Understanding The Value Of Personalized Attention In Insurance

The J.D. Power 2021 U.S. Small Commercial Insurance Study identified a lack of proactive support and personalized attention as causes for a significant drop in scores for a second year in a row. This is proof that Personalized attention is important to customers and will drive customer engagement. Digitization makes it easier to give that kind of attention.

Googling “insurance” and “personalization” loads up articles related to marketing and using personalization to attract new customers. In the old days this meant using the data that brokers had on hand like birth dates and x-dates. Getting an email birthday card from your broker is not personalized attention.

“…collecting more information and using personalization to reach customers with targeted messaging, offers, and pricing at just the right time…”

Now, mostly online direct insurers and online brokers are collecting more information and using personalization to reach customers with targeted messaging, offers, and pricing at just the right time, which McKinsey in this article call the “future of insurance marketing”. The types of information include financial, purchase history, location and age. As well as expiry dates which are getting easier to get with greater insurance shopping activity.

In the heat of the pandemic, this was not the type of personalization that most small commercial customers are referring. Small commercial customers were probably worried if they had some coverage for the pandemic government shutdowns and lockdowns. Also seeking if they were going to get some rate relief with the lessened activity. According to the Canadian Federation of Independent Business (CFIB) reports many businesses “can’t find an insurer at a reasonable price, or even at all”. This would likely make many small commercial customers more than a bit unhappy.

Personalized attention is more than marketing it is helping customers understand risk.

To us, personalization in insurance, particularly in the context of the pandemic, means more information that directly helps them cope with real problems they are either experiencing or worried about experiencing – all related to insurance.

Unfortunately, Covid-19 was very bad for the insurance industry and insureds. It shed some light on issues where customers think insurance failed. There is no way to go back and correct (some things could never be corrected) past failures we can learn to improve personalization for existing customers beyond marketing for new ones.

It is easier and less expensive to keep existing customers than get new ones.

There are 4 categories of personalization critical to insurance customers. These include:

  • Marketing Personalization
  • Environmental Risk
  • Segment Risk
  • Risk Perception

Marketing Personalization

Using various ways to collect data and then marketing to people on a targeted basis. The McKinsey article mentioned above will give this much more information about this. Data regarding event dates, location, age, financial potential and purchase history are used. This is costly to do and can be ineffective or worse if done wrong.

Environmental Risks

These are risks that are predominantly location related. Fire, draught, earthquake, flood, current events, political and social events. Construction, occupancy, protection and exposures are more immediate examples of environmental risks but may also be shared by the next category of risk.

Get the earthquake and flood zone maps for your territory and make it easy to disseminate that information to your customers.

Keep an eye of what is happening in your area and how it might affect your customers and communicate with potentially impacted customers. Covid-19 would fit into this category.

Underwriters have substantial information about environmental risks used to underwrite. Surprisingly, as helpful as this information can be, it usually doesn’t make it down to the customer. Newer digital full stack platforms can improve this data flow.

Segment Risk

These are risks that are shared among homogenous classes including activities, hazards and loss experience. In many ways, these are the risks considered the most in underwriting for selection and pricing.

For small commercial, an excellent source of segment specific information is readily available in Best’s Underwriting Guides and Loss Control Reports.

Individual Risk Perception

This, by far, is the most complex area of risk which has been examined the least for insurance purposes. There are 4 factors the affect personal risk perception that include Cognitive (what people are exposed to in media), Affective (emotions and feelings), Contextual (how someone processes risk information) and Individual (personality traits, experience and age – which might explain why your 5 year old thought it was a good idea to jump off the roof with an umbrella).

There is a good article “Risk Perceptions and Risk Characteristics” by Hye-Jin Paek and Thomas Hove 29 March 2017 that you can read if this interests you, as it does us.

Before digitization, this type of exercise was completely unachievable. Digitizing the insurance process model allows for us to learn more about personal risk perception. Products, coverages and choice of insurer can be tailored to target customers even within segments. Personalized attention will drive customer engagement.