Simon Papa has a thoughtful blog post on the consultation document on exemptions for robo-advice - at this link.
Increasingly smart chatbots are making headway in the simpler robo-advice applications. FP Money reported on a series of bots. These are typically text windows which allow a browser on the site, perhaps using the site's main planning tools to examine the typical retirement issues, to ask questions. The text window, typing of the client, context of the screen and a broad library of answers allows even modest technology to provide a chat-like response. You may have used these and not even realised you are talking to a robot, especially if they are the sort of bot that has a human helping out behind the scenes.
You can tell if you experience something like this: an initial inquiry pulls a fairly chatty response 'hang on, I'll have a look' and then a suggested fix 'does this help...' followed by instructions. If you type something relatively predictable related to the instructions (like, 'where do I type that') then the bot can often respond again. But type a long question, 'no what I wan to know is...' and then you get a pause, this can be because the 'bot has given up, flagged the feed as requiring a human response, and now a human is actually typing the answer.
Why don't we see them in insurance? Don't say this too loud, but insurance is actually more complicated than the linear goal of saving a pot of money for retirement. Although if we bring tax and income generation into the picture it is easy for retirement to get complicated too.
What rules might apply under a new financial advice regime? We suggest you take the following documents as a whole to help you plan for the requirements for a Financial Adviser Practice:
- The draft law - the Financial Services Legislation Amendment Bill, plus the associated consultation document, fact sheet and FAQ. Link.
- The QFE Adviser Business Statement Guide - the current guide to application for the current equivalent of a FAP. Link.
- The Guide to the FMA's view of conduct - a new document, outlining expected conduct obligations. Link.
- The FMAs licencing overview document - brand new, and a good overview of expectations, especially covering governance, conduct, and professional development, and financial capability for licensed organisations. Link.
- Plus, of course, the current Code of Professional Conduct for Authorised Financial Advisers.
The guide to conduct and financial capability indicate the latest development in thinking around effective supervision. Adviser businesses that wish to obtain a licence and continue to hold one would do well to get across these requirements now.
Considering them as a whole it appeared that we may be about to step across the threshold where licensing is sufficiently complicated that a new minimum business size is required (variable some-what with extensive outsourcing - but noting limitations the FMA expresses on that). That new minimum may see more adviser practice merger activity. Assuming it all comes to pass.
The breadth of the requirements may also herald a boost to the market for regulation-technology ('regtech') to help you manage it all. We have been busier than ever on the Quotemonster side of the business with advisers seeking to become more familiar with comparison processes and needs analysis.
If you like to have hard copies you can write notes on and have Post-it note tags sticking out of (like me), then you had better warn folks in the office before you send them all to print.
I use health tech, I am also in the life insurance industry. While I may connect heath wearables to the industry, most consumers don't. Heck, most of them don't think about their life insurance. That was part of the promise, that's the cherished 'peace of mind' we offered, so we shouldn't complaint too much. Also, tailoring life insurance products so that they connect to wearables is only urgent if it yields competitive advantage somehow. After all, it is still early days in the world of wearable health tech. That helps to put into context many of the general concerns about wearables which are always wheeled out as objections for their use by the insurance industry:
- Not enough people use them
- They aren't accurate enough
- There isn't that much evidence that increasing activity improves risk
Ignore the first point, in time, either there will be enough or there won't in time and we'll move on.
The second point makes me laugh. Your bathroom scales aren't accurate either. For decades blood pressure measurements have been getting more accurate, but remain heavily dependent on how you do them. But they are so much more accurate than most answers given to the 'weight' question on life insurance applications. The kind of level of inaccuracy is similar to your speedometer in your car (well, most cars). Also, precision isn't needed here. The accuracy is broadly fit for purpose. People who watch their weight know that their bathroom scales are out, and measurement depends a lot on when you weigh yourself, and factors like with or without clothes and shoes. The game is to watch trends, not worry about individual data points. If the wobbly line keeps going up, I need to eat more greens and less cakes.
The third point focuses on the emblematic '10,000' steps. This was never much more than an advertising slogan, very few such devices track steps alone. They seek to 'gamify' the generally accepted contributors to good daily health by getting the user to track a basket of data: general activity, proper exercise, heart rate, sleep, weight, and more. The usual things. Track these over a long period of time and we get trends. Non-tracking tells us something. Even abandonment by the user tells us something. We can't be snobby about this data when, as an industry, we use BMI which is generally based on what the applicant self-reports as their height and weight.
What is interesting is whether this trend can be brought into product design in a meaningful way. That is a concept that we are still struggling with as an industry. Initial ideas, such as 'giving a discount' are a bit dumb. Most people can hardly remember what their insurance costs, until it gets really expensive, and then, the kind of discount available for this activity, is nowhere near enough to make a difference.
If any form of connection to wearables is to be worthwhile we have to come up with better ways to connect the idea of your daily health activities with your lifelong risks. The core ideas that drive the health wearables market are alien to life insurers. Consider this: a committed user of a health app will interact with it more in one day than they will with their life or income protection product in a whole year. People who can make weighing yourself that interesting may have something to teach us. We should try to learn.
Checking out online financial planning sites I found this recently: verdiplus.com. This is a financial planning website with the look and feel of a new fintech venture. There is a lot of good solid financial planning type content. There is a budget-first approach to the process which matches well with established views of how best to advise people when you intend to offer the full spectrum of financial advice.
The service operates, we think, based on two revenue models: the first is a subscription, the second is referral to financial advisers. Subscriptions could be paid by either the consumer direct, or by advisers referring clients to the service. Based in Wellesley Street, Auckland.
"Context-based" is a relatively new concept for insurance which is commonly used in describing a category of insurtech innovations.
Context-based comes in two types, one that doesn't work, and one that does. Risk pooling is essential to insurance. If you cut the pool completely between those that are going to claim and those that aren't, you no longer have insurable risks. Sometimes tech writers unfamiliar with risk-pooling get too excited about the idea of only buying insurance just before you need to claim. That can happen by accident, which is fine, but when it happens by design it is usually fraud.
The version of context-based cover that really does work is, in essence, a way to underwrite from behaviour, rather than the written statements of a highly-partisan human: the insured. Read about this crowd with their vehicle insurance for Tesla owners. Link.
According to this article on Investment News advisers should be making technology changes if they want to keep up with their competitors and take advantage of opportunities to improve their client experience. That is, of course, an investment-focused view.
Now take the insurance one. From suspect to one month after first annual review a financial adviser focused on insurance has multiple systems to work from. Desktop software, or the cloud equivalents, a main CRM, marketing tools, cloud storage, quote tools, research, cloud marketing programmes, accounting software (probably also cloud) and so on. But the same lesson applies: you need to review and upgrade your systems regularly. In fact, the guideline of one system per year must really be a minimum: at that rate you would only work your way through the list above every seven years, which is an awfully long cycle for IT. But at least reconciling yourself to annual upgrade cycles will keep the issue on your annual planning agenda.
Suncorp is backing an insurtech start-up that uses a chatbot to sell insurance for online transactions. Link.
Read the works of some fans of digital disruption of the insurance industry and with care you can spot the difference between motivations. Some of the best commentators are genuine fans of digital capability, and tend to see it as a tool of customers, advisers, and insurers - not always all three at once, but they can imagine applications for all. They recognise that digital will create disruption, but they also know enough about the market to understand that there are reasons why different channels exist. Heck, if direct were the solution to everything - why is direct as a channel so small? Genuine fans of digital are unafraid to ask such questions and ponder the answers. The answers provide more insight into the market. They are interested in digital either because they have a technical background, or because they have seen initial digital offerings and are excited about their potential.
But mixed in among this herd is another fan of digital. They are less attracted by the new, than running away from the old. Theirs is a love of convenience because their real motivation isn't attraction at all. They just don't like advisers. Maybe they dislike the commission model. Maybe they had a bad experience with an adviser once. Whatever the reason they assume that some bad advisers means all advisers are bad. They ignore the complexity of advice which requires that some customers will always seek out a good adviser, and they looked around for another way. For them, digital is a way around the adviser channel, it is a marriage of convenience.
My preferred view of digital is as a tool, a new and powerful tool, which could be deployed in a number of ways to enhance the interactions between different groups in the market. I am interested in all channels, but recently I am very excited about adviser applications - partly because of my interest in Quotemonster, and the power that a research engine, a rules engine, and the creativity of advisers can combine to deliver.
There are so many good ways to use digital in adviser businesses, from ways to identify life events and situations which require advice online, cutting the time required to gather data, the efficiency of shared records, to the speed of online meetings, and the high bandwidth connection between adviser and client it enables.
Success doesn't just like company, or accrue it, it actually needs it. Very rarely are individuals successful on their own. Even so-called loners, such as authors, often list a dozen people in their books 'without whom this book would not have been possible'. It is very rare for a person to have all the skills necessary to build a successful business on their own. Most meaningful businesses involve many people, and many of them are strangers, that had to be sought out and convinced to join the venture.
As a person who would naturally rather work alone, I find that challenging (at this point I offer thanks to those people past and present who have been able to look past my prickly personality and work with me). If you are like that too then you might find that from time to time you have a great idea - but you can't execute it on your own, but you don't want to share it. That's a tough place to be. Try reading this, it might help.