Personalization in insurance is still in its adolescence. The industry’s conventional customer interaction model has been low-touch and sporadic, initiated mostly for payments and claims. It’s little surprise that incumbents are facing down threats from insurtechs that offer more responsiveness and convenience, inspired by consumer-facing industries like retail and powered by digital-first business models.
Personalization promises higher customer engagement and in turn, commercial growth for insurers. But it requires companies to harness the data and technologies that enable continuous, omnichannel engagement, aligned to the individual and their unique circumstances, without overstepping the boundaries of privacy and tilting into invasive territory.
Enabling channel choice
Customers want to engage with their insurer through a means of their choosing. Some prefer face-to-face interactions with a local representative. Others are accustomed to interacting with personalized and feature-rich digital channels in most aspects of their lives, and expect their insurers to provide the same sophistication and value, with websites and apps that offer ready access to a range of advice and services 24/7.
Personalization in insurance can take many forms, from tailored advice delivered by human agents, to chatbot-powered messaging, digital payments and self-service portals. From a personal insurance standpoint, a more data-driven offering can better reflect customers’ unique preferences for coverage, whether it be protection designed for specific hobbies, or deductible options based on varying risk tolerance and financial circumstances.
Apps enable more frequent engagement with consumers, breaking the traditional paradigm of interacting with insurers only when payments are involved, or in an unfortunate scenario when a claim has to be filed. Open channels allow insurers to follow a customer's life phases or major events such as a home purchase, and use that intelligence to cross-sell products or receive a real-time alert about an event that might allow them to proactively minimize risk or initiate the claims process. This demonstrates how the insurer understands the customer's circumstances and is offering solutions and support to match, leading to improved customer satisfaction and increased retention rates.
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Beyond digital channels, technologies like wearables and Internet of Things (IoT)-connected devices which are a part of a larger third party insurance ecosystem provide insurers access to deep pools of information about their customers, who in turn are increasingly willing to share this data if it results in more relevant, personalized offers.
By leveraging data and advanced analytics, incumbents are beginning to implement real-time, behavior-based pricing. This, in turn, gives insurers an opportunity to take proactive steps to minimize risks and educate their customers. Insurers can also prompt their customers to make slight adjustments to their lifestyle habits by feeding behavioral or lifestyle insights back through apps, and recommending improvements that would help lower premiums.
This kind of personalization delivers direct benefits to customers – but they will need to be convinced before they fully engage with apps or share data freely. Many organizations are attempting to boost engagement with direct incentives, but more creative approaches will also be needed. If the insurers want their customers to embrace the full potential of new channels and technologies, they will have to find innovative ways of adding value to their services, which is likely to require engaging with a wider third-party ecosystem.
Breaking down data and governance barriers
To reap the benefits of personalization and more individualized risk assessment, insurers need a 360-degree and near-real time view of the user, derived from internal or third-party data. We often hear from industry leaders that aging data infrastructure and strategies are hampering efforts to build this holistic customer picture. In many cases, relevant data exists across several systems and channels, but organizations struggle to harness their data's potential because it is so fragmented.
What's more, the shift towards personalization brings new regulatory burdens. More data than ever is being shared between partners, and insurers must comply with the rules and regulations governing each partner and their industry, as well as their own. All while changes in some jurisdictions serve to make compliance a moving target.
Though consumers are open to data-sharing, some have concerns about handing over sensitive personal information on topics like health or family circumstances. A commitment to transparency and ethics is key to earning their trust. Customers need to be clear about what data they are sharing and how it will be used for their benefit in pricing or improved customer service. Strong consent frameworks are also essential.
Insurers are beginning to use data and advanced analytics for real-time, behavior-based pricing, giving them the opportunity to proactively minimize risks. However, to fully engage customers and encourage data sharing, insurers must offer creative incentives and find innovative ways of adding value to their services.
Insurers must be mindful of the tradeoffs of personalization, and the lines that must not be overstepped. While standardized processes often deliver economies of scale, personalization can slow down operations and increase costs, making it challenging to balance efficiency with customization.
Over-personalization can lead to inconsistent customer experiences, where different segments receive varying levels of service or product features. This could be perceived as unfair in some quarters. Personalization can also feel intrusive or manipulative to customers if it involves tracking their habits and activities closely. Highly customized pricing models based on personal behavior may lead to confusion and frustration if they lack transparency, and a customer doesn't understand why they are being charged a particular premium.
Striking the balance, and realizing benefits
To deliver omnichannel personalization that is effective yet stays within the boundaries of sensitivity, insurers need to develop an overarching data management strategy that allows them to efficiently and securely collect, organize and use data while upholding data quality, and abiding by data protection regulations.
At a fundamental level, this requires breaking down organizational silos to create an integrated, data-informed view of the customer that can be easily leveraged by internal teams; and paving the way for the smooth exchange of data with trusted third-party providers to enable further product innovation and partnerships. All this has to happen in a manner that maintains transparency, so the processes behind important decisions based on data are clear and any outcomes can be traced back to the source.
Thoughtworks has developed tools and practices specifically designed to help insurers overcome data and regulatory barriers to unlock more personalized experiences. We have a track record of working with insurers to implement the infrastructure and capabilities necessary to integrate data from across the business, and make sure this data is available on an on-demand basis – for third-party partners as well as internal teams.
Thoughtworks has built a hyper-personalization engine for a financial services client, serving retail (urban and rural), non-resident, and corporate segments. This solution caters to:
- 20 million customers
- delivering 21 million weekly offers (1,000+ distinct offers) and;
- nearly 7,000 variants, all powered by 150,000 unique customer profiles
Thoughtworks developed a hyper-personalization engine for a financial services client, serving 20 million customers across various segments. The solution includes a data privacy layer for secure cloud processing and uses Customer CNA for segmentation and an “Offer Funnel” to manage personalized offers.
The solution used a data privacy layer to protect sensitive information before sending it to the cloud. It streamlined customer segmentation with Customer DNA and personalized offers through an "Offer Funnel" that prevented repetition, conflicts, and regulatory issues. Machine learning improved offer selection based on feedback, providing a smooth omnichannel customer experience.
Our approach is underpinned by clear, flexible data strategies and robust governance processes that ensure a base level of compliance and customer trust, while allowing insurers to adapt to regulatory changes as they happen. Whether it's developing new models for risk pricing or applying the power of AI to enhance customer interactions, our industry experience and tested approaches enable insurers to realize the full potential of data to empower decision-making, drive innovation, and deliver services that reassure and delight individual customers, on an enterprise-wide scale.
