Insurance Daily | May 2022

Let’s imagine two buttons, one green and one red. The green button defuses risk, while the red button triggers it. However, we are not dealing with an explosive device, but rather with the huge potential of offering protection tools together with investment products.

Italians leave large amounts of money on their bank accounts, mostly in order to cope with possible needs or emergencies.

However, upon analysis, such emergencies are all covered by insurance – home, fire, theft, illness, life.

Apart from a few exceptions, those who offer insurance policies defusing the negative effects of accidents, hardly ever suggest investing non-interest-bearing assets set aside in case of necessity.

In fact, offering protection is completely at odds with offering financial investments, which entail the idea of risk. I.e. the risk of losing the invested capital completely or partially; the risk of non liquidability in the time and ways desired by subscribers.

Few consider the risk of losing purchase value, a direct consequence of inflation which, since March, has been biting hard.

In markets still driven by financial professionals, their expertise and business attitude are key.

A corporate manager, used to providing money, will hardly make a good financial advisor, who instead asks, gets, and invests money; in the same way, an insurance agent will hardly feel at ease in proposing an investment.

The opposite, however, could be true: a good bank manager or financial advisor could employ the theme of protection to defuse the fear of investing money.

In other words, in an ideal and rational world, those able to convey a sense of protection from possible risks to their clients, would logically succeed in the hard task of converting savings into assets under management.

Reality is way different, and the reasons are many. Simply put, there are three factors that obstruct virtuous behaviours.

The first factor is connected to profit and to the performance of investments. For example, what to say to those who, with 7% inflation, invested their savings, which after six months indicate -12%?

If they have a correct time horizon – for example, at least five years for equity investments – they should not fear, but wait.

The true question is, how many set a correct time horizon at the time of the subscription?

The second factor is connected to the cost of products and how it is communicated. If one offers an investment to manage liquid assets which costs 1%, they will also need to explain how much not investing would cost.

The third and last factor concerns trust, a true propeller for both banks and insurance companies. Trust is built over time and is based on positive experiences.

If we add up these three factors – performance, costs and trust – we will see that currently the ball is in the half of the offer. And only the best will score with no fouls or offsides.

Nicola Ronchetti