It what may be good news for the traditional insurance broker, global banking giant HSBC has released findings from its international survey
Trust in Technology that show robo-advice has a long way to go before consumers trust its ability to perform as well as humans.
The survey results show that just over half of respondents would be unlikely, or very unlikely, to trust a robo-adviser that makes recommendations based on AI algorithms.
Last year, the Financial Markets Authority (
FMA) used its powers under the Financial Advisers Act (FAA) to grant financial advisers and institutions an exemption to use robo-advice (digital advice). Under the
FMA’s requirements, individuals and institutions will need to apply for a licence from the regulator to be able to give advice from a non-human.
Professional Advisers Association (PAA) chief executive Rod Severn said there was a lot of work that needed to be done in order for digital advice to gain consumer confidence.
“The problem with the consumer is twofold; one a lot of them don’t understand it to start with, so they won’t know what they’re getting into if they go online and start answering questions,” he explained.
“Secondly, because they don’t know what they don’t know, they’ll either give the wrong information to a question, or not be asked the right question because robo-advice doesn’t know the needs of the person at the other end. So, you’ll get this mismatch of questions and answers.
“The other issue around this, is that if something goes wrong, people want to have somebody to look them in the eye and say, ‘everything is going to be OK,’ or ‘what can I do to fix this problem?’ They’re never going to get that from a machine. The one thing a machine doesn’t have is empathy, and that’s what people are looking for… the good advisers will always win out over the machines because they can offer that empathy that a machine cannot.”
Insurance broker Nevil Chand, of Evolve Insurance, added that robo-advice will be difficult to apply in the insurance sector.
“I believe that when it comes to insurance advice, robo-advice will have a greater challenge overcoming personalised advice given by a human,” he said.
“The insurance industry is complex, and yes technology is designed to make the complex easy. But, the reality is establishing trust with the consumer is key to the success for all parties involved – the adviser, the consumer and the insurer. And most people will feel more comfortable dealing with a person rather than a ‘one size fits most’ model.”
