Companies have begun to focus more on customer experiences that enhance their business. This is where disruptive technology comes in handy in the transformation process, and it’s called disruptive for a reason. As with other industries, the insurance sector has also been impacted by the challenges emanating from e-commerce entrants, and now, Insurtech is similar to Fintech. However, a new wave of disruption has emerged, a much more consumer-driven disruption. Yes, it is all about personalization.
This generation of insurance customers has been exposed to customization in the retail sector, the food industry, and FMCG. These increased expectations have thus extended to the insurance industry, putting pressure on insurance providers.
More Power to Customers with Custom Insurance Solutions
To meet these growing demands, the insurance industry must shift from a traditional selling approach to one that empowers customers. Instead of simply offering standard policies, insurers must now focus on delivering custom insurance solutions that cater to individual customers’ specific needs and preferences. Product personalization isn’t new—industries like FMCG and retail have been leveraging it for years. However, due to the complex nature of insurance, it has taken longer for the sector to embrace this approach fully.
Despite these challenges, companies with digital business models lead the charge, demonstrating how personalized insurance can enhance customer satisfaction and retention.
The Mechanics of Insurance Customization
Personalization, or custom insurance, as it is often referred to, can be incorporated in many ways. One application may work directly with clients, while another provides solutions according to patrons’ characteristics. In each of these cases, the customer stays at the focus of the development process.
The issue of adjusting the insurance product and its characteristics is multifaceted and depends on many factors; each is complex in its analysis and requires an individual approach. Such variables include policyholder status (own-self, business, corporate), income source – regular or ups and downs, income range, attitude, risk tolerance, and age. Based on these factors, policies can be designed with varying degrees of customization, such as:
- Demographics-based segmentation
- Customer behavior-based segmentation
- Individualized personalization (tailored to individuals rather than market segments)
- Real-time, data-driven personalization
Regardless of the level of personalization, the goal is to add value for both the insurer and the insured. Personalization that doesn’t create mutual benefit becomes an unnecessary burden.
Benefits of Personalization for Insurance Companies
From the point of view of policyholders, personalization is significant because the client acquires a product tailored for this purpose. Customers can now select policies beyond conventional choices and thus improve their ability to choose according to their situations.
For insurance providers, the benefits of offering personalized products are clear. Here are some compelling statistics:
- 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
Personalization is not just a customer-centric strategy but also a revenue driver for insurers. The ability to offer tailored products strengthens customer relationships and improves long-term profitability.
The Game-Changer: Advanced Data Analytics
To understand the changes happening now, it is necessary to note that the traditional insurance model has not changed for many years and is in the process of restructuring due to digitalization. Today’s customers want a more personalized and customer-centric approach, and those insurers who can deliver this will survive. The industry’s growth is in bespoke insurance, brought about by data, analytics, and machine learning.
For instance, machine learning and big data enable insurers to make quick and informed decisions when designing appropriate policies for individuals or companies. By considering data like default probability or accident frequency among diseases’ chances of occurrence, the ML approach will help insurance companies provide relevant products to customers.
As these technologies evolve, the insurance industry is expected to adopt a “Market-for-One” approach, where products are tailored for individual customers. 89% of insurers believe that by 2023, offering personalized insurance bundles will become standard practice.
Custom Insurance Solutions: Personalized Protection
For many insurance companies, the main problem is how to remain competitive; the missing link is custom insurance solutions. Hence, advanced analytics helps insurers create products that cater to customers’ needs and improve their experience with the insurer. With such an advancement in customization gaining currency in the marketplace, consumers will quickly establish it as a trend rather than a fad.
Using big data analytics and machine learning, insurers can optimize product development, minimize the chances of providing insufficient or excessive insurance, and advance client relations. The end product is that the insurer and the insured agree to share the risks to benefit both parties.
Conclusion
The shift from mass production to mass customization has already occurred. As custom toppings have supplanted the standard pie and routine hotel meal offering, insurance is similarly changing. There will be an increasing need for individual insurance products since the owners expect the services to fit their specific needs.
By embracing advanced analytics and machine learning, insurance providers can stay ahead of the curve and deliver the personalized products that today’s customers expect. With Custom Insurance and innovative platforms like The CBC Health Insurance Marketplace for Costco Members, the insurance industry’s future is one where personalization reigns supreme, driving customer satisfaction and business growth.
