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Distributors and networks must up their technology game to meet the growing challenge posed by big tech firms looking to gain a foothold in the protection sector.
This warning was issued by The Openwork Partnership head of partnership services Setul Mehta who spoke to Money Marketing on the threat posed by tech conglomerates.
The big tech giants Amazon, Google (Alphabet), Apple, and Facebook (Meta) have already made inroads in financial services in various sectors. They see the market as lucrative for their expansion.
Last October, Amazon launched a home insurance comparison service in the UK after a successful trial launch in India. This raised a few eyebrows among industry watchers who see Amazon edge ever closer to the life and savings market.
The tech behemoth has already signed up large insurers, Ageas UK, Co-op, and LV= General Insurance, part of Allianz, to its portal.
The size and reach of these tech giants coupled with their state-of-the-art technology and consumer data cache would be very hard to match by distributors and networks.
The Financial Conduct Authority has taken notice of the threat posed by these big monopolies. It launched a discussion paper last year to explore the potential implications for consumers.
“Having the likes of Amazon will start to bring up a different style of challenge that advisers, networks and distributors and the industry isn’t used to,” Mehta told Money Marketing.
“They have huge databases they can use to contact a lot more clients at speed and at mass.”
Mehta said he believed the tech giants will try to dabble in technology with execution-only advice and online journeys. However, he said the client journey is still at the heart of any financial planning. And this might be the Achilles’ heel for these tech companies.
“What I found through various bits of research is many people start a journey online but then they leave that journey online to speak to a human being and have ratification.
“Now I think you will find the same with other technology organisations that would come in that will never go away. The need to have human engagement, interaction and validation will never go away.”
He asked: “The question will always be what is that client journey? What are the things clients are looking for? Are clients looking for big ticket items like protecting their mortgage looking to talk to Alexa or Siri to do it for them without realising the implications? Or will they end up speaking to someone in person?”
He added: “I don’t look at it as threat or worry because again if you look at other sectors and again, I bring general insurance as an example. General insurance have global players that have moved into the UK market. Zurich was a global player in different elements, they did wealth management and protection, so they were multifaceted, and they have moved into different directions.”
However, he said the interventions of these global organisations in the protection space could be “positive”, adding their presence could be opportunity rather than a threat.
He said technology could add lots of value to the protection space and that his firm, The Openwork Partnership, is already leveraging it to engage advisers.
“Technology can do a couple of things for you. We have our own inhouse CRM which is turning into a client portal which means that you get to engage with clients on different levels through your mobile phone, website, email etc.
“But what we are trying to do is work with some of our provider partner organisations working with individuals to see how we can make the life of the adviser easier.”
Mehta said technology will really add value in “reducing the process”.
“At the moment if you want to take a protection policy for £50 a month and you tell me you have a BMI of 35 and you have two parents who passed away before the age of 45, I know that’s going to be a rated premium. And I’m going to tell you that we are going to need to take some test, MRI etc.
“Technology will begin to connect with the providers and say actually ‘let me give you an indicative price now’. So the technology and algorithms are enabling us to understand the risk and we can protect you from day one. And that takes referrals to another level.”
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