Sci-Fi has relied on robotic advisors since the genre was launched, and for good reason: They improve the lives of humans. This science-fiction is finally being realized, and if you squeeze your eyes tight and look at the horizon, you can see the future forming for insurance.
Who is Mr. Robo and What Does He Want?
A ‘Robo-Advisor’ is a blend of artificial intelligence, data/analytics, and work-process technology that, according to Wikipedia, provides “digital financial advice based on mathematical rules.”
Robo-Adviors are becoming common in investment planning. Consumers are becoming more comfortable with handling financial services – including wealth management – on their own. And this is disrupting intermediaries. BI Intelligence recently noted:
As technology continues to change the way people invest, it becomes increasingly clear that we’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs. No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
Robo-Advisors have started to emerge in Life Insurance, especially with annuity products. Interestingly, while the US has dominance, Canadian insurers are responding to their customers as well.
In a 2016 a Celent report, “Thawing Market: The Growth of Robo Advice in Canada”, the author, William Trout, notes:
Fixed annuities (perhaps laddered to generate income) lend themselves to digital distribution, as do tax-sheltered retirement accounts. Robo advisory platforms also could be used to market bundled product (e.g., an annuity placed within a unified managed account structure to provide a guaranteed income or “floor”) to mass affluent customers on a “set and forget” basis.
But Robo-Advisors are extending to a wider life insurance portfolio. Scott Kallenbach, research director at US-headquartered insurance association, LIMRA, recently told Life Insurance International (LII) that Robo-Advisors can help agents and carriers be more effective and efficient, being able to take a more holistic approach.
Referring to agents, Kallenbach said, “They’ll be able to offer more sophisticated investment options.”
Moreover, Robo-Advisors will offer insurers more flexibility. “I can see carriers creating products specific for this platform – as a way to gain access to another distribution channel,” Kallenbach said.
And for P&C …
There is very little information on Robo-Advisors for P&C, but there are bits and pieces of the technology that, together, would provide advice and direction robotically.
Take Slice as an example. Ten months ago, we profiled Slice Insurance, an MGA that develops new models for insurance, focusing on the on-demand economy. These models allow users (e.g.,Uber drivers) to tap into Slice’s insurance only when the driver activates the Uber App for her car. And turns off when it ends.
One of the investors, Frances Kang from Horizons Ventures, noted that Slice’s “algorithmic approach and data-driven pricing model are truly innovative in the insurtech world.”
To mis-quote my father, “If it starts like a Robo and ends like a Robo, it’s likely a Robo.”
Finding Mr. Robo @ ICTC&BF2017
And there are other approaches that look like they would fit into Robo-Advisors. Several of them will be on display at the 2017 Insurance-Canada Technology Conference and Broker Forum.
For example, I will be moderating a Fireside Chat with Jason Storah from Aviva, and Carrie Russell, from Fin+Tech Growth Syndicate on Customer Engagement. In our prep sessions, I learned that Omni-Channel communication is the next sine qua non for servicing / engaging customers.
Last, but not least, we will presenting Insurance-Canada Technology Awards (ICTAs), several of which look like components that any self-respecting Robo-Advisor would want.
I would love to get your input on this. Let me buy you a drink at the ICTA2017 reception.