Innovation and disruption are the latest business buzzwords it seems, no matter what industry sector you’re in.
We all know that businesses can’t afford not to innovate to develop new products, services and ways of trading to stand out from the competition – but in innovating are we really changing our marketplace? 2015 saw a lot of intermediaries, lenders and insurance providers such as the Source investing in new technology solutions to enhance their business proposition and deliver new benefits to their trading partners and customers.
However there are those who think the often incremental change brought about by innovation isn’t enough and are looking to disrupt the market. And disruption is very different to innovation – it displaces an existing market or industry or technology and produces something new and more efficient, something worthwhile.
You might think that disruption is more likely in sexier industries than insurance or arranging mortgages and other financial products. After all, the young techies set on changing the world aren’t likely to have bought many insurance covers or tried to get a mortgage or arrange protection are they? If you think that, well I’m sorry to be the one to tell you that you’re wrong.
Last year insurance disruptor Cuvva launched its hourly pay-as-you-go insurance cover to people borrowing from or lending a car to a friend or family member. It takes just 60 seconds to arrange through Cuvva’s mobile app.
Peer-to-peer insurance solutions are now available in the UK. Guevara lets drivers pool part of their premium together in groups. That money pays for claims and anything left over stays with the group to discount their renewal. By giving the profits of safe driving back to its customers, it claims it is creating a fairer system. Bought By Many allows members to create their own groups to get great deals. So far they have almost 300 groups from Staffie owners to off-piste skiers to homeowners with valuable collections or thatched houses.
And in the financial advice space, there are those who think that robo-advice is the future.
While currently more common in the US where the likes of DIY investing services are flourishing, the UK government wants to plug the advice gap for those people who cannot afford the fees charged by professional advisors. Interestingly, I read last week that the regulator is considering reintroducing commission, because, even though they won’t admit it the move away from commission has alienated an entire swathe of the population who cannot afford to pay for advice hence the need to look for alternative solutions.
Robo-advisers use clever algorithms to analyse the answers potential customers give to a series of questions. They then direct the customer to the most suitable solutions for their circumstances. Done and dusted and all for a few pounds rather than thousands. Cutting out face-to-face contact means initial costs and any ongoing fees are minimal. And in today’s digital world, this advice can be sought and received via a smartphone.
These solutions many sound simplistic and go against the grain of building relationships with customers to retain their business and possibly cross-sell other services and products. Arguably those with more complex requirements will still want that face-to-face service but for those who have simple needs or simply can’t afford to pay significant fees, robo-advice could be the solution to accessing professional help.
Robo-advice is still in its embryonic phase in the UK. Charges are still relatively expensive and services offered are limited.
There are legitimate fears that it could trigger a new mis-selling scandal, however given our robust regulatory environment the proponents of robo-advice are confident their solutions will stand up to scrutiny. No-one is dealing with mortgages or insurance… yet.
The truth is that we all have to face up to the fact that consumer expectations have and continue to change. Ask any member of the millennial generation about how they will seek advice and the last answer you are likely to get is “go see a broker”.
They expect to be able to get what they want, when they want and all from their smartphone. Those expectations equally apply to getting financial advice and buying financial products. As providers of financial products and services, we’re all going to have to disrupt our own business models to meet these expectations, so what are you doing?
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