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by ProtectionReview 28/01/16

When an industry is undergoing dramatic and fundamental changes, it isn’t always obvious for those caught up in the middle of things.

However that definitely isn’t the case when it comes to robo-advice. The ‘machines’ have been hogging the headlines in the trade press for many months now, though it is probably fair to say that most of the debate and most of the attention has been focused on pensions and investments and particularly on helping people make the correct decisions about their pension income. In other words, protection has been a little overlooked.

So does this mean the robots will pass protection by, concentrating their laser eyes on supposedly more glamorous topics? At Space, we think the answer is a resounding ‘no’.

Of course, in financial services, we know that when we discuss robots, we are really discussing automation of processes across computers, tablets and smart phones rather than, for example, the Honda-built walking, talking robot Asimo that brewed and served QI host Stephen Fry a cup of tea a few years back.

In financial services terms, a robot - as opposed to a part human part computer ‘cyborg’ - would see a machine take over the whole process of customer interaction including the sale/purchase.

Some may be tempted to see this as the inevitable destination since the PC became a mass market possession and the internet developed to connect them becoming a vast, new marketplace very soon afterwards.

Go back 20 years, and e-commerce was really only in the planning stages. Fifteen years ago, and most life office CEOs were discussing its contribution to the bottom line when they reported their company results, usually as direct business. Now it is almost taken for granted that most business, including intermediated business is, in some form, e-commerce. To highlight it to analysts these days would almost sound old-fashioned.

Technology has allowed comparison sites to take huge market share in general insurance, taking a bite out of the market for life insurance in the process and ultimately building a new multi-billion pound sector. Yet this connectivity also drove the success of innovative businesses such as Direct Life & Pensions and more recently UnderwriteMe, which in turn drove more industry success.

The technology also steadily revolutionised relationships between insurers and intermediaries and customers and clients.

At all times, there has been a risk of disintermediation – ask a high street general insurance broker if you can find one – a process often carelessly described as cutting out the middle man, though sometimes it also meant the loss of a valuable ally in dealings with big institutions. There is a threat from robots today but, though we can’t predict the future, we believe it is premature for intermediaries to get really worried.

The technology, particularly around artificial intelligence, is moving at a remarkable pace. Software is increasingly intuitive while the marketing is keeping pace in terms of user journeys, story-telling, use of social media and more. It isn’t just a matter of easing someone’s passage through a web journey, though that remains important. We are now genuinely engaging customers borrowing from other sectors including for example, the computer games industry, to build and improve customer relationships.

Yet our view is that the intermediated market will remain very important. First, we are yet to see a credible online proposition that can sell a product, where the potential buyer didn’t already know that they needed and wanted it.

Second, we think totally automated systems i.e. robots, may help insurers reach more people, perhaps even growing the market for protection, and convincing more of the much discussed ‘Millennials’ to start engaging with financial services. Advisers need to be alive to the ways in which younger generations expect to engage, interact and transact. Yet we don’t see the customer base of advisers being whisked away just yet. Advisers and mortgage brokers still have the all-important relationship with clients. They still have to convince them to take out critical illness insurance and income protection as part of a coherent approach to insuring their income along with their mortgage, or as part of holistic financial planning.

Parts of the process are not automated, including – crucially - relationships and communication with GPs, although substantial improvements are being made in this area too.

So when commentators say the robots are poised to win a chunk of the protection market, we would sound a note of caution. The technology is advancing but it could actually grow the market not cannibalise the existing one. We also see a huge opportunity to help intermediaries streamline their processes. In many ways it means advisers becoming cyborgs. You won’t need any wires stuck into your head; but it may mean incorporating more online interaction into advice processes. It doesn’t have to be at the cutting edge; for example more advisers are using Skype and a shared adviser/client interface to make their advice more efficient. It may include helping advisers who have set up workplace auto-enrolment schemes to cross sell efficiently, convincing mortgage brokers that it is worth their while to advocate or introduce protection, and helping wealth managers consider their clients’ protection needs properly. With the right business planning and approach, it could and should help advisers reach further down the income scale too. (It wouldn’t hurt the sector to send that message to Ministers because protection has an important role in making the public more resilient.)

 So when you ask us at Space - a consultancy that helps built the technology and the customer interfaces for both direct and IFA-focussed business - whether the robots will be taking over – we think not.

It doesn't pay to be complacent. It may be an altogether different challenge for workers and professionals in industry, transport and even aspects of medicine and care.  Yet for now, at least, in protection, we think the robot should be your friend not your rival.