Other parts of this series:
From Siri to our investments, the use of artificial intelligence to make decisions has expanded rapidly in the last five years. As we’ve seen in this series, this trend is just starting to reach the insurance industry. Insurance agents working today could be forgiven for wondering if a robot will put them out of work in the coming years.
The Agent Advantage and Future Integration
While automation is likely to transform many jobs in the future, it is extremely unlikely that the insurance industry will give up entirely on its existing advantage of agent-consumer relationships. As a recent Accenture survey of nearly 33,000 customers around the world revealed demand for human interaction is not incompatible with demand for robo-advice.
- Almost three-quarters of customers are open to robo-advice for insurance purchases.
- Just over three-quarters are open to robo-advice for investment allocation.
- More than two-thirds are open to robo-advice for retirement planning.
- For complicated transactions or complaint-handling, two-thirds expect top-notch human interaction.
If the future of the insurance industry is machines and humans working side-by-side, established insurers may have an advantage against smaller, dedicated robo-advice insurance firms. Legacy insurers already blend technology and human service to please their customers. Adding robo-advisors to existing customer service channels could be a very powerful way for insurers to leverage their massive technology and knowledge bases. Robo-advisors could automate the early phases of the sales process, with human agents on-call to handle the most complex questions and issues.
Another possibility offered by robo-advisors is providing proactive, customized advice to customers on a broad scale. The same Accenture survey referred to above also found that most customers are interested in personalized services that help them reduce the risk they face.
The challenge for insurers is that providing customized advice at this scale is very expensive. Robo-advisors may provide a cheaper way of offering detailed advice to every customer who wants it. This, in turn, could be a first step towards providing the “holistic advice” we discussed last week.
Robo-advice as a Dashboard
Let’s look at how one fintech startup we previously discussed has started moving towards holistic robo-advice.
Wealthfront’s Path service, which links investments with savings data, provides a forward-looking view of a consumer’s retirement finances. It is also a usable first step towards automatic, customized advice on every aspect of a customer’s financial situation.
The service is built on Wealthfront’s own data on a customer’s investments. Path also integrates with other financial management APIs and authentications to access information on investments outside of Wealthfront, like a customer’s bank and investment balances. Path even encourages users to enter other assets like real estate.
Path combines this information with a short user financial survey.
The final output, produced using Path’s predictive model, provides a user with an overall picture of their financial health in a single graph, including projected net worth and assumed retirement spending.
Could an insurance company do something similar with information that already have? Yes. In fact, we are already seeing this in the agent-led, robo-assisted advice model of Learnvest.
Learnvest, a fintech startup purchased by the Northwestern Mutual Life Insurance Company in 2015, is attempting to offer holistic robo-assisted advice across a consumer’s entire financial existence. The company’s goal of accounting for every aspect of a consumer’s finances is illustrated in remarks from its CEO, Alexa von Tobel, at a panel discussion hosted by the Economist:
Basically I was looking at what technology was doing in other parts of my life, and I simply said, ‘I would love if technology could tell me exactly what I should do with my finances.’ It really started that simply. I was building something I wished existed for myself.
Learnvest includes insurance within their complete financial picture considerations.
Learnvest uses a combination of human financial planners and sophisticated software to track a customer’s finances, answer questions, and make suggestions. It accounts for a customer’s age, income, goals, and personal risk tolerance when creating a plan. While the startup has maintained its stand-alone offering post-acquisition, Learnvest is also working on integrating its knowledge and offerings with Northwestern Mutual’s agent-led services, including insurance.
It should be noted that Northwestern and Learnvest are firmly committed to a hybrid model, where robo-advisors assist humans to deliver advice to customers. Each Learnvest customer is paired with a specific human advisor who responds to the questions and guides them through difficulties. Almost every possible consumer financial consideration is included in a Learnvest “Action Plan,” including insurance consideration. The fees Learnvest charges—US$300 for setup, then US$19 a month afterwards—will make it difficult to scale customer acquisition. However, the firm’s acquisition by Northwestern gives it access to large amounts of data and a significant customer base that may let it scale up robo-advice in other ways.
Whatever happens, it is unlikely that the examples in this series will be the only approach for robo-advice in insurance. The information that allows robo-advice to shine builds over time. Customer comfort with automation in other areas is also likely to grow. The question at this point is not whether robo-advice will come to insurance, but whether personal and life insurers will provide enough value to become one of the places that customers turn for integrated, automatic advice on their financial situation.
Read other parts of this series:
- Where are robo-advisors being used today?
- What industries will robo-advisors impact next?
- Where are insurance robo-advisors deployed today?
- Where will robo-advice winners come from?
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