How will people buy insurance in future? Greg Becker visits the US for developments in online distribution.
Mint tries to answer the question: "How do you keep track of your financial life?" It does so by pulling in information from many sources interpreting the data, and producing things such as budgets and projections that are automatically based on a customer's actual spending history. Six million Americans have signed up, and one of its sales pitches is that it will offer suggestions on how to save money, claiming to offer $1,000 worth of saving tips in your first session.
Personal Capital also creates a central view of a customer's financial life by bringing many areas together, covering bank balances, pension and investment accounts and debt facilities. Transactions are analysed, expenses are categorised to help with things such as budget planning, and a detailed customer portfolio analysis is made available automatically.
Many efforts have been made to increase the "stickiness", with things such as bill reminders and real-time updates encouraging regular interaction. This service is advertised as being free, although it is likely to cost in the region of just less than 1% of the funds under management, and has a target market of those with investable assets between $100,000 and $2m. As is mandatory for tech offerings these days, it is available over the web on multiple mobile platforms, making it easy for customers to interact.
These business models may not be the end play, but they are pointing to the future direction. Most of us purchase airline tickets online, and many of us use online banking more than bank branches. Plenty of industries have been changed with increasing levels of online distribution. Will financial services be the same?
In Holland, more than one in three simple term sales are purchased online. In the UK, motor insurance is still purchased online in more than three out of four cases.
We can predict that the next few years will see the emergence of many new business models and different types of advice offerings - and 2011's Lloyd's Money Manager, Royal London's Money Vista and the government's Money Advice Service are just the start. Google's purchase of car insurance site Beat That Quote may be a shot across the bows. Be warned.
Greg Becker is product development actuary at RGA
