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Financing risk: prefund, postfund or both 

29/6/2016

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If you buy an umbrella when it is sunny, you probably are also a fan of insurance. However most people only buy an umbrella when it is raining and they see insurance as a necessary evil. The two approaches can be restated as: whether to prefund risk via insurance/savings or post fund losses via levies/borrowing? How risk/losses should or shouldn’t be shared is a separate question and is not addressed in this article but is addressed in this article.
 
So what’s the difference between prefunding and postfunding?
Prefunding obviously requires some estimating because when and how severe a loss will be is uncertain but less-obvious is that opportunity cost of investing in financial assets until monies are needed to pay for losses. Arguably prefunding is more forward looking, meaning there is a greater focus on risk management.
 
Postfunding is also a lot more transparent as the reason for the funding requirement is clear / there are less assumptions required. However, postfunding is less guaranteed because the source of liquidity may dry up when you need it following a loss. A liquidity shortage may be due to external events or the nature of the loss and the affect on you. One major benefit of postfunding is that there are less strings attached. Most insurance/savings scheme restrict payouts / how you can use the money. 
 
Some examples
Many discretionary mutuals and government insurers use a 100% postfunding i.e. subscriptions/levies are used to fund losses in the year rather than future losses where the underlying event occurred in that year. Donation based crowdfunding fits in this category.
 
Insurers offers a number of postfunding options to complement their core prefunding model. Examples include deductibles, co-pays, burning cost ‘premium adjustments’ and health savings accounts. 
 
Crowdfunding Cover is a genuine mix of both postfunding and prefunding. In return for regular risk-based subscriptions (prefunding), subscribers are entitled donation-matching of their life event crowdfund campaign (where donations are postfunded). An alternative name for this type of model is community coinsurance. What ever you want to call it – it is a entirely new way to finance risk. 

Take-away
Postfunding is a legitimate form of financing risk and is perhaps an approach you may very well want to consider.
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#insurchat is boosting #insurtech through sharing

11/6/2016

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What is #insurchat?
A 30 minute chat session on twitter covering a different #insurtech topic each week

​​When is insurchat?
Every Wednesday: 2pm Denver = 4pm New York = 9pm London = 10pm Berlin = 8am Thursday in New Zealand
Why have #insurchat?  
To boost #insurtech through sharing
Picture
Who's behind insurchat: 
Currently  &  co-host the session but no ones really owns it -  it is a collaboration of those interested in boosting #insurtech through sharing

​​Next week's topic: Brexit, borders & scaling ​(29 June 2016)

Topics to date:
  1. What's new in #insurtech (23 March 2016)
  2. Online vs bricks & mortar (30 March 2016)
  3. Startup playground, life, p&c, health - where do you play & why? (6 April 2016)
  4. Virtual hugs in online insurance: building trust among thousands (13 April 2016)
  5. Sharing success stories in #insurtech ​(20 April 2016)
  6. Blockchain applications in Insurance ​(27 April 2016)
  7. Wearable technology in #InsurTech ​(4 May 2016)
  8. Beyond personal lines, #InsurTech for Business (11 May 2016)
  9. P2P Insurance (18 May 2016)
  10. Building an #Insurtech Brand (25 May 2016)
  11. Facebook: Do's and Don'ts (1 June 2016)
  12. Insurtech: Is anything off-limits? (8 June 2016)
  13. InsurTech - Life (insurance)(15 June 2016)
  14. Rules - Regulation & Workarounds (22 June 2016) 
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Affordable single item cover

2/10/2015

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IAG Labs and Good Shepherd Microfinance have launched Insurance 4 That in Australia. Insurance 4 That is  single item insurance which makes insurance affordable by not gold plating cover nor providing insured limits which are too high. Protection is available for items including:
  • White goods
  • Electronics
  • Medical devices
  • Furniture
  • Musical instruments
​
In New Zealand, PeerCover is offering affordable zero-deductible single item cover. Currently we offer Gadget cover for electronics but we can expand this should you require. PeerCover is a bit different than insurance
  • your payout is based on your deposit (no premium)
  • if your PeerGroup has no claims, you don't pay anything
  • if your PeerGroup has claims, the cost (including claims handling fee) is shared pro-rata amongst the PeerGroup
So if you are looking for single item cover in New Zealand, sign up to PeerCover today.
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Bill Shock Cover - get rid of those nasty surprises

2/10/2015

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Bill Shock is the negative reaction a subscriber can experience if their phone/internet/power bill has unexpected charges. Bill shock can happen when, for example, a user changes their mobile phone, switches to a smart meter, or uses a mobile device while roaming without understanding the voice or data roaming charges involved.

In New Zealand:
  • The Telecommunications Dispute Resolution (TDR) scheme deals with about 2,000 complaint per year of which approximately 640 relate to billing and credit issues.
  • The Electricity and Gas Complaints Commissioner Scheme dealt with over 3,600 complaints last year of which over 1,600 related to billing complaints.

Until now there was just 2 ways to mitigate bill shock:
  1. Choose a plan to avoid bill shock e.g. prepay, unlimited or data shaping (for internet)
  2. Monitor frequently

Now you can protect yourself and your friends through PeerCover.  You'll be notified if anyone in your PeerGroup is experiencing bill shock, so you can avoid the same situation. Alternatively you may able to help them get off by letting them know what to say. If push comes to shove, the bill shock amount (and a small claims handling fee) will be shared amongst the whole PeerGroup - to spread the load.

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Cyclones in New Zealand

22/6/2015

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New Zealand manged to miss a lot of the damage caused by Tropical Cyclone Pam earlier this year. So what is the cyclone risk in New Zealand and how does it compare to say Australia?

The Global Risk Map provides useful insight. The map comes from the PSI Global Resilience Project, which is led by Insurance Australia Group (IAG) and was formally launched at a global insurance industry event in New York in June 2015.

ps If you are wondering why the there is a band around Malaysia where there are no cyclones. The explanation is that this is the 'doll-drums' a place with not much wind. Interestingly this is where cyclones are born but they need lateral wind to get fired up.
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Insurer offering a 35% saving on your insurance – the question you should ask first is how.

12/6/2015

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Selling insurance is not the same as selling physical goods like oranges or iphones. Insurer’s don’t “run out” of insurance. Subject to capital requirements, insurers can always make more insurance.
However, just like insurer’s can make more insurance they can also make less. How do they do this? They change their terms and conditions. By changing their terms and conditions insurers can add cover which sounds good but is not worth much or remove cover which is costly. Sometimes, to be really tricky, insurers will define cover in a certain way, which may mean the common sense definition does not apply.

If the insurer is just covering you for 35% less or worse 40% less, you may wish to reconsider. There are some good reasons why some insurers are cheaper, for instance:
  • Tower’s insurance SmartDriver can rate your risk better
  • Progressive (not in NZ yet) is 100% online, cutting selling and administration costs
  • PeerCover lets you insure smarter by rating on things that an insurer can’t and sidesteps regulation
  • Some health insurers are investing in wearables like SleepWakeApp
  • AIA's wellness program (not in NZ yet) through Vitality 

So, if an insurer offering a 35% saving on your insurance – the question you should ask first is how.

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Public Database of Debits and Credits

16/5/2015

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Like google docs or sheets, this is a public database of debits and credits. Also known as Decentralized Value Transfer Systems (DVTS). The best known example right now is BitCoin, but there are others, such as Etherium and RippleLabs.

Just like google docs or sheets, there are controls around database entries. Entries are verified through a process known as the blockchain. For added security, multiple copies of the database are made on multiple computers - any unauthorized transaction would need to alter all these copies - very difficult to do in practise. Unlike google docs or sheets, there is no owner – the database is decentralized.
Being decentralised, it made sense to use a decentralised or global currency. The public database of debits and credits uses the Bitcoin.

The database is set up to provide an avenue for the transfer of value without the need for the central structure usually provided by a financial institution. peercover.com (the American company  related only by name) was looking to use a public database of debits and credits to provide a market place between insured and insurers. 

PeerCover.co.nz is keeping an eye on the progress of the public database of debits and credits. However, at this stage peercover will not be using this technology until it is further proved-up .

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#itidc Insurance Times Innovation and Disruption Conference

28/4/2015

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Allied Peers - Microinsurance

29/3/2015

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Allied Peers is looking to facilitate P2P insurance using 'smart contracts'
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