When people want insurance advice, they can go to an insurance broker, who, like with a financial adviser, will ask a series of questions about their needs and situation, and then give them tailored advice that is specific to them.
But robo-advice — a new digital kid on the block — is giving people the option to skip seeing an actual human financial advisers or insurance brokers and instead interact with digital ones.
WHAT IS ROBO-ADVICE?
Robo-advice is financial and insurance advice calculated by artificial intelligence, usually via an app or chatbot (a robotic chat client), through your computer or phone.
HOW DOES IT WORK?
The chatbot or app will ask you to enter a series of personal information relating to the service your seeking. That personal information might include, among other things, your age, gender, financial goals, liabilities, appetite for risk, assets, income and details on any insurance policies you might have.
The app then presents you with advice tailored to that information. This might include things as gaps you have in your insurance cover, policies that you have doubled up on or savings you could make. Some apps will eventually allow you to buy additional cover from within them.
WHAT MAKES ROBO-ADVICE COOL?
Robo-advice is easy and convenient. You don’t have to meet with anyone, you don’t have to wait for someone to get back to you and you don’t even have to get out of your pyjamas — you simply enter all of your details into the app and the bot will generates solutions for you then and there. No fuss and no waiting.
There’s also the fact that it’s cheaper. While customers have to pay human financial advisers and insurance brokers for their services, app users don’t usually have to pay to get robo-advice (although it’s important to note that this isn’t the case with every robo-advice service provider).
IS IT CATCHING ON?
Yes, there are a number of startups that have gotten in on the ground floor with robo-advice. FinanceFox in Switzerland and Brolly in the U.K. are among some of the startups that have developed apps that use AI and algorithms to help people secure insurance and financial products that are best suited to their needs.
Existing businesses — like banks and super funds — are also making use of chatbots and robo-advisors to help alongside their human offerings.
WHAT DOES THIS MEAN FOR HUMAN ADVISERS AND BROKERS?
So far, the emergence of robo-advice doesn’t appear to be leading towards the elimination of traditional insurance brokers, and there certainly seems room in the market and demand for both options. It might also mean that broking roles change, becoming more integrated with digital systems.
Robo-advice does have limitations. When it comes to a person’s unique goals, circumstances and needs, it’s hard for a digital program to truly be able to understand these if they’re not basic. Goals, circumstances and needs can often be complicated and require explanation, which a financial adviser or insurance broker will be more equipped to deal with and respond to until the Artificial Intelligence running these bots gets super good.
If your circumstances do change and you need to query something or you need help, it’s a lot easier to talk to a person than it is to talk to a digital device, so many of these digital brokers also have the option of talking to a real person whenever you need to.