Insurers support robo options

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An exemption to allow roboadvice in New Zealand will include the provision of personal insurance products, something which one insurer has argued could lower commissions to advisers.

Thursday, October 19th 2017, 12:21PM 1 Comment

The Financial Markets Authority revealed this week that it planned to go ahead with its proposed exemption, which will allow roboadvice before the introduction of new advice laws would otherwise have made it possible.

Originally, it had said mortgages and personal insurance would be excluded but director of regulation Liam Mason said it had since altered its view on that.

Fidelity Life and Partners Life both made submissions in favour of the roboadvice exemption,

Partners Life’s plans to use the exemption were removed from its submission, as commercially sensitive.

But the insurer argued roboadvice would be an important part of addressing underinsurance.

“Roboadvice platforms can service many consumers, even if they are remotely located, including customers who do not use traditional advice methods. - It will improve the consistency of advice for consumers.”

It said allowing roboadvice on insurance could reduce advisers’ commissions as they had to compete with a lower-cost channel.

“There are risks associated with roboadvisers who advise clients to replace existing business – these risks can be mitigated through process design that considers these risks.”

Managing director Naomi Ballantyne said if advisers were being provided with a roboadvice tool it would make that part of their process more efficient and safer. "Then that's part of the role they no longer need to do. There's less risk, less time and their remuneration will reflect what they do."

She said people who used roboadvice instead of human advisers would have different costs structures again. 

Ballantyne said she could not see a good reason for not allowing roboadvice, as long as every distribution channel had to meet the same requirements. 

Partners said its data showed that advisers were less likely to advise clients who wanted to insure very small sums. “This implies they are more likely to target higher-value customers, leaving many New Zealanders under-advised.”

Roboadvice could help to address that problem, it said, with lower-cost advice that would give consumers more options.

Fidelity Life said it was concerned about under-insurance in New Zealand, too.

“This means people’s biggest asset – their ability to earn income – isn’t protected when circumstances change, and this can place huge financial pressure on families. Fidelity Life supports a regulatory regime that is technology neutral,” it said in its submission.

“Roboadvice has the potential to help bridge the under-insurance gap and should be permitted and encouraged where it provides consumers with more choice and access to good quality advice. While we believe that roboadvice cannot deliver the same value as a long-term relationship with a professional human financial adviser, it may allow consumers - who would otherwise remain under-insured – to have easier access to advice and insurance protection; empowering consumers with choice is beneficial for the whole market.”

It indicated that it would explore roboadvice opportunities, if it was made possible.

Tags: roboadvice

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