As the advice gap steadily grows, Jaskeet Briah explores how technology can help the protection industry reach new customers who aren’t receiving financial advice, and how data and artificial intelligence (AI) can improve communications with customers in the first piece of this two-part feature.
This year the advice gap across financial services stands at 24.3 million people, an increase of around 20% in the past two years, according to a recent report from The Lang Cat.
There are three main barriers to taking advice: a lack of trust, a lack of awareness of advice and how to find an adviser, and a lack of confidence in managing money.
These obstacles all come down to ambiguity aversion: if customers don't understand a product or the next steps, they are more likely to give up, explains Stephanie Hydon, director of client distribution at iPipeline: "In the absence of facts, we tell ourselves stories, and unfortunately for us as an industry, there is quite low trust."
With consumers lacking an understanding of the protection space, online educational tools can spread awareness on what protection is and how the different products work, explains Andy Walton, protection proposition director at the Mortgage Advice Bureau (MAB).
"Education can be tackled through technology by sending customers videos that explain how protection fits into their overall conversation and journey, and how products factor into future claims," he says.
This ensures a larger demographic of customers receive a generalised form of advice, while additional signposting to advisory firms in these videos can create a larger pool of potential customers.
Overall, short-form videos are the most engaging type of social content for 66% of online consumers, according to software company Sprout Social, making this a feasible tool to encourage more customers to engage with financial advice.
Data & AI
Customer data is a key tool to understand their needs and inform methods of communicating with new and existing customers going forward. However, protection experts believe that data isn't currently being used to the extent it could be.
"We're all sat on huge amounts of data and with AI gathering the pace, greater understanding from this data can help us generate much more accurate, meaningful and understandable communications to customers," Walton says.
AI can identify triggers for certain life stages where customers are more likely to require cover, meaning that the "right message" can be sent to the "right person at the right time," Hydon notes.
"It can be difficult to rely on that messaging manually. Using data from existing customers enables us to not only build triggers in multiple areas, but processes that build from trigger to intent to action," she says.
Specifically, data can close the advice gap for the next generation of customers who are removed from protection conversations.
"The advice gap stretches from that next generation of customers all the way to those in retirement, and we need to overcome these annoying and frankly lazy stereotypes that we have about the next generation of customers," Hydon details.
There are assumptions that the next generation of customers wish to buy everything online, she explains, but these customers want support as protection "is not something you engage with very often."
"This is where technology and data are crucial. It goes at the beginning to generate understanding and create intent. That then goes into purchase, and that purchase then goes into ongoing support and management of that purchase," Hydon says.
Additionally, using personalised data and cash flow modelling to demonstrate the financial setup of other customers in a similar age bracket, what products they purchase at certain times in their lives and the benefits of these will provide social reassurance, Hydon adds.
This can help tackle any misconceptions customers have of protection and support customers when they are stuck in the buying process.
For customers who do wish to pursue a purely digital journey when purchasing a financial product, live chat capability can answer in the moment questions and direct customers to the "most appropriate" next step, Rose St Louis, protection director at Scottish Widows, explains.
"Online calculators are another example of how to support customers in calculating the amount of cover a family individual or business would need in the event of death," she details.
Social media
The next generation of customers, Generation Alpha, is the first born into a world of social media, and so digital platforms create a huge opportunity for the protection industry to increase the relatability of financial services and encourage customer engagement with protection.
St Louis says: "As providers, we have the power to use the digital channels, social media and the media to share stories that break down the common insurance myths."
Claims stats alone do not build trust, she explains, but coupling this data with storytelling "brings to life the value of protection and what it means to customers."
Ultimately, social media can reach potential customers that would otherwise associate financial services "as a sector that doesn't apply to them," adds Nicola McKenzie, co-founder of Dunham McCarthy.
However, TikTok as a platform is unlikely to engage users in protection conversations compared to Instagram or LinkedIn due to the age of this demographic, McKenzie details. Despite TikTok being used by almost half (42%) of those online in 2023, 85% are aged between 16-24 years old, according to Ofcom.
Although Dunham McCarthy is on TikTok, the quality of inquiries the business receives "doesn't compare" to other platforms: "There's likely another five to 10 years until the main age range on TikTok becomes a regular stream of inquiries," McKenzie comments.
Ongoing advice
The advice gap isn't just created by the number of customers who don't access financial advice - it also reflects a client's entire advice journey and the ongoing communication delivered throughout the duration of a policy.
"What can happen is that customers purchase protection and then might not hear from the adviser for many years," Walton says, ultimately reinforcing the aforementioned barriers to engaging with financial advice.
"None of that inspires trust and confidence because advice is given and then very little is heard from, either from the provider or adviser post-advice and sale," he adds.
Walton emphasises there should be an ongoing conversation with customers to reflect the ongoing changes in a client's life, such as job changes, income fluctuations, or family situations, to provide a constant review of their needs and to ensure their policy is still relevant.
"Ongoing reviews could trigger responses from AI or advisers, who can analyse the situation and provide appropriate interactions, leading to positive outcomes for the customer," Walton details, as this will highlight any gaps in customers' future needs and will in turn increase confidence.
"Technology can help build a platform to interact with customers far more effectively pre-sale, during and post-sale."
Part two will dive into how the protection industry can streamline processes to close the advice gap, the use of rules-based logic as part of AI to improve time management, and how the wider financial services industry can engage with protection.
