Personalised Insurance: Customised solutions through analytics
It’s a customer-centric market today. Industries across the world are increasingly talking about positive customer experience as a key differentiator to business growth. And, apparently, disruptive technology is crucial for achieving this, ‘disruptive’ being the keyword.
The insurance sector has dealt with ‘disruption’ in the past: insurtech (similar to fintech), competition from e-commerce players entering the same market and changes in the way products and services are delivered. However, it is a different kind of disruption today.
The current age of insurance customers has had a taste of personalisation from other industries such as retail, food and FMCG, which has raised their expectations from the insurance sector too.
More power to customers regarding product choices
To cope with the increased demands of customers, the insurance industry has to reposition itself from being a seller to empowering customers to decide and choose. This means designing solutions that are tailor-made for customers so that they look forward to buying them. Product personalisation, as it were, is not a new concept. Industry sectors like FMCG, retail and food have been using it to their benefit for a while. However, insurance carriers have been slow on the uptake owing to the complexity of the nature of the business. But those with digital models have started to lead the way and inspire others.
The nuts and bolts of insurance customisation
Customisation or personalisation takes many forms - for some it means wearing the hat of collaboration while for some others it means designing a product based on user-preferences. Whatever the form, the customer, for whom the solutions are tailored, is at the heart of every stage of development.
As for the insurance sector, designing products based on customer preferences is somewhat complicated owing to the many variables involved, which present too many permutations for analysis. Some of the influencers are: insurance holder type (individual, a business house, or corporate), income type (fixed-regular, irregular), income bracket (high-net-worth), personality type (high-risk-taker), stage of life, etc.
Based on the above, policies can be designed with varied levels of personalisation, including:
- Demographics-based segmentation
- Customer behaviour-based segmentation
- Individualised personalisation (personalisation is not based on market segments but on individuals)
- Real-time, data-driven individualised personalisation
Whatever the level of personalisation, unless it adds value to both the insurer and insured, it is a burden. So, what are the advantages of personalisation?
Benefits of personalisation
For the insured, personalisation offers a product that caters to their needs. The insured are no longer limited by the standard choices on offer.
For the insurer, it is better to allow the figures to speak for themselves:
- 60% increase in revenue per customer
- 81% increase in customer retention
- 89% increase in customer engagement
- 75% increase in sales and marketing conversion rates
- 61% increase in in-house sales agent effectiveness
- 60% increase in broker-channel effectiveness
The ace game changer: advanced data analytics
The traditional insurance model, which has been stable for many years, is now being challenged by digitisation. A new wave of customer behaviour is crying for a futuristic model and by heeding to it, insurers are doing themselves a favour.
The future of insurance lies in personalisation, the true totem of customer centric digital transformation, which is realised only by tapping the potential of technology — in this case big data analytics and machine learning (ML).
ML and big-data analytics have the ability to analyse gigantic volumes of data (such as an individual's tendency to default, accident proneness and propensity to develop a life-threatening illness) and deploy sophisticated modelling techniques accurately and fast. This capability makes them the right technological tools for designing effective personalised policies and enhances their ability to network and connect better with customers.*
Eighty-nine per cent of insurers believe that by 2023, offering ‘Market-for-One’ insurance product-bundles can well become a standard market practice.
As services get more personalised, customers will come to expect something similar for products too. This expectation is met by deploying advanced analytics and ML that can efficiently crunch through large amounts of data and tailor products best-suited for an individual at a given moment while also accounting for the organisation’s business objectives. In doing so, the current problem of inadequate or excessive insurance can be reduced and customer trust and satisfaction enhanced.
The world has moved from standardised to personalised. Standard hotel menus have made way for customised pizza toppings. The new era of insurance is akin to this, and insurance companies need to look at their products in the same light to penetrate the market.
Personalisation is the future and insurers need to invest now: the business benefits are clear.
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