Other parts of this series:
Several disruptive forces are undermining the roles traditionally performed by insurance advisors.
The emergence of disruptive digital technologies such as artificial intelligence and robotic process automation, as well as increased competition from a variety of new rivals, are prompting many insurance companies to reassess the roles performed by their advisors. There’s little doubt that the work of advisors, such as agents and brokers, is going to change significantly. In our latest Technology Vision for Insurance survey 79% of insurers agreed that artificial intelligence will revolutionize the way they gain information from and interact with customers.
Key factors insurers should consider when reviewing the place of advisors in their business strategies include:
- Growing threat of disintermediation: Many new entrants to the insurance industry, as well as some prominent carriers, are bypassing brokers and targeting key market sectors, such as small businesses and young professionals, with highly customized services. Furthermore, some carriers, reinsurers and a few big brokers are winning major accounts by offering direct value-added services such as analytics-driven aggregation.
- Rise of virtual advisors: Several insurtech start-ups, and a growing number of traditional carriers, are launching on-line robo-advisors that provide consumers with direct access to insurance information and recommendations. Some of these virtual advisors also sell basic policies. Advances in machine learning and cognitive robotics will raise the capabilities of these services. Their speed, convenience and apparent transparency will make them increasingly popular with a wide range of customers. Our research shows that high-income earners, for example, are eager to receive computer-generated advice about insurance as well as retirement planning.
- Soaring consumer demand for digital services: Insurance customers are hankering for new personalized, on-demand digital services. Around 64 percent of insurance customers canvassed in our recent Global Distribution & Marketing Consumer Survey expect their insurers to use the data they share to deliver more personalized products and services. Furthermore, many customers want their insurers to give them more than just insurance. Eighty percent of the consumers we surveyed would like their life insurers to notify them of the location of the nearest hospital in the event of an emergency. Sixty-four percent of auto insurance customers were interested in receiving hazard warnings when they’re driving.
- Smarter risk assessment: Sophisticated big data and analytics systems will soon be able to determine risk and match it with appropriate insurance cover more quickly and accurately than traditional advisors. What’s more, emerging technology, such as drones, will enable insurers to gather and process risk-related information with greater efficiency than in the past. State Farm, USAA and AIG, for example, have secured approval from the Federal Aviation Administration in the US to test drones.
- Drive for cost reduction: Tapering revenue growth in most developed markets, together with rising competition and growing pressure on premiums, is forcing insurers to curb costs through greater automation. We estimate that by 2020 brokers’ revenues from medium to large customers, for example, could be eroded by as much as 20 percent.
It’s clear that the role of advisors will have to change substantially to accommodate the huge changes that are buffeting the global insurance industry. Advisors will still fulfill a critical function. Their experience and expertise will remain important. But they’ll need to shift their focus and enhance their skills to thrive in an increasingly digital industry.
In my next blog post, I’ll discuss the key skills advisors will need to align themselves to the new business models insurers are likely to adopt. Until then, take a look at these links. I think you’ll find them useful.