I recently read a blog from a young Millennial former insurance agent who was practically begging Amazon (or one of the other dominant online companies) to enter the insurance business.
Her chief complaint about the insurance business? Way too slow and too much paperwork which could be handled more efficiently with digital technology. Like what has been transpiring in the financial services industry for nearly a decade, the young blog writer saw the insurance industry as ripe for disruption with technology leading the charge.
I don’t think she was wrong. Historically, insurance companies – and our industry as a whole – has tended to be a little archaic in the adoption of new technologies.
We’re not using floppy disks anymore but we’re still pretty far behind the times.
But I think that is about to change. The entire insurance industry is undergoing a renaissance. There is a lot of innovation that’s occurring in the insurance space and a lot of new technology is being implemented.
Advancements in Technology
Currently, the innovation is mainly occurring in areas of our business that large insurance companies don’t have the incentive to exploit, such as ultra-customized policies, social insurance, and collecting data from all manner of internet-enabled devices to price premiums based on actual observed behavior.
In addition, there are technology firms that are creating apps to pull discrete policies into a single platform, and other firms that are automating legal documents for online application.
Some innovators are employing artificial intelligence (AI) to find the right mix of policies to determine an individual’s coverage, and others that are streamlining the entire policy process so it is easier for advisers and their clients to analyze, procure and maintain their insurance assets.
These advancements aren’t coming from the big traditional insurance companies such as Guardian Life, Prudential and John Hancock. A few of them have deployed technology on the risk assessment front, but it has only resulted in expedited policy purchases for small benefit amounts. Needless to say, this has not been transformational.
But as these new start-up platforms evolve, there will be plenty of opportunities for the big companies to acquire or partner with these firms and to integrate their technology into their operations.
Insurance is a People Business
I welcome all the technology developments that are on the horizon and I know they will be of benefit to our industry as a whole. These innovations will enable the entire process to be more seamless and more accountable. It will also make it less likely that a customer can be taken advantage of by someone disreputable, because they will have more information available to them at their fingertips.
However, I am also aware that, at its core, the insurance business is a people business. Insurance can be complicated and many folks aren’t comfortable navigating those waters on their own.
Emotionally, people don’t like to think about death or dying, or becoming disabled. Those are scary things to think about and so generally, clients are looking for a more personal touch, someone to help coach them through the process, and to make sure it is successfully completed.
Also, there are so many different products available in the insurance industry, it’s very difficult for the average consumer to know which one is best for them. They want to know, “Did I buy the right product? Did I buy the best product?”
Additionally, when a client buys long-term care insurance or an annuity, they don’t really understand how it all works – what the riders and features are – and under what circumstances the insurance is triggered.
Equally significant, as it pertains to permanent life insurance, long-term care and disability insurance, it’s important that clients are aware of the trade-offs and to understand how their insurance assets are working within their overall financial plan. Being properly insured – not over insured or underinsured – is a goal that is unique to your personal circumstances.
So given these considerations, clients place their trust and confidence in the expertise of their adviser for the answers to their questions.
The Sky Isn’t Falling
In the insurance business, there is a history of the Chicken Little syndrome; a propensity to believe that every new change will be the death knell of the industry. With every new regulation passed, there are hordes of people who loudly shout “The sky is falling! The sky is falling!” predicting the insurance industry’s demise. And no doubt, those same naysayers are looking at these coming technological changes and are ready to spread their doom and gloom.
But the truth is the sky isn’t falling. People want and need to have insurance coverage and generally, they also want a personal coach and expert to help them make the right decisions.
The coming technological changes will only amplify and make the industry that’s here today better tomorrow.
United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.
The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.
Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.