Sanjay Prasad - Head, Capital Markets and Insurance, USA, TCS Financial Solutions
Unlike any other product or a service that we purchase, Insurance stands out as an outlier – one of the products you buy while hoping to never use it. In this context, the ask for personalization of an insurance product may fundamentally sound counterintuitive. Why would one want to customize something that one hopes to never use?
Well, the truth, it appears, may be the opposite. The players in the insurance ecosystem have a real task at hand considering the dualities of collecting personal data and complying with data privacy laws related to PII, HIPPA and individual sensitivities. Furthermore, the need for personalization does not stop at the product and extends backward to the buying process and forward to the policy administration and servicing processes.
We hypothesize that the carriers who will be able to address this personalization and privacy paradox optimally and continually will be able to cut away from the rest.
With insurance premiums not a priority for individuals, convincing the fit and healthy to invest in insurance rather than membership to a gym or health equipment becomes a challenge for both insurers and regulators alike, rulings like the Affordable Care Act notwithstanding. Secondly, the likelihood of invoking insurance coverage is predicated on a variety of factors such as individual habits, attitudes, age and present situation in life. The propensity to face health issues or lose life due to an accident depend on habits and beliefs while at the same time two individuals in similar conditions can still ask for two different sets of coverage.
Thirdly, the buyer of the insurance product may not be the one covered, and instead be for a family member. So, while individuals may rest in the confidence of thinking that ‘it cannot happen to me’, a partner may have a different view. Often the protection they may seek could be higher than the perceived risks associated with the person being insured.
It is therefore perhaps reasonable to conclude that the insurance seekers’ needs and purpose for buying the insurance may be as unique as themselves and therefore there a is a case for personalizing the insurance offered.
What does it take to personalize insurance? Apart from the expected personal identification parameters like age, gender, zip code, type of asset, make/model, family health history, race, or event or even the not so obvious factors like employment history, mass personalization will require many more individual parameters. For example, in case of auto Insurance, past traffic violations can considered as essential for personalization whereas access to real-time driving data that includes the fine grained driving behavior like speed, brake, curving around corners, highway or inner road driving will also be critical. Furthermore, even the zip code information can be enriched with infrastructure details as they exist in the current time such as speed bumps, potholes etc. A good smart phone can capture all of the above and transmit data in real time to the insurance carrier. This data can then be harnessed to create inputs for underwriting systems and thus create a mass personalized auto insurance quote.
Pivoting this on to the Life and Health side of insurance, Health and fitness apps in smartwatches can capture finer vitals like the heart rate, breathing, HRV, VO2 max, SPO2, ECG, workout and exercise routines, calories burnt, calorie intake besides medical records including blood work, vaccination records, wellness visits, and so on. Without compromising on the facets of the HIPPA law, such personal data can surely help carriers come up with mass personalized Life and Health policies.
In an era of paradoxes where despite social media venues having more data about us than we know about ourselves, individuals continue to remain paranoid about sharing ‘personal’ data, is there a way to create mass personalized products?
Here are few ways in which we can approach this:
Incentivizing sharing personal data and Identifying the “persuadables” - Credit goes to firms in the recent times who popularized the term ‘persuadables’, referring to pockets of people who are more amiable to monetizing their personal data for a lower premium.
Digital Underwriting and PAS – All of above, will ultimately need the power of an intelligent underwriting engine and digital Policy Admin and Claims System that can configure new insurance products and service them in short intervals. So also, embedded AI and ML capabilities in processing claims, flagging potential fraud and supporting multiple product lines on a single platform to enable a 720-degree view of carrier - customer relationships.
In conclusion, Insurance products are inherently unique as they are bought not to be used. Counterintuitive as it may be, they make for a compelling use case for mass personalization. Incentivizing the ask will be one way forward.
Disclaimer: Views or opinions represented in this blog are based on the author’s own research and do not represent TCS BaNCS.