Around the world: Online distribution in USA

How will people buy insurance in future? Greg Becker visits the US for developments in online distribution.

With about 15,000 financial advisers being RDR-qualified by the end of 2012, and with the UK population standing at 62 million, simple arithmetic suggests that 4,000 people will be served by each financial adviser. 

While many people will not have the funds to purchase a wide range of protection and savings products (children, for instance), it is fair to say that not everyone is going to receive costly financial advice from ­RDR-compliant financial advisers. Yet the need is large, so how will people get advice?

The UK industry already has a thriving price ­comparison market, which is responding to the need for those looking to purchase products without advice – or ‘execution only’. The government has responded to the need for improved financial literacy, with its key initiative being the Money Advice Service. 

But this initiative has not fully realised its ambitions – it is being cut back and a repositioning is being proposed. The first incarnation focused on information and guidance (despite having “advice” in its name), and a drawback is that it did not offer an end-to-end solution as a customer still had to embark on a separate journey to purchase products that fulfilled their needs.

The Money Advice Service has realised it needs to change its ways. While one of the changes is a substantial reduction in staff, it has recently announced that it is trying to move in the direction of advice, although it adds it will not be offering regulated advice.

The private sector is also moving into the advice space. The most interesting recent launch is that of the fee charging offering from Royal London: Money Vista. 
Money Vista may have a cost barrier to entry and it may be held back by being attached to a product manufacturer. But it also seems to suffer from the limitation of not offering an opportunity to move from a detailed needs analysis to the purchase of products to fill the gap.

LIVING THE AMERICAN SCHEME

The US is the global leader in the online space in most product areas, and financial product distribution is no different. Mint and Personal Capital’s products will be looked into much detail, although the list is a lot longer with Pageonce Personal Assistant, BillTracker, BillMinder, BankRate.com and Simplifi.net also filling this space.