The march of progress moves ever onward, and robotic advisors are becoming more and more common—they’re even invading the financial advice space now too. They’re popular but can they really give you the insurance advice you actually need?
Robo-advisors are popular for two simple reasons: they are quick, and they are easy. You can get what seems like an accurate quote for your insurance needs in just a few minutes—no need to book in an appointment with your advisor, all from the comfort from your computer desk or your phone.
In this regard, insurance isn’t all that different from anything else you can find on the web. People love to start their search for insurance on Google, and often make decisions based entirely on what they find on page one. And that’s not a bad thing—we’re living in an age with an unprecedented ease of access to information after all.
The real question is why wouldn’t robo-advisors be popular?
It’s a similar story with employee benefits. Imagine trying to give answers that covered every personal insurance facet for every single person in your company.
Robo-advisor vs human
The problem is that just because something is popular doesn’t mean it’s good. In fact, the name ‘robo-advisors’ is practically ironic, because they don’t really act as advisors!
If you wanted a quote on getting your lawn mown or wanted to find the cheapest airplane tickets to Christchurch, then you can find everything you need online: that’s because these are quite simple tasks with only a few factors that might affect your quote.
Insurance is another matter entirely. There are hundreds of different puzzle pieces that all must slot together perfectly to give you an accurate picture of your insurance needs.
Robo-advisors lack this ability for nuance. They don’t know you and your circumstances like a human advisor does, and that is a significant part of determining what you need from your insurance policies.
Robo-advisors lack this ability for nuance.
Take life insurance for example. A robo-advisor might ask you a series of standard questions about your health and your circumstances, in many cases similar to the preliminary questions your insurer would ask you.
One example that we encounter often at BRAVEday is blended families. Separate provision need to be made for children from previous relationships as well as those children from a current relationship. Correct ownership of the policies (previous spouse or a family trust) need to be considered as well as the correct sum assured.
Another example is medical family history. This can have a major impact on what insurers can offer and which insurer is likely to provide the best terms. An experienced advisor will usually investigate this before any quotes or options are provided.
But that’s where the similarity ends. By the end of the robo-advisor questionnaire, you’ll likely be presented with a policy option that either includes glaring holes or cover you don’t actually need.
That’s because a robo-advisor has to assume a lot about who you are and what you need; otherwise they wouldn’t be fast or accessible—after all, that’s what makes them so popular.
Getting into the nitty-gritty
Then there’s the problem of detail. Let’s look at a classic health insurer question: do you have high blood pressure? With a robo-advisor, you’d get the option of yes or no. No detail. No reasons for the high blood pressure. With a human advisor, you could say “yes, but I’ve spoken to my doctor and we’ve figured out a way to get it back to regular levels” or “no, but I do have similar cardiovascular issues that haven’t been listed in the questionnaire you gave me”.
"Failing to ask about a particular condition or assuming the wrong information about some part of your health can result in your claim being denied due to pre-existing conditions."
Again, this is not the fault of the robo-advisor. It’s an inherent part of designing a tool that is quick, easy and accessible. But faultless or not, the reality is that failing to ask about a particular condition or assuming the wrong information about some part of your health can result in your claim being denied due to pre-existing conditions.
Human advisors can head down these tangents and get the information they need to provide you with policies that you actually need.
What about business insurance?
If you thought personal insurance was nuanced, then you’ll be flattened by how specific business insurance can get. In order to get policies that cover you properly without becoming unnecessarily expensive, your insurer needs to know every potential risk that your company could encounter. A robo-advisor can’t get into that level of depth without asking you hundreds of annoying yes/no questions.
It’s a similar story with employee benefits. Imagine trying to give answers that covered every personal insurance facet for every single person in your company. There’s very little chance you’d end up with a policy that is both relevant and affordable with a robo-advisor.
Summary
Robo-advisors aren’t all bad. They just aren’t the be-all and end-all of insurance advice. They are convenient, but they can also be inaccurate. They’re fast, but they can lack nuance. They can give you a vague guess at your insurance costs, but they can also ignore your real needs.
Take our advice: if you must use a robo-advisor, only consider it a ballpark figure. You should still go to a human expert to get the level of detail and personal attention you need to avoid junky or unnecessarily expensive policies.
Robo-advisors might seem like the future of insurance, but for the time being at least, us humans still leave them in the dust!
To learn more about your insurance needs, download our free personal insurance guide below.
