Insurance Automation & Bots (The Sky Is Falling, The Sky Is Falling)

insurance automation - agent meets robot

I was having lunch the other day with two of my brothers-in-law when the subject of purchasing car and homeowner insurance online came up. The one, a retired chief of police from a large metropolitan city of Southern Idaho, aggressively advocated for the relatively new marketing model which bypasses the insurance agent/client model most of us are using for purchasing insurance.

“With so much information available and the ease of filling out online application, this make good economic sense; and besides that, you know if you use an agent, he is going to try to upsell you because he has his best interest at heart rather than yours.”

The other brother-in-law, a retired accountant, enthusiastically endorsed the agent/client model with his observation, “I have now had the same insurance agent for twenty two years and have no desire to shop my insurance because she has been so reliable in explaining my coverages, reviewing my options, and was very prompt when I had part of my roof blow off. She just took right over and I didn’t have to do a thing but sign a claim notice.”

Just about the time we finished our conversation, my 21-year-old millenial granddaughter came in and said, “I would do almost anything to stay away from having to talk to someone face to face. Even if we were in the same room, I would rather text them. I just don’t want to be lectured to or be made to feel I don’t know what is going on. I would, in fact, hope when I use the phone I get an automated system asking for information rather than giving the same information to a real person. I want to be able to hang up at anytime, which I probably wouldn’t if it were a real person because I wouldn’t want to be rude. I really just want to buy my insurance ‘cause I’m not interesting in making a friend of the person I am buying the insurance from.”

Having been an insurance agent for 42 years, retiring just at the genesis of this new and rather exciting marketing approach, I left that conversation with real mixed emotions. The question lingering in my mind was, with the use of technology and bots will there still be a place for insurance agents to have the one on one rapport with clients?

In reading an article published in “The Times of Israel” dated May 14, 2018, titled “Replacing Agents with Bots, Startup Upends Home Insurance Industry,” I got the impression like I should be Henny Penny and start running around flailing my arms in the air yelling “The sky is falling, the sky is falling. Agents beware, you are being replaced by A.I. and you better find another profession quickly before you go the way of the dodo bird!”

With the model described in the article, the insurance company called Lemonade Insurance based in New York purportedly can with the use of bots and artificial intelligence through a chat with the company’s bot give you insurance coverage within 90 seconds and within 3 minutes of submitting a claim have it paid.

“We aim to create a mind-blowing insurance experience for our users,” Shai Wininger, a co-founder of Lemonade Insurance said in a recent interview. “Insurance is one of the most hated industries in existence and this presents Lemonade with an unusual opportunity.”

Whether this particular company with its emphasis on bots and A.I. will weather the rigors of regulatory issues and other market pressures remains to be seen, but it does add flavor to the discussion of automation in what has been a very personal marketing venture. Sheryl Sandberg, Chief Operating Officer for Facebook, though not addressing the insurance industry per se when speaking to the 2018 M.I.T. graduates, clearly focused technology and human involvement thusly, “Technology needs a human heart beat. The greatest opportunities we have are not technical. They are human.”

This seems to be the take away from Bain & Company “Global Digital Insurance Benchmarking Report 2015” in which is drawn that a strong digital offering–one that fuses the best digital and physical worlds–results in greater customer loyalty and advocacy. Consumers still want that human element while being able to take advantage of all the digital advancements available to them.

In 2014 a Bain & Company survey of more than 180,000 consumers in 18 countries found that the share of digitally active insurance customers range from 35% to 70%. Over the next few years, this is expected to rise to 79% who said they will use digital channels for insurance interactions.

The major mainstream companies are aware of this but have had some difficulty in responding to the paradigm shift due to allegiance to traditional method or due to a lack of vision as to how to meet the opportunity. This has opened the door to startups and young firms to chip away at insurance markets. These “disruptors” will aim to take advantage of customers’ frustration with traditional pricing or premium structures. (For a detailed narrative on impact of bots and artificial intelligence on insurance industry go to Bain & Co. the “Global Digital Insurance Benchmarking Report 2015.”)

These are exciting times for the insurance industry and the buying public to be able to unitedly improve the marketing and buying experience in one of the largest dollar outlays in our economy. Wouldn’t it be nice to get rid of some of the old obsolete ways of doing business by replacing them with better methods of processing and risk pricing. Consumers play a major role in this paradigm shift because companies can only survive when they are meeting the needs of those whose demands they are attempting to meet.  

So, for the coming future, my brother-in-law who feels secure in dealing in a bot world will remain convinced this is the way to purchase while my brother-in-law who loves his insurance agent will still be able to sleep well knowing if he has an insurance issue he knows who he can turn to for help. As for my millenial granddaughter, I have developed an insurance glossary (see Insurance Glossary for Millenials) for beginners where she can go and have no human interaction as she learns the “lingo” of insurance because the insurance industry isn’t going away and will continue to be a major player in her financial future.

As for insurance being one of the most hated industries, if you will allow them, most reputable agents want to earn the right to your business–and that is not done by deception, dishonesty or false representations. I would suggest when you dump us in one barrel we lose individual identity and we become like Congress; but when you look at your own insurance agent, you will probably still invite him or her to baptisms, athletic and musical events, bar mitzvahs, graduations, and funerals. If you have the kind of relationship I had with my clients, you will recognize there are very few people who you shared your dreams and aspiration with more than that agent.

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