The Best Advice is Personal

Much discussion has happened in the industry portending the inevitable elimination of the insurance agent as consumers move to purchasing insurance direct and online. Disruption of the agency model seems to be a foregone conclusion judging by the amount of recent investment in InsureTech startups focused on transforming the distribution model. The increase in insurers offering commercial insurance direct may be seen as an inflection point not just in terms of commercial lines sold direct, but in terms of a shift in momentum from the agent to technology, across lines of business. It’s not surprising that both insurers and consumers are interested in a shift in channels. It promises to be less expensive for an insurer to go direct, and consumers are clearly showing a shift in preferences for accessing coverage

However, consumers use agents for very good reasons. Prior to direct purchase on the internet, consumers needed agents to access different markets. There was no mechanism for a consumer to purchase directly from an insurer. With the advent of digital agents, aggregators, and direct-to-consumer insurance insurers, this reason is less important than it used to be. However, replacing an agent isn’t as simple as simply automating access to markets.

One of the primary points of value provided by an agent is personalized advice. Although access to markets is more readily available, consumers still need advice and guidance. Insurance is a complicated product. Understanding which coverages they should purchase, what limits and deductibles are appropriate, and whether additional terms or endorsements are relevant is one of the key points of value that an agent offers.

Consumers are more financially literate than ever before given all the information available on the internet, yet still want transparency in the choices available, and value guidance and advice as to what options are appropriate and why they are appropriate. 58% of consumers surveyed say that when choosing a financial services provider, they are looking for a personalized offer, tailored to the individual firm or person.

Until an insurer can accurately and appropriately provide advice it is unlikely we’ll see a wholesale shift of the channel. Some insurers focus on giving consumers choices by providing price comparisons with other insurers. Others have tried to provide choice by labeling side by side choices with titles such as “less coverage”, “standard coverage”, and “more coverage”. But these choices don't usually have any relationship to the actual risk profile of the prospect and don’t offer any suggestion as to why one option is better than another. Consequently, consumers aren’t confident enough to make a decision.

Want to know how to improve online conversion? Provide actual advice to a prospect with an explanation as to why a particular limit, deductible or coverage is relevant. Anecdotal conversations with companies who have implemented a feature like this indicate potential conversion improvements of 20-30% or more.

Automated advice comes in a variety of permutations that vary depending on how much automation is utilized and how much personalization is provided. Insurers can assess their capabilities and determine how to proceed down the path. Even small amounts of advice seem to have an impact on conversion.

Automated advice can range from very simple parameter driven advice, to incredibly sophisticated advice-for-one backed up with sophisticated analytics. It can be delivered via simple online suggestions, or through a guided journey using a chat bot. Each successive generation of advice engine seems to bring increasing benefits when it comes to conversion.

Yet automated advice also carries potentially significant risks. The customer is relying on the technology – including the assumptions and methodologies that underlie it. For example – did the system ask the right questions; did the prospect understand the questions adequately to answer accurately; did the algorithms act as intended, were the underlying business rules appropriate?

Using third party data can mitigate some of these risks, but raises other issues including the accuracy of that data. On the one hand, consumers are more financially literate, are looking for more transparency and control, and expect insurers to utilize technology in an online environment. However, insurers also have to be careful not to be creepy when using third party data.

Insurers can overcome creepiness by not overreaching, and by clearly communicating how they arrived at their conclusions. In this transparent world, the path to the recommendation becomes nearly as important as the outcome.

Interested in learning more about automated advice engines? Check out my newest report “The Best Advice is Personal: Robo-Advisors v. Agents”.  

One prediction for 2016 is about to come true – our event on February 3rd

With just under a week to go until our event at The Magic Circle in London is on February 3 I though it worth reflecting on 2016 and the folly of predictions in today’s world. One of the key challenges for any organisation trying to respond to an unpredictable future is the hockey-stick graph or geometric growth that is increasingly describing adoption and the impact of technology on our society. That is to say that the figures stay relatively flat and predictable and then grow out of all proportion to what went before. Adoption of the Internet is a good example, the rise of the smart phones and that of tablets is another. Some may still argue that wearables as a fad has passed, citing them being around for a while but not really seeing the growth one would expect. Perhaps though, this is the false sense of security brought by the flat bit of the graph? The same is true of self-driving cars, a concept that’s been alive and well in Hollywood and on TV shows for decades (anyone remember the Hoff and Kit?) and is only now starting to creep onto real world roads. If the trends of cheaper and ubiquitous technology continue then these trends could at some point see that hockey stick moment, that massive growth in adoption and impact. For insurers – just reacting may not be good enough, instead perhaps it is worth spending time thinking: it is only a matter of time until it is ‘normal’ for clothes and accessories to be internet connected, for cars to drive themselves and for people to live longer through better management of their health. This is precisely the type of thinking we’re hoping to bring to our event, which will be a mix of folks who are on the curve of some of these changes and also some tools to help insurers plan and respond. So while I’m waiting for my Internet connected suit to come along (not that fanciful, you can already get connected yoga-pants and nappies that tweet) and the car that drives me to work – I look forward to spending some time those of you can attend our event next week to discuss the future of insurance and to ask the question, What if … ?

6.26.2014 Celent Insurance Webinar: Functionality and Technology Trends

Jamie Macgregor, Senior Vice President of Insurance and Nicolas Michellod, Senior Insurance Analyst This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chris Williams at cwilliams@celent.com or at +44 208-870-7875. Please click here for more information.

6.11.2014 Celent Webinar: How to Better Leverage Celent

Celent CEO, Craig Weber This event is free to attend and we expect you to walk away with a better view as to how you can get more from working with us. For more information, please contact Anna Griem at +1 603 582 6137 or agriem@celent.com. Please click here for more information.

5.13.2014 Celent Webinar: The Internet of Things and Insurance: Can an Old Industry Learn New Tricks?

Donald Light, Director of Americas Property/Casualty Practice This event is free to attend for Celent clients, flex-plan clients, and the media. For more information, please contact Chuck Smith at 1-617-262-3125 or csmith@celent.com . Please click here for more information.

5.20.14 Celent Insurance Webinar: Which way is IT going across Europe in 2014?

Senior Vice President of Insurance, Jamie Macgregor and Senior Insurance Analyst, Nicolas Michellod This event is free to attend for Celent clients, flex-plan clients, and the media. For more information, please contact Chris Williams at 44-208-870-7875 or cwilliams@celent.com . Please click here for more information.

4.29.2014 Celent Insurance Webinar: Insurance Customer Perception

Senior Vice President of Insurance, Jamie Macgregor and Senior Insurance Analyst, Nicolas Michellod of Celent’s Insurance Group This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chris Williams at +44 208-870-7875 or cwilliams@celent.com . Please click here for more information.

4.23.2014 Celent Insurance Webinar: Insurance CIO Pressures and Priorities, North America 2014

Donald Light, Director of Celent’s Americas Property/Casualty Insurance Practice This event is free to attend for Celent clients, flex-plan clients, and the media. Non-clients can attend for a fee of US$250. If you are unsure of your client status, please contact Chuck Smith at +1.617.262.3124 or csmith@celent.com. Please click here for more information.

6.5.2014: Celent Insurance Webinar: Consumer Mobile Apps in Latin America: Life & Health Edition – Spanish Language

Celent Senior Analyst Juan Mazzini. This event is free to attend. Please contact Juan Mazzini at jmazzini@celent.com with any questions. Please click here for more information.

6.3.2014: Celent Insurance Webinar: Consumer Mobile Apps in Latin America: Life & Health Edition – English Language

Celent Senior Analyst Juan Mazzini. This event is free to attend. Please contact Juan Mazzini at jmazzini@celent.com with any questions. Please click here for more information.