARENT columns. But if they do, they aren’t working those databases very well.

Come to think of it, I didn’t even get any insurance material in the baby welcome kit from the hospital where he was born. Formula and diapers yes, insurance no. The story on life events marketing in insurance is age-old, but at least in my home town no one seems to be acting on it.

The good news is that many carriers appear to be building out infrastructure in a way that supports life events marketing. For example, needs analysis solutions are getting very good at teasing out the customer’s story. Web-based self service is generating tons of data that can be mined for relevance. “Practice management” tools are integrating the workflows and data across front and back offices. Now if someone aim those tools at the thousands of birth announcements appearing in newspapers every day, I might get the offers for financial products that every new parent needs.

Empowering Your Agent at Insurance Networking News

There’s a great article at Insurance Networking News (in which I am quoted) about the rise of agent portal technology. It’s been a favorite topic of mine, and I’ve written multiple reports about it at Celent. As the article explains, there are essentially four ways insurers have gone about providing agent portals.
  1. Build it themselves.
  2. Leverage a portal technology vendor.
  3. Leverage the portal technology in a policy administration system.
  4. Utilize a framework from a professional services firm.
The first option has–so far–been the overwhelming choice for insurers, but as technology offerings from vendors have matured, this is changing. Considering that such a high percentage of carriers have an agent portal (according to Celent research, it’s between 85 and 95 percent, depending on line of business) It’s surprising that it’s taken so long for this many viable vendor options to be available. Though, really, many of these vendor technologies have been in the marketplace for a while. I think the real change is that many carriers have completed the build out of proprietary portals and are now stepping back and asking how to take those portals to the next level. For INN’s take on it, check out the “Empowering Your Agent” article.