A KEY part of the adviser offering is recognising when a client has lower life insurance cover than what is appropriate.
However, closing the gap between actual and optimal cover for clients persists as a major problem within the life insurance industry, with the government cost on social security expenses as a result of underinsurance exceeding $1 billion per year.
Behold the world of insurance fintech, or InsurTech as it is increasingly becoming known.
What is InsurTech?
A portmanteau of ‘insurance’ and ‘technology’, InsurTech is one of the more recent additions to the fintech ecosystem.
According to Investopedia, it refers to the use of technology innovations “designed to squeeze out savings and efficiency from the current insurance industry model”.
KPMG’s global head of fintech in insurance Martin Blake says the role of the adviser is constantly changing.
He says that, through InsurTech, there is an opportunity for them to assist clients with the selection of products using advanced data analytics and the personalisation of third party data.
“There are opportunities to identify changing needs or triggers and actually engage with the potential customers during the discovery process, which influences the buying decision of individuals,” Mr Blake says.
“During the explore stage, there are opportunities to provide comparison platforms and aggregators – roboadvice – for clients as well.”
Mr Blake says entering the Australian market has become an attractive option for many InsurTech start-ups.
“Because of the high levels of digital engagement, it does provide an attractive market for insurers to actually come to Australia and pilot their ideas and, obviously being a testing ground for financial activities to be rolled out, it means that our local insurance industry is going to innovate faster than if these technologies were piloted elsewhere,” Mr Blake says.
One Aussie-based fintech start-up that has jumped on the InsurTech bandwagon is Sydneybased Flare HR.
An authorised representative of non-aligned licensee, MyPlanner, Flare HR provides all-in-one human resources and benefits software.
The software aims to find the best group insurance for new employees and remove as many compliance hassles as possible.
“Currently, any employee or any person in Australia can get life insurance paid from their superannuation,” says managing director and co-founder of Flare HR, Jan Pacas.
“Yet, if you ask how many people really increase their default cover, and how many people really know about that, that they can access higher default cover from within their superannuation, the number is very small.”
Mr Pacas says the underinsurance gap is best tackled at the onboarding process.
“When any employee is onboarding, and the very first question we’re asking [is] what superannuation fund they would like to pick, we as a business are completely non-aligned to one or the other financial houses,” Mr Pacas says. “We have independent funds on our panel and people can pick one or the other. We have a comparison engine that compares the different funds.”
Once an employee has made their decision, Mr Pacas says the next question becomes whether they want to increase their level of life insurance above the default level.
“We really ask this as a specific question because it is something that is of great value for all employees and all people in Australia,” he says.
“I think what our experience shows is that consumers like it significantly more because we make their life much easier.”
The barriers to entry
But despite the untapped potential that surrounds InsurTech in Australia, take up of the technology within the life insurance industry has been slow.
TAL’s general manager for innovation Dan Taylor says the slow take-up of new technologies within life insurance, relative to other financial sectors, is due to its high regulation, as well as the complexity of the industry and the products with which it deals. He says the capital requirements on the insurance sector also make it difficult for start-ups to come in alone.
“Within life [insurance], it’s just the long-term nature of our products where we can sign up a new customer but it might be 20, 30 or 40 years before a claim comes through,” Mr Taylor says. “That makes it very complex and difficult for a start-up with a new bit of technology just to jump into the industry.”
Mr Taylor also cites the importance of the claims experience itself as a factor behind the slow adoption of InsurTech.
“When we do have a claim, it’s at a really difficult and important time for the customer and they absolutely need reliability and confidence that we’re going to be there,” he says.
“They often need that sort of human factor, if you like, that can really bring and understand some of the emotional context and helping, rather than just dealing with more automated machines or a digital context, whatever that may be.”
In Mr Pacas’ case, Flare HR’s business model is built around acquiring business-to-business customers, and then offering their service to consumers.
He says the model is very effective in terms of customer acquisition, but does acknowledge that it is very expensive and that the barriers to entry are pretty high.
“The software to build it is not cheap,” Mr Pacas says.
“If you want to synchronise all the data in terms of HR and insurance and benefits and pay it all, it is all quite complex.
“You don’t do that in three months, and you need a lot of money for that.”
Seizing the opportunity
While the InsurTech industry may still be in its early stages of development, major insurers are already opening their eyes to the potential the technology holds for both advisers and clients.
TAL’s Dan Taylor says advisers can benefit from the possibilities of technology, such as artificial intelligence (AI) and data analytics.
He says there is a great opportunity in using AI to save time doing some of the more compliance driven and administrative tasks.
“What that does, particularly for advisers, is it can free up time effectively to offer a higher level of care to the customers and spend more time on the value adding stuff rather than the form filling,” Mr Taylor says.
Further, Mr Taylor says data analytics can help advisers understand how they can better target customers, and provide those customers with the right insurance offering.
As for any fears about being replaced by InsurTech, Flare HR’s Jan Pacas believes advisers can harness it to their advantage.
“It’s the same with any technology model. It’s not replacing the product but it’s making it much more convenient for you,” he says.
“Do you want to embrace the technology as an opportunity and think hard about how you can use the technology to your advantage, or do you want to be on the defensive side, denying that this is happening?
“The innovation is not that it completely substitutes insurance advisers but it makes it much more convenient for the consumer, and shortens the buying experience and the entire process.”
Goodness me. No sooner have we had one bunch of leaners spend time trying to clip the life insurance ticket and fail continuously (Banks), now the masterminds in the HR world think there is easy money to be made. All ‘care’ and no responsibility….