The digital advice revolution is here to stay. Understanding the value of current – and future – digital advice offers help to show us the right strategies for the future. After all, all business models are a hybrid of both digital and human components.
Gradually, online sales services are being upgraded to offer true advice: personalised, and yet automated, using algorithms based on a combination of an advice theory, and big data to make offers efficiently, usually provided through a web application, or a smartphone app.
New customer relationship management systems, new sources of data, and new visualisation techniques will play a big role.
When consumers give permission for some of their data to be used by an advice application, the information obtained can be applied to anticipate and then solve customers’ problems, preferably as first-point resolutions. Once data permissions are given they only rarely rescind that permission. That means a digital advice platform may enjoy both good data and good access to the consumer to make multiple offers.
In large markets with many buyers, digital should enjoy substantial economies of scale, and speed of execution – especially if the best value can be extracted from consumers sharing data.
That may not be enough, at least initially. Consumers find smartphones complicated and fascinating – insurance is complicated, but consumers find it boring. That ‘low engagement’ may make very complex purchases difficult without the support of experts and motivators: even if their ability is delivered by a chatbot. The market dynamic may therefore require the most successful digital services to have more human involvement, to add empathy to their data and models.
In an environment of re-regulation, digital can offer the advantage of being predictable. Algorithms should enable clarity both in the advice model and indisputable evidence that it was followed, with little temptation to break rules due to conflicts of interest. With such advantages, will digital conquer all?
There is a real risk however, that improving technology may not necessarily achieve the greater transparency and trust required for financial services of the future.
Media sometimes presents a false choice - that the future is either digital or human. Yet no broker works without extensive digital connectivity, data and systems. No digital system works without extensive networks of highly trained people. There is no digital divide anymore. All advice businesses are always an ally of both systems and people.
For more information, contact an Insurance Advisernet Member Broker today.
General Advice Warning
The information provided is to be regarded as general advice. Whilst we may have collected risk information, your personal objectives, needs or financial situations were not taken into account when preparing this information. We recommend that you consider the suitability of this general advice, in respect of your objectives, financial situation and needs before acting on it. You should obtain and consider the relevant product disclosure statement before making any decision to purchase this financial product.