Potential of Robo Advisors in the Insurance Industryby Fintechnews Switzerland March 3, 2016
Automated advisory platforms, or so-called robo advisors, have been making a lot of noise in the financial services industry because of the high level of automation and efficiency they bring to the table.
In a new report entitled ‘AI – The Potential for Automated Advisory in the Insurance Industry,’ Surely Group and ACORD Corp examine the potential of artificial intelligence (AI) in the sales process, what this technology means for consumers, and address how it can significantly disrupt the insurance business, warning that “those who do not have a strategy to deal with AI … may find their business at risk.”
The insurance market, which has been rather immune to the wave of innovations triggered by the crash of 2008, won’t be immune forever and there is growing evidence that startups and investors are increasingly focusing their attention on the sector.
“Brokers and insurers may believe they can rely on long-term client relationships, but many policies have an annual expiry (certainly in the General/Property & Casualty Insurance segment), meaning that change can actually come quite rapidly if consumers are sufficiently convinced by the alternatives,” the report warns.
According to a 2014 Capgemini survey, less than a third (29%) of customers are satisfied with their insurance providers’ services, globally. Given the declining customer satisfaction levels, the report argues that players who put consumers’ needs first will “take the prize in a massive way.”
Consumers are seeking solutions that offer convenience, transparency and trust. More precisely, they want a solution to manage all their insurance matter in a simple and coherent way. A relevant service that we’ve covered in the past is called FinanceFox and consists in an online platform that acts as a single point of access for all insurance matters.
In short, all signs indicate that the insurance market is likely ripe for a new consumer-centric solution: a solution that would allow users to manage all their insurance needs in a coherent way, to enable the smarter use of their own data and to select relevant products that are suitable for them.
Applications of an automated advisor solution
The report cites five possible applications of an automated advisor solution:
- Wealth management: handle customers’ insurance and wealth management needs;
- Pure consumer plays: these include solutions such as Sherpa in the UK, and Knip in Switzerland;
- IFA and broker networks: offer a wider service offering to their consumers and follow a “hybrid” technology and human advisor model;
- Banks via their online banking platforms or banc assurance operations;
- Affinity platforms and large retail brands: they already serve customers in one area and want to provide additional insurance servicing to create additional revenue streams.
The document notes however that the “pure technology” model is likely only to suffice in certain circumstances. Consumers are likely to prefer a “human touch” for certain aspects of their insurance affairs.
Hence, the report advises to choose a hybrid model that would use automated advisor technology only for aspects of a portfolio that are straightforward and purely transactional.
“Whether the advice is offered by Artificial Intelligence or a trusted professional or a combination of the two, it will need to be based on a solid understanding of the market and customer.”
Featured image credit: Freepik