Space01's Marilyn Cole discusses ‘robo-advice' and how protection intermediaries can benefit from automation.
When we think about modern robots we often picture Honda's walking, talking robot Asimo that brewed and served Stephen Fry a cup of tea a few years back.
In financial services, by ‘robot' we mean the automation of processes and relationships across computers, tablets and smart phones.
Yet, if a financial services Asimo was sent out to talk to the public, most policymakers would want him talking to older people about their retirement decisions or, if younger, their pensions and investments.
Does this mean the robots will pass protection by, concentrating their laser eyes on supposedly more glamorous topics? At Space01, we think the answer is most certainly ‘no'.
Firstly just about every sector could benefit in some way from automation and protection is no different. Indeed, technology has already been transformational, yet it may be that things have changed so fast that we didn't notice.
Go back twenty 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.
Depending on the firm involved, a chunk of that was protection business. In 2016 it is almost taken for granted that most business, including intermediated business is, in some form, e-commerce.
Indeed, to highlight it separately in a call to analysts would almost sound old-fashioned.
Of course, technology has also allowed comparison sites to take huge market share in general insurance, taking a bite out of the market for life insurance in the process. Ultimately, this has meant the rise of a new multi-billion pound distribution channel.
Yet, this connectivity also drove the success of innovative businesses such as LifeQuote and more recently UnderwriteMe, businesses which have helped intermediaries drive efficiencies.
Technology has steadily revolutionised most relationships - between insurers and intermediaries and customers and clients.
The often-discussed artificial intelligence does mean that automation can move up a gear, yet our view is that the risk of disintermediation, while real can be overplayed. Technology could actually mean much better interaction and understanding and feedback to intermediaries from their clients.
Marketing techniques are keeping pace with tech
That said, 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.
Look at the role social media played in the Seven Families campaign. 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.
At the same time, the industry and all distribution channels need to be careful about how we apply some of the more controversial techniques, given increasing concerns about addictive programming aimed at children.
It may be a case of the regulatory environment helping with this, certainly if we apply the principles with integrity. It also underlines the case for the involvement of an adviser in some parts of the process.
Intermediaries can win if they play to their strengths
So it is our view that the intermediated market will remain very important. 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. This plays to a protection adviser's strengths in many ways.
Advisers and mortgage brokers still have the all-important relationship with clients. They still have to convince them to take out critical illness 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.
The technology is advancing but it could actually grow the market not cannibalise the existing one. Advisers may have to become ‘cyborgs' using smart technology to help them do their jobs better.
There is no need for advisers to turn into the advice equivalent of Robocop; but it may mean incorporating more online interaction into advice processes to better utilise the valuable but expensive face to face time.
It could allow advisers setting up workplace auto-enrolment schemes to cross sell efficiently and this is becoming a vital link between financial firms and the mass market.
It may help time-pressured mortgage brokers that it is worth their while to advocate or introduce protection, and it could help wealth managers consider their clients' protection needs too.
Some of the platforms have already embraced this as part of a bid to add value to their adviser partners.
Advisers should not be compliant about the rise of the robots. Yet for now, in protection, we think the robots may offer the opportunity to grow the market.
They may extend sales to new markets, but also where advisers and automation fit together, grow the existing intermediary market by value too.
If we can get more people protected, it may be good for advisers, clients and the country too.
Marilyn Cole is managing partner at Space01
