Hyper-personalisation introduces new challenges for insurers, even as it brings benefits

Hyper-personalisation will bring new challenges to insurers even though it offers key benefits including competitive differentiation, enhanced retention, pricing accuracy and improved risk assessments, experts said during InsureTech Connect Asia panels on Thursday (June 4).

Carriers risk introducing statistical noise through hyper-segmentation of insurance risk pools, says Efren Jr Caringal, Chief Risk Officer of Filipino insurer, Insular Life Assurance.

The law of large numbers allows actuaries to predict losses with reasonable accuracy across large, diverse risk pools, but hyper-personalisation threatens this fundamental concept. “Within a given microsegment, you basically have very similar risk profiles, so that introduces volatility,” Caringal says. “With volatility, that becomes more challenging.”

Insurers have to look at this in a very pragmatic manner. “At some point, you stop getting reasonable segments, and you start slicing these risks into chaos,” says Ronald Engel, CEO of Austrian insurtech subsidiary VIG platform partners.

To optimise capital, firms need to focus on sustainability. “Every solution is going to have some inherent volatility,” says Jaideep (Jay) Sharma, Regional Head of Specialties at Lockton Asia. “The biggest concern as a broker and risk advisor to your client is to actually collapse something that could be really useful.”

Focusing on optimisation through segmentation could leave solutions vulnerable to shocks across different settings, Jay Sharma says. “The problem is that there will always be an unanticipated chaos factor that will create volatility and sustainability.”

Personalisation still important

Even as personalisation goes against the basics of actuarial science, it still offers benefits across the insurance value chain when implemented thoughtfully. Access to customer insights can make a difference.

Data can help insurers intervene early and in a targeted way, says Mariette Thulliez, Chief Actuary at Partner Re.

Partner Re has worked with carriers to identify applicants and insureds who need enhanced risk assessments and targeted interventions, Thulliez adds. “We identified this group of policyholders that were at risk of lapsing their policy, and we shared that with our client in advance. It enabled the clients to intervene early and in a targeted way, and the persistence improved.”

“We know there are a lot of products around. We want to penetrate the markets. We want the customers to buy the policy. But we also want the customers to stick around. We want the customers to pay their premiums. We want them to enjoy the policy and their peace of mind, and we want to be there and support them when they need it,” Thulliez says.

The value proposition of personalisation is even clearer for commercial clients, says Jay Sharma. While benchmarking — showing how clients performed relative to peers or geographic segments — was once sufficient, commercial clients now demand more.

They want to understand where the data insights intersect with their specific situation, according to Jay Sharma. “The only way to remain relevant is that you actually do personalise and optimise coverage. Otherwise, honestly, they’re not going to buy from you,” he says.

Data power shift

On a personal level, however, insurers face a more immediate challenge, as they lack the data necessary to personalise effectively.

Banks, e-commerce platforms, ride-sharing services and other digital ecosystem players possess something traditional insurers largely lack: real-time behavioural data and high-frequency customer touchpoints. “I don’t think carriers can ever beat them,” says Rajat Sharma, Chief Revenue Officer at InsureMO.

The question now lies in how insurers can leverage data to understand consumer behaviours and whether they can embed insurance products into these high-velocity, high-frequency touchpoints.

“That’s where insurance companies will have to deliver experiences to the customers, where they are,” Rajat Sharma says. “You can’t create a different app and give them a great experience if they don’t want it.”

Even then, the wealth of data that insurers already have can be used as a strategic tool. “We use data as a strategic tool, as a differentiator,” says Jay Sharma. “From our standpoint, I think about our forefathers of insurance. Can you imagine how delighted they would be with the amount of data we had? They would be harassing us if we didn’t use that data properly.”

Data is the guiding light for firms to manage their risks and for brokers to place risks, Jay Sharma says. “Any client of any size is going to want to know what’s the value you get beyond just a pure transaction,” he says.

Embedded insurance solves bottlenecks

Still, even as insurers recognise the need for greater personalisation through data, implementing these changes means facing significant technical obstacles. Sourabh Chitrachar, Regional Vice President for Asia Technology Strategy and Operations at Liberty Mutual Insurance, says that integration challenges and data silos are persistent barriers.

“One of the biggest challenges is legacy systems,” Chitrachar explains. “Integration, data silos and data quality become massive challenges. Unless you have a robust plan in terms of how you are going to achieve [this], and you’re measuring it at every step, it simply is not going to work.”

There’s still a lot of modernisation that needs to happen, says Thulliez. “On the front end, we can be state-of-the-art and ready, but in the back end, [we’re] not ready to follow.”

With these constraints, “behind-the-scenes” personalisation is a more viable option rather than customer-facing complexity. And simplicity proves crucial for conversion, especially for embedded products.

“The higher the complexity, the lower the conversion,” says Engel. “If you imagine booking.com, they don’t want a full-fledged configurator on their checkout page. They want a one-click upsell.”

Embedded insurance gives customers the right offer at the right time, Engel says. “Hyper personalisation in embedded insurance means you have certain personalisation, but you have hyper alignment with your distribution.”

Where customer experience matters, insurers can simply go and embed their products at the right time, place and price point, says Rajat Sharma. “The companies who are doing it [are] growing at a rapid pace.”