Making Insurance Personal: Tailoring Insurance Products to Meet Consumers’ Needs

March 2, 2021 by Udi Ziv, CEO of Earnix

According to a recent Accenture study assessing consumer views about the financial services industry, personalization is a critical success differentiator for insurers. This trend towards personalization is replacing the traditional and ineffective way of providing consumers with too many product options and rates.

Traditionally, consumers have had to decide the level of coverage needed, their appetite for risk, and assess the adequacy of the rate for each insurance offer all on their own. In the sea of options, consumers have become more receptive to insurance carriers that direct them towards a select number of product offerings and rates responsive to their needs, preferences, and financial circumstances.

If insurers can continue to improve the consumer experience and keep up with changing demand, this will undoubtedly give them a competitive edge and increase their customer retention rate. “If you’re not convinced that retaining customers is so valuable, consider research done by Frederick Reichheld of Bain & Company that shows increasing customer retention rates by 5% increases profits by 25% to 95%,” cites Amy Gallo in the Harvard Business Review. One way insurers have done that is by adopting software solutions that leverage smart analytics, artificial intelligence (AI)and traditional statistical models to make the personalization of rating and products possible, and in real-time.

Personalization

Purchasing insurance can be a complicated process. A recent Policygenius Home Insurance Literacy Survey found that almost 50% of homeowners surveyed “mistakenly believe that the amount of home insurance coverage they need should be based on their home’s market value.” Overestimating the level of coverage needed, underestimating risk levels, and overpaying or underpaying for insurance are just some of the challenges that consumers have. Not receiving adequate insurance options and rates can create long-lasting uncertainty among consumers and diminish customer experience and retention.

How are insurers achieving personalization that alleviates their concerns and improves the customer experience?

The path to true personalization in risk-based industries starts with setting the right coverage at the right price for the insurer and consumer. There are analytical methods that, when combined with the latest AI, allow insurers to adapt the product offering and even proactively reach out to the consumer. If consumers are offered a product that meets their needs, at the rate they can afford, and at the time when they need it, insurers have managed to successfully eliminate the guesswork and concerns consumers have about coverage and affordability. This is the core objective of personalization: to simplify and improve the accuracy of the insurance purchasing process, thus increasing consumer confidence in an insurer’s ability to provide them with the coverage they need and can afford.

Personalization + Business Velocity

Although personalization itself is critical in meeting consumers’ expectations, personalized products and rates must be delivered in real-time to maximize value. Rate quotes and product offerings should reflect the consumer’s present circumstances and needs, not those of the past. Insurers need the ability to leverage data quickly and adjust their offering to consumer life events and changes in their needs. To be as agile and timely as the market requires, insurance companies should implement an end-to-end solution to speed up rate deployment and offer highly personalized products to consumers.  These capabilities need to be sustained by an advanced rating engine that adjusts prices and deploys them to all consumer touchpoints, in real-time.

With a single, fully automated system, consumer trends and rates can be monitored to create highly personalized prices and products. Insurance companies need smarter analytics solutions – a combination of cutting edge AI and traditional statistical models – to manage their data and models, run “what-if” simulations and track real-time market changes to make the necessary rate and product adjustments. The faster an insurer can deliver accurate and personalized product offerings and rates to the consumer, the higher the rate of customer retention and satisfaction.

Personalization + Business Velocity + Integration

Employing one fully integrated solution, comprised of rate making and real-time end-to-end deployment can assure fast, agile, and automated delivery of rates and products across multiple business lines. Implementing a single solution also allows insurers to automate governance and compliance over the entire rate-setting process. Conversely, employing multiple systems for each of these functions separately poses a risk to regulatory compliance, efficiency, and accuracy in addition to a significant loss in overall value.

Personalization of product offerings begins with the right strategic approach and leads to a win-win, for the consumer and for the insurer. This is especially the case in risk-based industries like insurance, where smarter analytics are key to assessing a consumer’s risk, preferences, needs, and changing life circumstances in real-time.  Staying competitive in today’s market requires that insurers embrace an innovative approach and combine personalization, agility and automation into a single end-to-end system.

The clock is ticking on how quickly insurers must act to personalize rates and product offerings to meet the needs of the consumer and respond to the changing market. The solution lies in customer-centric innovation.