Buying Complex Financial Products Online

Gabriel Botelho2022-12-29

Oh the times they are a changing. It's now possible to buy complex consumer financial products without talking to a person. What have we wrought?

It’s 2023 and how people buy complex financial products like insurance, investments, and loans has metamorphosed over the past thirty odd years since the first boom in consumer internet. Rare are the transactions that require users to visit a bank or call an advisor to make a purchase. Now the way people shop for and purchase these types of products by comparison, via direct marketing, and through optimizers.  Underlying a lot of these changes is the ways these products have been financed and what their expectations for growth are as a result. The proliferation of online financial platforms targeted at consumer (primarily credit) management is incredible. Websites and apps like Nerd Wallet, Credit Karma, SoFi, Jerry, and Coverage Cat allow consumers to compare different financial products, get personalized recommendations, and make purchases online.

Robo-advisors like Betterment, Wealthfront, and Coverage Cat use software to create and manage investment portfolios for their clients. Peer-to-peer lending platforms such as Lending Club and Prosper allow borrowers to connect directly with lenders, bypassing banks as the arbiters for personal loans. And it seems like user sentiment is there to support this growth: a survey by E&Y, found that nearly 60% of consumers preferred to contact their agents or brokers digitally to shop for insurance in 2021, as digital-native users continue to grow as a category.

Despite the convenience and time/cost savings of buying financial products online, risks loom. The lack of personal interaction with a financial professional makes it hard for users to weigh risks and benefits of the tools they’re using. Even more frustrating, it can be tough to get good support–a major stressor when dealing with software and services that can be essential to peoples’ lives when it comes to a big event like a claim or loan payout. It doesn’t help that many platforms are predatory or just hostile by design where established businesses make use of dark patterns to increase sales success rates to the detriment of usability.

Another issue is that, although this isn’t the case for many online insurance brokerages, online financial platforms are sometimes not subject to the same regulatory oversight as the financial institutions they coexist with / seek to replace. The optimistic case is that this speeds up product development in a way that is net beneficial to users compared to the risks they’re exposed to from working with digital financial services. The worst case is that everything gets blown up due to poor risk management, and that users lose their funds and data. 

For some users this type of fallout can lead to things like false arrest, defamation, invasion of privacy, libel and slander that can be covered by umbrella insurance. Whether you’ve been an information worker for a while or own a high-growth company check out Coverage Cat to see if umbrella insurance is a good fit for your needs.

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