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The Role of the Financial Planner in Retirement Planning

 A financial planner’s role in retirement planning goes beyond merely analyzing a client’s existing resources and determining how much must be saved to reach a particular level of projected retirement income. A good retirement planner should be prepared to assist his or her client in developing realistic retirement objectives and lifestyles, and to help ensure that the client is aware of the decisions and adjustments that he or she may have to make at retirement. A retirement planner should be able to help his or her client retire to something, not just from something.

 Examples of the services that a retirement planner might provide include the following:  

 • showing clients who are in their early working years the benefits of identifying retirement objectives, and starting to save and invest early. 

• showing clients who are in their peak earning years the importance of accumulating sufficient retirement resources and investing them appropriately

 • reviewing existing resources and pension plan memberships, and projecting the savings required to reach retirement objectives. 

• counselling clients approaching retirement about the financial and other adjustments that they will face at retirement

 • counselling clients regarding their distribution options of pension benefits.

• evaluating the advice that a client receives from other retirement advisors, to ensure that it is consistent with his or her overall retirement plan .

 • counselling clients who have retired about liquidating assets to meet living expenses.

The History of Retirement – Mars Empire Group Inc.

The History of Retirement

The concept of formal retirement was first developed in Germany in the 1880s. At the time, Chancellor Otto von Bismark was facing a number of problems, including a very unhappy labour force and a civil service and army full of aging and unyielding bureaucrats. Von
Bismark solved both problems with one solution, by introducing government social benefits that included health insurance, accident insurance and an old age pension to commence at age 70.

 At about that time, Canada first began to be concerned about poverty among the elderly, particularly in urban centres. In rural areas, individuals kept working the farm until they died or were incapacitated, at which time they were cared for by their families. However, industrialization in urban centres eroded this system of family care. Businesses began to see that the easiest way of getting rid of elderly, inefficient workers was to give them a small
pension, usually beginning at age 70. While the amount was not enough to live on, it was expected that the pensioner would find some form of supplemental income.

 The government established its first social program for the urban elderly in the 1920s. In his election platform of 1926, Mackenzie King promised to introduce an Old Age Pensions Act. The Act was passed in 1927 and as a result, Canadians 70 years of age and older began to receive $20 per month, which was about 25% of the average industrial wage at
the time. This first social program was largely a political platform. At the time, the average
male life expectancy was only about 61 years of age. Furthermore, the pension was subject
to a means test, not only of the pensioner, but of his family, as the government still
expected the family to care for its elderly. At death, the government would actually try to
recover the pension (plus interest!) from the estate of the deceased.

Canada’s retirement programs began to develop more substance in 1951 when Prime
Minister Louis St. Laurent introduced Old Age Security (OAS). This program provided a
universal pension of $40 per month to all Canadians aged 70 or more, and a similar amount
to individuals aged 65 to 70 who passed a means test. Prime Minister Diefenbaker
subsequently raised the amount, and added survivor and disability benefits to the OAS
program.

In 1966, Prime Minister Lester Pearson lowered the OAS basic eligibility to age 65 and
added a guaranteed income supplement for individuals with low incomes. He also introduced
the Canada Pension Plan (CPP).

PwC survey :Insurance company CEOs optimistic about growth over the next three years

This survey was conducted with 1,201 business leaders in 69 countries around the globe in the last quarter of 2010, including 57 insurance company CEOs.

More than half (56%) of the insurance company CEOs surveyed said they were very confident about their company’s prospects for revenue growth over the next three years, and “virtually all the rest” said they were reasonably confident.

nsurance company CEOs around the world are more bullish about their companies’ growth potential over the next three years than their counterparts in other industries, according to the PwC 14th Annual Global CEO survey.

The survey was conducted with 1,201 business leaders in 69 countries around the globe in the last quarter of 2010, including 57 insurance company CEOs.

More than half (56%) of the insurance company CEOs surveyed said they were very confident about their company’s prospects for revenue growth over the next three years, and “virtually all the rest” said they were reasonably confident.

“That makes them more optimistic than CEOs in almost every other sector” of the survey, PwC said.

But exactly how they intended to grow would prove to be a challenge for many, the report suggests. It noted the surplus capital held by many wholesale insurers is depressing rates across most lines of business.

“While growth in many mature markets may be slowing and returns on many of the more commoditised lines may continue to be low, there are ways for wholesale insurers to generate more favourable and sustainable shareholder value,” the PwC report states.

“This includes developing the scale and efficiency to provide volume products efficiently and cost-effectively.

“They could also get closer to the client, rather than waiting for the broker to deliver the business. This would enable them to build up a better understanding of the client’s specific risk management demands and develop carefully tailored solutions to meet them.”

Over the long term, 56% of insurance CEOs surveyed saw opportunity knocking in emerging markets, rather than in their home markets. China topped the list of countries targeted for growth, followed by the United States, Brazil and India.

“While growth in many mature markets may be slowing and returns on many of the more commoditised lines may continue to be low, there are ways for wholesale insurers to generate more favourable and sustainable shareholder value,” the PwC report states.

Predictive Modeling Improving Insurers’ Bottom Lines, Market Share

Property/casualty insurance carriers currently utilizing predictive modeling continue to see their bottom lines improve and almost 4 out of 10 say it has helped them increase market share.

For this and other reasons, predictive modeling also continues to gain momentum among North American insurers, with most carriers either expanding current implementations or planning new or additional predictive modeling applications, according to the second annual survey on the topic by global professional services company Towers Watson.

Of the 43 U.S. companies that responded to both surveys, 88 percent said the use of predictive modeling enhanced rate accuracy (up from 77 percent when the survey was first conducted in 2009).

Seventy-six percent said they realized an improvement in loss ratio and 68 percent said that it improved profitability. Both figures were up from a year ago.

Additionally, 42 percent said the use of predictive modeling has furthered the expansion of their company’s underwriting appetite, while 39 percent indicated it helped increase market share.

Predictive modeling uses advanced statistical modeling techniques, along with company and external data related to individual policyholders, competitors, marketplace conditions and customer behavior.

“Effective implementation of predictive modeling enhances risk selection and pricing — leading to greater insurer profitability and the potential for growth in market share,” said Brian Stoll, Towers Watson senior consultant and the survey’s coauthor.

The current use of predictive modeling in the U.S. is up by roughly 10 percent across all lines of business except commercial property/business owners package (BOP), which remained relatively flat.

Among personal lines, 83 percent of auto carriers said they use predictive modeling (versus 76% in 2009), while 61 percent of homeowners carriers have implemented predictive modeling (versus 44 percent).

In the standard commercial lines segment, predictive modeling usage in workers compensation has increased to 32 percent, up from 18 percent last year. Other increases include commercial auto (32 percent versus 21 percent). Commercial property/BOP was essentially flat at 25 percent (versus 23 percent in 2009).

Predictive modeling implementation in general liability lines has increased to 22 percent, up from 14 percent in the previous survey, and to 17 percent in specialty lines, up from 5 percent.

New Road Safety Strategy in Canada

Road Safety Strategy 2015 has been approved by the Ministers Responsible for Transportation and Highway Safety.

It strives to make Canada’s roads the safest in the world by providing each province and territory with a variety of solutions to road safety risks such as road users, vehicles, and roadway infrastructure. The Canadian Council of Motor Transport Administrators (CCMTA) will lead the implementation of the strategy.

The Insurance Bureau of Canada (IBC) is one of the program stakeholders, and has contributed to its development.

“We fully support this plan as being the right approach to continue our significant progress on road safety in Canada,” Robert Tremblay, director of research at IBC told Canadian Insurance Top Broker January 28.

Tremblay stated the new strategy is an update of its predecessors.

“The previous versions were essentially looking at very specific targets of road safety strategies such as drinking and driving. Even though it was successful overall, we didn’t feel it was necessarily those objectives that gained progress, and rather it was everyone working towards the same direction.”

Since it was implemented 15 years ago, Road Safety Strategy has been successful in reducing fatalities and serious injuries on Canada’s roads. The provisional fatality total for 2009 is 8.7% lower than the number of road users killed in traffic crashes during 2008, and represents a 25.1% reduction over the 1996-2001 baseline figure, it was stated in a press release. This is the lowest death toll on record in Canada in more than 60 years.

According to Tremblay, road safety should be viewed not just from the vehicle and the user perspective, but also from the engineering factors of the road itself.

“It’s the road, vehicle, and driver,” he said. “Everyone recognizes that the weakest link is the driver, but the idea is to use a systems approach. We know that driver error is very likely to happen, but what we have to do is ensure those errors aren’t fatal.”

One of the ideas that came from the strategy is adding “rumble strips” along roads, which are designed to alert inattentive drivers.

“It is a very simple thing but it can lead to a significant reduction in dozing drivers,” he said.

Mutual Fire Insurance Company of British Columbia receives ‘A-‘ financial strength rating

A.M. Best has assigned a financial strength rating of ‘A-‘ (Excellent) and issuer credit rating of ‘a-‘ to The Mutual Fire Insurance Company of British Columbia.

The outlook for the ratings is stable.

“The ratings and outlook for Mutual Fire are reflective of its excellent risk-adjusted capitalization, sound pure loss ratios, consistently profitable operating performance and local market presence,” an A.M. Best release says.

The rating agency also noted the insurer’s “focused underwriting discipline” that has consistently produced favourable pure loss ratios for the latest five- and 10-year periods.

“Partially offsetting these positive rating factors are Mutual Fire’s elevated expense ratio and the potential challenges it may encounter as it expands into new markets across the Western region of Canada.”

Australian floods likely to break the $1-billion insured loss mark

Floods ravaging large swaths of the Australian state of Queensland will likely trigger insured losses in the billions, according to unnamed sources in an Australian newspaper. If so, this would make the floods one of the costliest catastrophes to hit Australia.
Floods have battered the area since the end of 2010, where the average rainfall in Queensland was 250% above normal. The floods from December 2010 to the beginning of January 2011 triggered more than 4,300 claims, reported the Insurance Council of Australia. Within the past week, the flooding has intensified.
The City of Toowoomba in southeast Queensland was hit with a flash flood on Jan. 10, 2010 and intense floodwaters are expected to hit Brisbane on Jan. 12, reported the Sydney Morning Herald.
Experts expect floodwaters to reach 22 metres high in Brisbane, where as many as 6,500 properties are at risk. A comparable flood hit Brisbane in 1974, resulting in insured losses of $2.1 billion if adjusted for inflation and changes in population density, reported the SMH.
AIR Worldwide noted residential flood coverage varies considerably by insurer and location in Australia, while many commercial policies include flood coverage.
Suncorp Group writes about $1.4-billion worth of coverage in Queensland each year and has received approximately 2,500 claims for flood damage as of Jan. 11, 2011, reported the Sydney Morning Herald. Insurance Australia Group received 900 claims as of Jan. 11, 2011, marking an increase of 300 since the week prior.
Both companies told the Sydney Morning Herald it was still far too early to determine the total insured damages.