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Introductory - robo advice for insurance financial advisers

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Robo advice: a quick review of the legal, process, development, and conceptual ideas for robo / online services for insurance-focused financial advisers in New Zealand.

Robo advice: a quick review of the legal, process, development, and conceptual ideas for robo / online services for insurance-focused financial advisers in New Zealand.

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Introductory - robo advice for insurance financial advisers

  1. 1. JUNE 2017 Prepared by Russell Hutchinson Please refer to the copyright information on the final page before copying or distributing www.chatswood.co.nz INSURANCE ROBO-ADVICE IN NZ Situation Review and Future Prospects
  2. 2. ROBO-ADVICE DEFINITIONS 2 www.chatswood.co.nz “Can enable a compliant personalised advice recommendation to be made without the requirement for a human adviser to be responsible for the advice” • robo ‘nearly advice’ – best example: LifeDirect • ‘nearly-robo’ advice – some adviser tools are like this, Quotemonster is one • ‘technology enhanced advice’. – some great service include kiosks and Suitebox • 'robo-to-advice' uses combinations of tools to help clients self-qualify, or complete aspects of the advice process themselves, to bring them better prepared into an advice- giving discussion with an adviser. There is a lot of room for development of effective services in each of these areas. We are very interested in developing services for advisers in the last category.
  3. 3. ROBOTS YOU CAN USE NOW 3 www.chatswood.co.nz History: • Originate as portfolio management tools • Tend to be offered by companies selling direct • Compliance drives some of these projects Look up these: • Schwab • Betterment • Futureadvisor • LifeDirect What you will find: • Assumes behaviour change • Very little ‘why’ or motivation • Narrow scope goal • Directed approach • Escape lanes
  4. 4. THE PROMISE OF ROBO-ADVICE 4 www.chatswood.co.nz • Save money – when you achieve scale they are cheaper than humans. • Increase access – allow more clients to reach a product avoiding a slow human process • Control compliance risks – robo-advice is controlled and not subject to human error. However actual robo-advice failures are usually systemic and may affect large numbers of people. • Help clients find the right channel – because there is a big shift to commencing the sales process online, robo advice can act as a series of gates to ensure clients are directed to the best channel to meet their requirements. • Improve offers – bundling a particular form of advice with the product may improves the whole package for the customer
  5. 5. LEGAL STATUS 5 www.chatswood.co.nz “Can enable a compliant personalised advice recommendation to be made without the requirement for a human adviser to be responsible for the advice” • Therefore not legal in New Zealand under the Financial Advisers Act 2008 • Exemption from the law being consulted on in June 2017 • Individual exemptions likely • Full-robo permitted under the Financial Services Legislation Amendment Bill which may be law in late 2017, with a transition period to full implementation of around two years • A robo-process may be legal provided a financial adviser is responsible for the advice. That adviser must be a natural person • …but many of the adjacencies are: • Nearly-robo advice • Nearly-advice robo • Technology enhanced personalised advice
  6. 6. LIKELY REGULATIONS 6 www.chatswood.co.nz • FMA concerns that will need to be addressed in regulations: • Financial literacy • Escape lanes • When the client is unsure • Final checking • Why policymakers and regulators will support robo-advice: • Licensing organisations (now QFEs, future FAPs) is more efficient • They get to manage to a document – the licence conditions, not to principles, which are harder to interpret • They get to manage algorithms and system logs, rather than conversations and memories • Regulatory risks: • A risk of excessive regulation of ‘calculators’ • The risk that there won’t be a law change • Caps and category limits
  7. 7. THE TECH WE’RE EXCITED ABOUT 7 www.chatswood.co.nz Watson Voice recognition Wearables data Quotemonster Blockchain RealMe Jude.io
  8. 8. THE NEED FOR ROBO-SERVICES 8 www.chatswood.co.nz Most robo-services will be about the pathway to advice, assist in advice generation and delivery, and improve ongoing advice services. It can make good advice available to more people at less cost. Direct No Advice Broad Financial Advice Single- Need Advice Robo- Services Face-to- Face No Advice Call Centre No Advice Advice to large low- value groups Prospect- to-advice pathways Call centre advice guides Prospect qualification tools Online advice Financial literacy Online advised sales
  9. 9. ROBO IDEAS FOR INSURANCE 9 www.chatswood.co.nz • Enhanced engagement with consumer • Sorting clients to the right channels: Seamless passing between online- direct, call-centre-direct, face-to-face advice, and others and Managing leads flow from your website to advice channels (internal, owned, alliance, or third-party) • Upselling from: KiwiSaver, or other low value direct, travel insurance, life- only, mortgage insurance – you name it, to full personalised advice. • Serving orphan clients: especially those that you have no current address for who will look for you first online • Providing advice to clients with access problems: time-poor, overseas/remote, don’t like advisers
  10. 10. But will the robot steal your job? 10 www.chatswood.co.nz
  11. 11. PROFESSIONALS GET BETTER ROBOTS 11 www.chatswood.co.nz
  12. 12. PROFESSIONALS GET BETTER ROBOTS 12 www.chatswood.co.nz
  13. 13. NZ ADVISERS EXPLORING ROBO-ADVICE 13 www.chatswood.co.nz • Every week an adviser approaches us with ideas for online services – but don’t call them a robot! • New comparison tools are opening these opportunities up • New needs analysis tools make online advice more possible • Automating annual reviews makes it safer for an adviser to help more people • There are lots of other ideas to work on
  14. 14. ADVISER PROJECTS 14 www.chatswood.co.nz • Use simple robo-to advice widgets to enhance your web and social media presence: • Pricing widget – helps clients stay because they’ve done shopping • Simple forms widgets - encourage clients to engage and self-qualify • People like us – a referral tool that creates leads • Auto-renewals – reduces the work at renewal time, and creates new appointments • Use more technology to enhance compliance and save time in developing your recommendations and writing SOAs • Start to map your advice processes • Use tools like head-to-head, simple needs analysis, and underwriting requirements • For bigger projects, contemplate plugging in other resources such as Call centre, webmail, online lead generation systems and more
  15. 15. VISION 15 www.chatswood.co.nz • That all of you can benefit from robo-to-advice and robo-nearly-advice tools to make your job better / easier / and quicker • The customer will love all that and can collect information and self-qualify and self-select the right channel for their purchase process – and get better and better advice with the optimum combination of systems and people • We can get capture and manage data to allow for continuous improvement in the sales process
  16. 16. CHATSWOOD CONSULTING Chatswood Consulting Limited specialises in providing marketing, distribution, and product development services to financial sector companies: insurers, fund managers, banks, financial advice firms, and industry associations. Chatswood works with companies to develop and manage new marketing opportunities channels for financial services business. Russell Hutchinson Rob DowlerKelly Pulham 16 www.chatswood.co.nz Our team includes: Strategy, sales and marketing consulting, research Industry and compliance consulting Business development manager
  17. 17. 17 THANK YOU! © Chatswood Consulting Limited Visit us at www.chatswood.co.nz25 www.chatswood.co.nz www.chatswood.co.nz17 This report is a confidential publication. This material is Copyright. No reproduction permitted in whole or in part except without the prior approval of Chatswood Consulting Limited. Public reference to material in the report requires reference to Chatswood Consulting Limited and must be sought and received in advance. While every effort has been made to ensure the accuracy of the information contained in this document, Chatswood Consulting Limited takes no responsibility for actions undertaken by readers that may have been made either in whole or in part on the basis of the information contained in this report.

Editor's Notes

  • My name is Russell Hutchinson and I run a business called Chatswood Consulting
    - Most people know me for my articles in Asset and Goodreturns, or my blog at www.chatswood.co.nz
    - the personality of my work is quite different, columns are there to make people have second thoughts about something and to laugh. But In my business I'm all about DATA and ANALYSIS and PROCESS ...
    - most of my business is actually INSURERS, and few banks, and quite a few BROKERAGES...
    - So my views will tend to reflect the work I do, who I do it for, and the way I do it. You may disagree!
    QPR - my business is becoming increasingly focused on advisers again because of the focus on Quality Product Research, which runs Quotemonster, which has about 3,000 advisers using it regularly. 

    BUT you know your business, and we may know some interesting things too, we're here to share, not lecture ...
    We will pause near the end of this session to take some questions about robo-advice and we’re glad to really get stuck in on those when you are ready

    AND, we're not prescriptive, there are "many best ways" to run an insurance brokerage...
    This is just our view
  • PUT LEGAL STATUS TO ONE SIDE, I’LL GET TO THAT

    But there are plenty of “nearly” robo, and “nearly” advice

    We’re particularly interested in ”nearly robo” and “ROBO-TO-ADVICE”

    We like those services because we think that’s where the best robots will be deployed – we think that robots to support advice, take people towards advice, and enhance the quality of advice are the real winners

    Full robo advice, while interesting, tends to happen for services in larger markets that are more standardised, and commoditised.




  • PLEASE TAKE A LOOK AT THESE TOOLS LATER AND ASK YOURSELF WHETHER SOMETHING SIMILAR COULD BE DONE WITH INSURANCE…

    Insurance has some wider challenges:

    They only have to look at “How much do I save” and “Which fund (or how much risk to take”

    WE HAVE MULTIPLE PRODUCTS, MULTIPLE “HOW MUCH” QUESTIONS TO LOOK INTO, AND MULTI-DIMENSIONAL TRADEOFFS

    Things like – do I take less cover or higher excess? Do I remove a cover? Do I switch provider? Do I choose the one with the tougher underwriting limits but better definitions? Should I own this or my trust? What about naming beneficiaries? What about my business insurance?

    We need better robots than these… OR MORE LIKELY, WE NEED A COOL ALLOY OF ROBOT AND HUMAN.
  • STAY WITH THE CONSUMER ROBOTS FOR A MINUTE – WHY ALL THE FUSS?

    CAN ROBOTS DO ALL THESE? ……….. PROBABLY.

    OF COURSE, WE ARE IN THE EARLY DAYS OF ROBOTS. THEY WILL ALSO
    COST MONEY, ANNOY PEOPLE, BREAK THE LAW, TURN CLIENTS AWAY, AND DAMAGE REPUTATIONS

    STILL, WE WILL DEVELOP THEM AND USE THEM ANYWAY………. THAT’S WHAT HUMANS ARE LIKE

    BUT ALL THESE THINGS COULD APPLY TO OUR “ROBO-TO-ADVICE’ CATEGORY TOO…


  • So, it turns out that robo advice is illegal? Not really, and its all changing, plus: remember, robots are our friends.
  • AT THE RECENT FINTECH CONFERENCE AT THE END OF LAST YEAR WE TALKED A LOT ABOUT THE TECH WE HAVE AT OUR DISPOSAL AND HOW IT CAN BE USED

    THESE ARE THE ITEMS THAT WE LIKE BEST

    EXPLAIN AN EXAMPLE OF EACH

    ……..

    TAKE YOUR TIME

    ………….

    FOCUS ON JUDE AT THE END

    ……………

    THE THING I LIKE MOST ABOUT THIS LIST IS THAT ALL OF THESE ARE LIVE AND BEING USED RIGHT NOW


  • I suspect that most robo-services will be about the pathway to advice, assist in advice generation and delivery, and improve ongoing advice services. It can make good advice available to more people at less cost.
  • AND THERE ARE SOME GREAT IDEAS FOR

    ROBO-TO-ADVICE

    ANOTHER WHICH WE ARE WORKING ON WITH SEVERAL ADVISERS IS AUTOMATING ANNUAL REVIEWS:

    Not all advisers do annual reviews
    Those that do them budget resent the cost of mail, which is frequently discarded, and the effort in phonecalls which are frequently unwelcome

    We can do better.

    With an automated review process we can email every client
    For those that don’t open the review we can re-send in a few days time with a different header
    The email can compare their current cover to the cover most commonly bought by people like them. If they are under the average we can show them what they need to buy
    We can ask them questions about what they have done recently – changed job, got married, had children, started a business and so forth
    For those that look at the review and don’t act we can remind them…
    We can see who opened it, when, and how often. We can tell if they forwarded it to anyone
    We can automatically quote upgrades
    We can provide a button which connects to a call centre, or another robot who will book your appointment… we can do that all NOW
    Suddenly a tedious waste of time and effort can be made to be so much more efficient

    AND THAT IS JUST ONE EXAMPLE
  • With all this awesome capability, you wonder…

    … well, NO…

    But there is a proviso.

    Your job will change a bit.

    But trust me, I can still prove that the robots are your friends, provided you can change.
  • I don’t believe you will be replaced, I believe you will get better robots, and some of you here today will have a hand in designing them too

    Look at this comparison.

    On the left is a retail health robot. I love mine. I don’t‘ seem to use the actual health professionals any less. In fact, they keep thinking up more reasons and more ways for us to spend time and money on our health. So much so, that our lives have got a great deal longer.
  • In almost every sphere of life the consumer robot is not as good as the professional one.

    You CAN buy amazing drones. But the pros spend more and use them better
    Your CAR has a great computer in it. But the engineers have a much more complex diagnostic computer
    TRUE, there will be drone cars: but whole new groups of jobs will emerge from building, testing, new roads, guides, and many, many, more.

    Heck, we even have a comparison in life insurance LIFEDIRECT is the consumer robot, and QUOTEMONSTER is the adviser robot. QM prices and researches more than 20 times the number of products than LD does. The combination of humans and robots together makes amazing things possible.

    Just as an aside, creativity is a critical factor in advice. Dynamically spotting when you need to lighten the mood, tell a joke, or get serious and call your clients to face their fears, is a very human activity. They don’t owe the robot the honesty. They only owe that to another human.

    As another aside, at the Guggenheim gallery in New York they currently have one of these industrial robots as part of an incredible installation. Arguably the best of their current works. The robot is the installation. The human was the inspiration.

  • ADVISERS ARE CATCHING ON

  • Prospecting is the single most time consuming activity we have in most insurance sales.

    The second most time consuming is compliance. Typically, compiling the SOA.

    I don’t think we can make you entirely redundant from either activity, for all but the most basic work.

    I think we can make you a heck of a lot more effective.

    AT THIS POINT I WOULD LIKE TO TAKE SOME QUESTIONS BEFORE SUMMING UP.


    QUESTIONS …………………….. QUESTIONS…………………

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