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What are robo advisors in insurance and can they change the game?

Oct 10, 2019 | 5 months ago | Read Time: 3 minutes | By iKnowledge Team

Six years ago, when Nikhil was in the market for a new smartphone he had very definite ideas as to what he wanted the phone to do, its features and applications but somehow none of the phones in the market had all the trappings that he required. Eventually the matter was taken out of his hands when a close friend gifted him a premium phone from a leading manufacturer and on examining it, he found that it met nearly all his specifications.

A little later, when shopping for a laptop he had more luck. A popular computer brand allowed him to build a laptop online, choose disk space, memory space, speed, other features that he wanted. In short, he could custom-build the laptop exactly the way he wanted.

In the world of investments, we need that kind of flexibility. I do not want a ready-made package. I’d rather have the liberty of an a la carte menu where I can pick and choose. This is important in the case of insurance, one of the most important financial products we buy in our lifetimes.

Here is where robo advisory would help and in fact, the insurance sector is looking at robo-advisory to bring about a paradigm shift in the way insurance is being sold and serviced.

What is robo advisory?

Robo advisory involves the use of technology for the creation of platforms and apps where customers have the convenience of deciding what they want and get it with little trouble to themselves. It reduces human interface.

Data analytics and artificial intelligence is used extensively in robo advisory and algorithms are created so that by answering question and, keying in data, the robo advisory platforms are able to recommend the right plans to customers based on their goals.

A robust robo advisory platform can be created by putting in as many parameters and scenarios as possible and capturing granular customer data, their behaviour, and their preferences and so on. The robustness of the platform and what advice it will give depends very much on the inputs provided.

How is robo advisory contributing in insurance?

A Capgemini report earlier this year pointed out that robo advisory had the potential to transform the sales methods and processes in life insurance by providing customers customised and “personalised policy advice” [1].

Robo advisory platforms can pull up data on a real time basis and customers can get advice that meets their needs. They can process data and based on the needs of customers give them solutions instantly. Most “predefined scenarios” can be handled by robo advisory platforms, the Capgemini report said and exceptions can be routed to human advisors.

Insurance companies such as Aegon Life offer online life insurance policies with minimal paperwork. There are six different funds you can invest in, you can increase your investment by adding loyalty points to the fund in the last five years of the policy, and investors can withdraw 20% of their investment after five years when the need arises.

Robo advisory platforms have capability of storing, tracking and monitoring customer data over years, analysing trends and changes and using this data in providing the plans for customers and servicing them.

The entire drudgery of underwriting, document processing, sending reminders to customers on premium payments, the payment process etc., can be taken out of human hands by robo advisory platforms. This leaves insurance companies free to develop new covers and actually put their energies into thinking up ways where they can better serve their customers through the use of technology.

While claims are still processed the old-fashioned way, initiatives are being taken by third party robo advisory platforms to settle claims with the help of technology, at least in cases where the documentation is proper. [2]

Automating systems lower costs for insurance companies and this cost can be passed on to customers. With lower human interaction (it cannot be removed altogether), overheads of companies in terms of staff costs will be reduced and commissions (that are a bane of the insurance industry now), will be lower.

Many insurance companies are using chatbots or live agents who deliver help online and provide solutions on a real-time basis. This has big ramifications in ensuring customer loyalty. Overall, it has become an easier experience to buy life insurance than it was before. To know about Aegon Life’s insurance products like term insurance and other products, visit our home page.


[1] Top Ten Trends in Life Insurance 2018, Capgemini



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