The Best Advice Is Personal: Robo Advisors Vs. Agents

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30 November 2016


Celent has released a new report titled The Best Advice is Personal: Robo-Advisors Vs. Agents.The report was written by Karlyn Carnahan, a Research Director with Celent’s Insurance practice.

Key Research Questions


What is automated advice, and why is it needed?


What are the different varieties of automated advice?


How can an insurer get started when thinking of deploying automated advice?

Disruption of the agency model seems to be a foregone conclusion judging by the amount of recent investment in insuretech startups focused on transforming the distribution model. However, consumers use agents for very good reasons. Prior to direct purchase on the Internet, consumers needed agents to access different markets. There was no mechanism for a consumer to purchase directly from an insurer.

With the advent of digital agents, aggregators, and direct-to-consumer insurance insurers, this reason is less important than it used to be. Although access to markets is more readily available, consumers still need advice and guidance. Insurance is a complicated product. Understanding which coverages they should purchase, what limits and deductibles are appropriate, and whether additional terms or endorsements are relevant are some of the key points of value that an agent offers. Want to know how to improve online conversion? Provide actual advice to a prospect.

Automated advice is the use of technology to provide some level of personalized advice to a consumer or agent based on the characteristics of the insured. Provision of tailored advice could increase online conversion while improving compliance. Automated advice comes in a variety of permutations that vary depending on how much automation is utilized and how much personalization is provided.

Even small amounts of advice seem to have an impact on conversion. We look at the path to automated advice through three stages of sophistication. Insurers thinking about automated advice need to think about the mechanics of the advice engine in several areas: the data and analytics needed to create the advice, the ability to integrate the advice with the delivery of the product, and the presentation of the advice.

"The increase in insurers offering commercial insurance direct may be seen as an inflection point not just in terms of commercial lines sold direct, but also in terms of a shift in momentum from the agent to technology, across lines of business. It’s not surprising that both insurers and consumers are interested in a shift in channels. It promises to be less expensive for an insurer to go direct, and consumers are clearly showing a shift in preferences for accessing coverage. However, replacing an agent isn’t as simple as automating access to markets. One of the primary points of value provided by an agent is personalized advice. Carriers looking to drive conversion should focus on ways of providing more relevant guidance,” commentedCarnahan.

“Consumers are more financially literate than ever before, given all the information available on the Internet, yet still want transparency in the choices available, and value guidance and advice as to what options are appropriate and why they are appropriate. Fifty-eight percent of consumers surveyed say that when choosing a financial services provider, they are looking for a personalized offer, tailored to the individual firm or person,” she added.