Personalized Insurance Experience: 5 Steps to Do it Right!

Imagine your neighborhood bookseller from 20 years ago, climbing a ladder to retrieve from the top shelf a book you have to read, creating a feeling of warmth and intimacy. What if your company’s insurance offerings could elicit similar feelings in your customers?

Imagine what that could do, not only for their insurance buying experience but for their loyalty to you in the long term. And as most insurance companies expect their digital channels to grow in the next 12 months, product personalization becomes a key driver in the ability to accelerate sales and growth.

But it has to be done right. Personalization takes the customer on a buying journey with the potential to create tangible value for insurance companies. But building a personalization strategy is a journey as well, requiring new ways of thinking across the organization, and at least some trial and error. As you consider leading your insurance company through this journey, it is important first to understand:

• Why should personalization be part of your sales strategy in the first place? Why are you doing it?
• What does your organization need to safely embark on this journey?
• Once you are ready, how do you take the first step?
• Where are you headed, and what will your offerings look like when you get there?

Why Make Personalization Part of Your Sales Strategy?

Digital transformation, which started long before COVID-19 but has been intensified by the pandemic, means that face-to-face interaction will gradually become obsolete in the sales process. Personalization is widely discussed as a component of this transformation. But as you begin to shift sales to an entirely digital experience, why exactly is it so important to include personalization in your strategy? Let’s explore three main reasons: evolved customer expectations, the potential for increased customer loyalty, and avoiding commoditization.

Customers Expect Personalization

Companies like Amazon and Facebook have set a customer experience precedent that other players must align to: customers expect to be served personally. When we buy something—especially a more complex and valuable purchase like an insurance policy —we expect a personal catering experience.

Think about your elderly parents or grandparents, who probably bought insurance through an agent who they built a life-long relationship with. Over the years this agent grew to learn and understand your family’s risks and requirements, and in turn could offer insurance products that truly fit your needs. Your grandparents, suspicious of personal information online as is typical of their generation, might not expect to receive the same insurance buying experience through a web application.

Personalization Creates Loyal Customers

When customers perceive that their insurance company meets their expectations, the product becomes more valuable to them, and they are more likely to be loyal in the long term. They are less likely to switch insurance companies and may even purchase riders and add-ons. Personalization that meets customer expectations creates value, which drives digital conversions and also helps companies sell higher-profit, higher-margin product components.

Escape the Digital Commoditization Paradox

Insurance companies selling digitally face a dilemma. As they succeed in their online sales, they increasingly run the risk of being commoditized. Online selling will always involve some standardization, and when you offer a standard product, you risk consumers judging it based exclusively on cost. For example, auto insurance buyers in the UK tend to purchase through a price comparison website, where they barely consider additional attributes of the various products on offer and go with the lowest price.

Called the Digital Commoditization Paradox, personalization is one of the ways that can help companies avoid it. Personalization allows you to move the discussion away from price alone, and toward product attributes that differentiate insurers and provides value beyond the attractive cost alone.

The Essential Checklist for a Successful Personalization Strategy

Understanding the potential of personalization, you now need to assess your organization’s readiness to implement it. Personalization is an ongoing process that involves changes to your organizational mindset, structures, and possibly to your product.

Here are the main variables you should consider before starting:

1. Product Variation

Your ability to personalize rests on the extent to which you can create product variations to meet the many needs, tastes, likes, and preferences of your customers. Variation comes in different forms. You can vary:

• Core coverages: Home insurance, auto insurance, and other lines of business can vary by coverage amounts and deductibles.
• Riders and add-ons: Your company probably offers a catalog of add-ons. The more you enrich it, the more options you have to offer a granular, personalized buying experience.
• Usage-based insurance policies: You can vary your offering based on usage. For instance, auto insurance can be priced differently based on mileage driven, time of driving, or region. These variations have been especially popular during covid, with many customers driving much less than anticipated when they purchased their policy.
• Loyalty programs: In addition to selling insurance, you can attach related coupons and club memberships, so each customer sees a personalized package of tailored products and services.

2. Analytics and Rules to Determine the Right Offer Per Customer

How do you determine the right product to offer a customer at any point in time? You’ll need to build out artificial intelligence (AI) and machine learning (ML) models that predict what customers are most likely to need and buy, and hence what should be presented to them.

Rules can help to govern your personalization strategy. You may need to comply with regulatory constraints. Or you may want to avoid underwriting certain risks for some customers. You should consider risk-adjusted margins and how they vary across individual risk profiles. Finally, you can write rules to govern how and when offers are presented. If you present three packages to a web shopper, you may want to lower that to just one for mobile shoppers, to not overwhelm them on a smaller screen.

3. Collaboration Between Unlikely Bedfellows

A successful personalization strategy demands strong collaboration between teams that previously worked together little—or not at all—such as digital marketing teams, pricing actuaries, and product and business line managers.

Building this infrastructure is hard, because each of these teams works toward different goals. Digital marketers may measure click-through rates and conversion, while actuaries look at growth rates or lost cost targets. These teams have diverse world views, but personalization cuts across all of them. So, this would be a great time to bring them together.

4. Integrated Systems

All the above need to be enhanced and supported by integrated systems. Insurers need a large enough data repository to drive their predictive models. You need to test and run those models to make sure they capture the rules and underwriting logic that was set. These need to tie into your product catalog to reflect your product variations. And all that should be integrated with your channel and underwriting systems. Finally, all collaborating teams should have visibility to this information, so each can measure its respective performance metrics.

Seamlessly integrating your systems is no small feat, and many companies feel ill-equipped to do so. But the investment is worthwhile. The result of properly integrated systems is that when a customer visits your website, you can instantly gather your data, modeling, and product catalog, determine the best package to offer that customer, and push the package to your digital channel.

5. Support from the Top

Personalization is not a tactic. It is a strategic initiative and, as such, needs to be championed by executives. Executive efforts should focus on leading mindset shifts in two areas. First, leaders embarking on a personalization journey need to adopt a proactive mindset. You are going to reach out to customers rather than wait for them to tell you what they need. This is an unnatural approach for many insurance companies, and those who make the shift early stand to gain a competitive advantage.

Second, leaders must move their companies from thinking first about products to thinking first about people. Personalization is about understanding the customer’s true needs and making product decisions accordingly—not the other way around. By thinking first about people, insurance companies will build offerings that cut across products and business lines to serve the person holistically. Auto insurance alone becomes an auto, home, and travel bundle. After all, most customers need all three. Why not cater to that?

Taking the First Step towards Personalization

All your preparation for a personalization strategy can be daunting. Eventually, you need to take the first step, which is fairly simple: start with what you already have. Begin by thinking about how you can personalize your existing product variations. Map your current digital buying journey and identify where you can inject small pieces of personalization without building from scratch.

Take John. John wants to purchase auto insurance. He has filled out his personal details and car information. At this point, a screen appears in which he needs to choose his coverage levels.



 

At this point, John technically can choose whatever he needs. But he is presented with too many options—between all the coverage types and levels, he could create thousands of combinations. Screens like these often cause customers to abandon the process or complete it by phone at a later time (perhaps with a different company).

This is the point where insurers have to create the first level of personalization. Using AI and ML modeling, you can predict what combination of coverages best suits John and offer him that package only.



You can also go a step further and explain to John the rationale behind each coverage choice. John feels that your company really knows him, which carries tremendous value compared to the standardized packages that other companies are offering.

Glimpse into a Personalized Insurance Future

John’s example is only the beginning of how personalization can quickly create value for your customers based on your existing product offering. Imagine what you could do as your catalog expands and your models become more complex!



Take a look at the above travel, auto, and home insurance bundle personalized using hundreds of customer-specific insights to amplify value and differentiation. To the travel insurance, we added airport lounge access, knowing that is an attractive offer for this particular customer. A customer who received lounge access through their insurance company is unlikely to switch to a company that doesn’t offer at least the same. To home insurance we added appliance warranty, knowing this is something customers will likely need and buy elsewhere anyway.

These are all examples of how a well-built personalization strategy can drive improved customer experience and increase loyalty, as well as expand revenues and wallet share through cross-selling.

Begin Your Personalization Journey

Insurance personalization is a journey with a first-mover advantage. It involves learning and adjusting, so the earlier you embark on the journey, the more time you will have to test different personalization strategies before your competition catches up. And to start right, you need to understand why you are on this path, the conditions that will set you up for success, and where you are headed. Ultimately, both you and your customers will be glad you did it.

 

See how Earnix enabled D&G to price 40X more plans per month, and create highly personalized insurance offers. Read Now.