15/11/2022
Blog Insurance

Why is the insurance sector not yet ready for personalisation? 

Marlena Wilk 7 min Read

Today, there is hardly any industry that doesn’t aim at personalisation in one way or another. The insurance sector is no exception. We all acknowledge the need to take an individual approach to our clients, who, in turn, want to be the centre of attention and expect to receive a customised service. But insofar as personalisation usually takes place on the level of communication and customer service, is the insurance sector really able to tap into all the data it can access and create personalised products?

In theory, there is talk about using vital signs monitors to create personalised products in the insurance sector.In practice, customers often struggle to reach their agents on the phone and distrust the insurance packages they are offered.

(Hyper)personalisation in the insurance sector

The world moves forward, technology surges ahead and business is constantly on the lookout for new ways to win customers over and keep them close. Several years ago, personalisation was on everyone’s lips; today, we often take it even further, in the form of “hyperpersonalisation”. New technologies (such as AI, including machine learning) allow us to understand customer needs inside out and build a really individual relationship with the client. In theory, there is even talk about using vital signs monitors to create personalised insurance products (e.g. clients who have a healthy lifestyle could get access to cheaper policies), but how does that actually work out in practice? 

Unfortunately, neither omnichannel sales, nor smooth query handling are yet the standard in the sector. Consultants still rarely have access to a single customer database that would include all relevant customers’ data and records, along with their products, services and cases. This means clients need to provide their data and describe their cases over and over again. They also struggle with long waiting times whenever they want to talk to their agents or have no contact with the insurer whatsoever, often due to tight schedules and time constraints. And yet it is precisely these elements that lie at the foundation of good, personalised customer service; customers should be able to browse, manage and use insurance products without any obstacles. 

What about insurance products as such? Have these, at least, reached the highest levels of personalisation? 

Insurance personalisation – fact or myth?

Let us take the vantage point of a customer. When looking for an insurance option, customers are often offered three packages: minimum, medium and maximum. These may be sold under fancy names like “comfort”, “prestige” and “VIP”, but usually boil down to the same thing, a simple choice between three slightly different options, none of which really meets our demands. In view of how diverse we are, can this even be considered a personalised offer? 

Products are created according to a pattern that groups customers into segments based on simple demographic data, which help determine how fat their wallet is and define a set of supposedly universal customer needs. There is no room for individual preferences or concerns. As a result, customers don’t get the sense that the product is really tailored to their needs; all they can do is choose whether they want to pay more or less. A recent report published by Deloitte and entitled “The Future of Home and Motor Insurance”, lists frequent complaints, such as the lack of transparent policy structure and a high degree of complexity; no certainty that the price is appropriate or that any potential damages will be covered; fears as to possible hidden costs; costs that exceed benefits, etc.. It is easy to conclude that, simple as it may be in theory, the current solution largely fails to satisfy those it is meant to serve. 

What would hyperpersonalisation change in insurance? 

Hyperpersonalisation goes beyond a merely demographic segmentation of society and avoids hasty conclusions. What it does is it creates a space where you can learn about your customers and provide them with what they need. 

For instance, it is clear to see that the industry treats young drivers with a lot of suspicion. Every day, there are more and more twenty-somethings who own their own expensive, luxury cars. These are mostly rather conscious drivers, head over heels in love with their vehicles. If they enjoyed greater leeway to personalise their insurance, insurers could provide them with customised products, such as, e.g. extra varnish protection. The problem, however, is that few flexible solutions exist; there is also space to get to know all individual customers and analyse their expectations. In general, all that most insurers know is that they are dealing with young men on the cusp of adulthood; they have just three ready-made solutions available and zero data to help personalise them. 

Of course, some insurers are already able to tweak their packages a little or offer certain extras. However, only the best-informed customers currently take advantage of such options, because there is not enough time and resources are lacking to hold a full interview with each and every single one. Of course, customer needs surveys are still filled out as per standard, but do they really tell us what our customers expect? 

A more individual approach was practiced in the 1990s, when sales training included instruction on how to talk to potential customers to dig up as much relevant information as possible and offer the best available option (not always related to the product the client originally asked about!). This was praiseworthy but, in the end, in the absence of IT solutions, all that information was mostly unstructured, confined to the sales reps’ memory, and irretrievably lost as agents came and went (or simply omitted to share their data with insurers). 

What stops personalisation in the insurance sector today? 

Among other things, hyperpersonalisation rests on mutual trust. Let us suppose we want our customers to fill out a survey that will ask for very personal, often sensitive data (e.g. their greatest fears). In a time when personal data protection, cybersecurity and privacy are so important, a solution of this kind might prove too controversial. The survey needs to be really well constructed and avoid direct questions so as to glean all the necessary data without making the client feel uncomfortable. 

Overall, only 54% of respondents would agree to share their loan history with the insurer in exchange for a lower premium or a tailored product. 

“The Future of Home and Motor Insurance”, Deloitte 

Because data is essential. Without an accurate understanding of the client, no personalisation, let alone hyperpersonalisation, is possible. And even though we are surrounded by data-collection technology at every turn, the insurance sector is still held back by the human factor. In Poland, but also many other countries, a relatively high proportion of clients still prefer to purchase their insurance products from an agent (or at least initiate the process in that way). Surveys show that in Canada, as many as 37% prefer to buy their insurance policies over the phone and a further 35% opt for face-to-face contact with an agent. 

This suggests that while technology may significantly support hyperpersonalisation, it cannot replace human contact at this point. 

Why doesn’t the industry consider specific customer needs? Why do individual customer preferences seem to have no impact on the final shape of the product? 

There may be many reasons:  

  • Risk calculation. From the perspective of insurers, safe and standardised packages entail fewer risks (individual insurance, after all, is optional); 
  • Lack of trust. Insurers assume that whenever customers speak freely about their fears and suggest solutions, they intend to abuse the policy; 
  • Inability to design customer surveys that customers will want to fill out to share their needs; 
  • Lack of tools to create packages tailored to a given segment in a fast and cost-effective way. 

In light of the rapid technological advancement we are witnessing today, it is hard to believe that the last of these aspects should be so decisive. Fortunately, the experience we have working with our original solution, Altkom Insurance Suite, gives us the confidence that the IT industry is ready to rise to the challenge.  

Will the other aspects then take centre stage?