Insurance Connect | October 2022

According to Giambattista Vico – an Italian philosopher, historian, and law scholar of the Enlightenment – historical recurrence characterizes the path of humankind, moving from the senses, to imagination, to reason; society then inevitably deteriorates and falls back to savagery, only to climb once again the ladder of civilization.

History repeats itself. Pandemics and wars have changed and will change human history and the geography of the world: who would have thought that between 2020 and 2022 a pandemic and a war in the heart of Europe would have crossed our path?

Let’s just hope in Vico’s theory of history and in a return to civilization. Meanwhile, punctual as a handbook of macroeconomics, inflation has started to bite where it hurts, our wallets.

In order to contain inflation, the European Central Bank (ECB) opted once again for raising interest rates by 0,75%, announcing an additional increase over the next months. 

Christine Lagarde, President of the ECB, declared that “the total shutdown of all Russian gas and oil supply will lead to recession”. In 2023, we shall witness an economic collapse from 3,1% to 0,9%.

Let’s just hope that Lagarde’s decisions will not make us regret Mario Draghi at the ECB as well as in Italy.

Meanwhile, 75% of Italians opt for keeping their savings as liquid assets instead of investing them; moreover, only 10% of them is adequately protected from basic risks (home, health and life).

This way, Italians feel ready to handle possible accidents or unforeseen situations. Such as the one we are currently experiencing: among its many ill-fated by-products is the return to austerity, a distant memory of the 70s.

Moreover, a cold autumn lies ahead, despite the drastic effects of climate change: we are (finally) called to make a cautious use of gas and energy sources to handle the biting recession waiting just around the corner.

The lower class will undoubtedly pay the price; but also, the middle and high-middle classes (i.e., the affluent segment), which hold the majority of the over 1.700 billion euros in liquid assets on current accounts and are not adequately protected or insured.

Moreover, in times of recession, the overall level of trust in banks and insurance companies tends to decrease dramatically, with due exceptions.  

When it comes to rate hikes, banks and insurance companies seem grateful, at least in the short term; however, in the medium term the ensuing recession and rise in the cost of money will increase the risk of credit crush.

This, in turn, will expose banks and insurance companies to the risk of yet another decrease in their clients’ level of trust, thus triggering a vicious circle whose consequences can be easily predicted.

All in all, in this context, the job of financial advisors and financial professionals working in asset management becomes increasingly complex.

However, figures reveal that, in some instances, the world of insurance premiums, asset management products, consumer and real estate credit product is setting yet another record.

What’s the magic formula behind such success, found mostly among companies linked to the world of financial consultancy?

In truth, there is no secret. It is a formula with few, well-blended ingredients: proximity to clients, proactivity, transparency, and a high level of trust.

Such elements are well-known among the protagonists of the financial industry. However, they are hardly implemented, perhaps for lack of healthy carriers of both financial and insurance expertise.

The industries of asset management, protection and credit tend to stay apart, underestimating the synergies that may originate from a unitary and holistic approach.

Instead, holistic consulting envisions the individual as a whole and considers their many needs in terms of savings, protection, and access to credit. Could holistic consulting be the solution to all evils?

Speaking of which, we have identified two schools of thought: 1) the first promotes and practices holistic consulting by blending different skills within their service model; 2) the second opts for a model of “pure” consultancy.

The names we attributed to the two schools of thought are inspired by a noble and very ancient practice: the art of winemaking. In fact, behind any good wine is not only good grapes, but also a lot of work and great expertise.

Each bottle results from the combination of many varieties, expertly blended to create the specific taste, smell and flavour that distinguishes a given wine. However, some wines, known as pure varietal wines, are produced using only one variety of grapes.

Metaphors aside, both schools are based on valid and commendable models.

The so-called blended model is based on the Anglo-Saxon principle of “one stop shop”, typical of large retail chains (e.g., large-scale retail trade, or examples like Harrods).

Its mission is to assist clients on three fronts at once: asset management, protection, and credit.

Achieving such purpose takes large economies of scale, that is assets under management worth over one hundred billion euros as well as a large number of clients (over one million).

In addition, either sales networks specialized on three fronts or supported by experts; or a large banking group able to operate in the fields of asset management, protection, and credit.

Managing the blended model takes a true war machine with impeccable governance, engagement rules able to prevent common internal conflicts over clients, as well as a strategic plan built on all three business lines.

This, however, is only a prerequisite and, thus, can hardly guarantee the success of the blended model. Only the quality of service can make this three-headed model work. And, when it comes to protection, the quality of service reveals itself in the so-called moment of truth.

In other words, there are no insurers without proven experience in the field – so, of the two, you either have one at home or you acquire it elsewhere.

There are some emblematic examples of blended model with significant differences in size, history, and mission.

Banca Intesa Sanpaolo, our national champion led by Carlo Messina, has an insurance division: part of it was built a while ago with the assistance of leading companies in life insurance (Intesa Sanpaolo Vita and Assicura); and some is the result of more recent acquisitions (RBM Salute).

Banca Mediolanum, led by Massimo Doris, has been aiming not only at investment and asset management products, but also at insurance products and consumer and real estate credit.

In fact, Banca Mediolanum’s over 5.000 family bankers can count on a team of almost 650 protection and credit specialists, divided between employees and agents.

Moreover, there are three banks with protection in their DNA; as a matter of fact, they belong to three of the largest and best-known insurance groups in Europe.

They are the Italo-German Allianz Bank, led by Paola Pietrafesa, Banca Generali, led by Gianmaria Mossa, and the new-born Italo-Swiss Zurich Bank led by Giovanni Giuliani.

They are the leaders of the world of financial consultancy: Allianz has been the first and only bank to start a project in which financial advisors and insurance agents coexist and operate under the same roof (i.e., Casa Allianz).

Banca Generali has recently launched an insurance solution with an emblematic name: BG Oltre, in which the protection of separate management is enriched by a new approach to asset management. Its objective is to gradually attract clients towards inventing in the main trends of the future.  

Finally, Zurich Bank Italia (which embraced the inheritance of the older Finanza & Futuro, then Deutsche Bank Financial Advisor) will allow Mario Greco to realize his dream of creating a centre of excellence in the insurance and financial sectors.

On the other hand, there are two emblematic examples of the so-called pure model, with meaningful differences in size, strategy, and history.

First of all, Fineco Bank: with over one million four hundred thousand clients, a financial network made of over 2.750 professionals and 417 financial shops (Fineco Center) is among the leading multichannel banks of the market.

Fineco Bank, led by Alessandro Foti, has pushed further on the accelerator of the pure model by guaranteeing growing importance to their Fineco Asset Management.

The second example is Azimut, one of the leading European independent asset management groups founded by Pietro Giuliani and led by Paolo Martini. Azimut is pursuing a growth strategy in the sector of alternative investments dedicated to real economy. This way, they aim at becoming an important gateway for Italian small and medium-sized businesses in search of advisory services and an easy access to the capital market.

Regardless of the type of model – be it blended or pure – banks, financial networks, asset management companies and insurance companies shall want and be able to close ranks around Italian families and companies.

Nicola Ronchetti