Insurance vs. Banking - Conflict or Collaboration?

January 10, 2018

 

Every insurer has a bank account, and every banker has an insurance policy.

 

 In Switzerland, the insurance and banking sectors almost never mix, leading to fierce competition for client assets, and a fair amount of negative sentiment. Most of us don’t hold our insurance agents in high esteem, to say the least, and the same can often be said of our bankers.

 

Worst of all, your bankers and insurers almost never talk to one another to determine what's best for you. 

 

The difficulty is, you are a client of both insurance companies and banks - and you need clear and integrated financial solutions.

 

Insurance and Banking are two sides of the same coin.

 

Despite the almost visceral separation between these two industries, the truth is simple: insurance and banking are two sides of the same coin - integral parts of the financial family. Both industries survive using your hard-earned assets, and you as a client need your financial protection and investment return to work in harmony.

 

So, what’s the problem?

 

Bankers and insurers have different priorities, but these priorities are complementary, and not in conflict, as many believe. You, as a client, need both. One is all but useless without the other.

 

  • An insurer’s role is to protect your assets, and your financial and physical security.

  • A banker’s role is to grow your assets, provide liquidity, and investment opportunities.

 

Let's imagine two scenarios:

 

Insurance: Imagine you collide with another skier on the slopes this winter, gravely injuring them. You may be responsible for hundreds of thousands of francs in lost income compensation, legal fees, and medical costs.

 

Your investment portfolio's performance is no longer a concern now – your financial survival is.

 

Banking: Imagine you have taken out a mortgage recently in order to buy a property. Following an accident, a fire breaks out and destroys your home, and everything in it, in a matter of minutes. Luckily, you and your loved ones were not present at the time.

 

Without quality insurance, how will you pay off the loan? Moreover, how will you rebuild your life, without clothing, furniture, or any possessions to your name? That 1'000 franc insurance premium doesn't sound so "over-priced" now, does it?

 

Need another example of how insurance and banking are more related that you might think? Let’s get technical.

 

Let’s look at something you might hear about only if you’re “in the know” – financial derivatives. Investment products reserved for qualified investors and financial professionals - complex stuff.

 

More specifically, let’s look at a Put Option.

 

A put option is defined as a contract giving the owner the right, but not the obligation, to sell (retrieve the value of) an underlying asset (such as a car) at a set price (such as the price you paid) within a specified time. The buyer of a put option believes the underlying asset will drop below (may decrease in value due to damage or theft) the exercise price (price you paid) before the expiration date (the life of the car). Buying a put option incurs an option premium (cost of the protection), which you pay regardless of whether you choose to exercise your right or not (insurance premium). 

Sound familiar? We thought so…

 

Tired of insurance and financial professionals telling you “it’s very complicated”? 

 

So were we.         

 

 

 

 

 

 

 

 

 

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