Innovations in technology are set to transform the insurance industry. But Canadian insurers have been slow to implement the technological developments that could be helping financial advisors engage, serve and communicate with their clients.
Insurance advisors are under pressure to meet the changing expectations of a new breed of clients, who increasingly prefer a digital experience instead of the traditional paper-based processes that have dominated the insurance industry.
“Globally, there has been a more progressive and aggressive approach to adopting technology solutions [in the insurance industry],” says Kelly Gustafson, national director for sales innovation with IDC Worldsource Insurance Network Inc. in Calgary and member of the Financial Advisors Association of Canada’s (Advocis) Technology Task Force.
The emergence of a host of new technologies such as blockchain, connected devices and artificial intelligence are enabling the development of new tools for insurance companies.
Some insurers are taking steps to digitize certain processes with innovations such as electronic applications, e-signatures and digital insurance contracts. But the industry is still dominated by “a slow, manual, paper-based process that is antiquated and outdated, providing a poor user experience,” Gustafson says. “The traditional business model does not work anymore.”
Other technological developments, such as digital platforms that connect advisors, clients and insurance companies, and advanced analytical tools that support the client acquisition and sales and management processes will also play a greater role, improving advisors’ efficiency.
Insurance companies must therefore focus on meeting the needs of a new generation of advisors who want effective practice management tools that foster greater efficiency, says Donald Chu, chief operating officer and co-founder of Finaeo Inc., a Toronto-based digital managing general agency.
“Buyers of insurance policies are looking for a digital experience,” Chu says, “as young people do not have a desire to work in a paper-based environment.”
Gustafson adds that companies such as Alphabet Inc. (Google’s parent company) and Amazon.com Inc. have built expectations among consumers for simplicity, transparency and speed of delivery. Clients now want this type of service from their advisors.
The need for greater digitization is also the result of a shift in client demographics, behaviours and expectations. This shift is led by millennials, who represent a growing proportion of the population and are moving into their peak earning and spending years, according to a 2016 study by the U.S.-based Institute of International Finance entitled Innovation in Insurance: How technology is changing the industry.
The study states that the preferences and expectations of these “digital natives” pose a particular challenge to the insurance industry, which traditionally has had low customer “touch” and slow technology adoption.
As advisors adapt to technological change, they are faced with many challenges. For example, Gustafson says, IDC Worldsource has 25 insurance carriers on its shelf, some of which offer advisors e-apps and have electronic platforms. “Everyone is developing their own systems and different applications,” she says. “There is no consistency; the process is disjointed.”
To put this into perspective, Gustafson says, client application forms supported by e-apps range from 12 to 65 pages in length — indicating the lack of collaboration among carriers in developing consistent apps. “Can you imagine advisors’ frustration,” she says, “in having to work with 25 different apps?”
Advisors face similar challenges with the use of electronic signatures, which are not accepted by all carriers. The rules regarding electronic signatures vary among carriers, Chu says.
He suggests that insurers are hesitant to use technology, preferring to stick to what they know best. As result, advisors are not getting access to the front-end technology they need to grow their business.
And there appears to be a disconnect between what advisors want and what insurance companies believe they are providing.
According to Lyne Duhaime, president (Quebec) and senior vice president of distribution (Canada) at the Canadian Life and Health Insurance Association in Montreal, the insurance industry and regulators are working together to adopt new technologies in a way that respects regulations and benefits consumers.
“The insurance industry works with regulators to support change, where necessary,” Duhaime says, “so that the regulatory framework in which insurance is sold contemplates new technologies that can improve the customer’s experience.
“Insurers embrace new technologies, processes and concepts,” she adds, “that can enhance current services and create new market opportunities. Many of the technological advances that support the consumer’s experience are related to platforms and back-office systems that enable the efficient processing of these transactions for clients across the life cycle of their policy.”
But insurance carriers are not prepared for digital engagement, Chu says, because technology experts do not have a voice at the table — at both the carrier level and the regulator level. Some carriers are facing huge implementation challenges, he adds, because they have to deal with multiple legacy systems within their own operations: “It’s a systemic problem across the industry.”
In order for digitization to proceed effectively, Chu says, “regulators have to allow for controlled experiments” in a live environment. This process will identify the risks and challenges of adopting new technology.
Meanwhile, Gustafson says, advisors who are digitally engaged will be a step ahead of those who are not. Online insurance retailers are particularly well positioned to meet the needs of digitally savvy clients.
However, even if there is greater use of innovative technology, both Chu and Gustafson acknowledge that there will always be the need for the human touch in selling insurance.
“Customers will still need advice to validate their decisions,” Chu says. Technology will be an enabler for advisors to work more efficiently and serve their clients better.
Duhaime agrees: “Consumers still mostly prefer to work with a human advisor before purchasing life and health insurance. Insurers use technology as a tool to both support their advisors and improve the client experience.”
As innovations in technology gain ground, Gustafson adds, consumers should benefit from lower pricing for insurance products.
As well, Chu says, there is potential for increased profitability.