Personal care has long been part of insurance's promise. That's why Allstate has assured customers they're in good hands and why State Farm has claimed to be a good neighbor for so many years. And now "big data" and AI allow insurers to know so very much more about their policyholders, so they can tailor products and services to individual needs and tastes.
But a TransUnion study found that customers didn't get the memo.
While 70% of insurers told TransUnion they deliver a personalized experience, only 43% of customers agreed. Among members of Gen Z, which is becoming a more important market for insurers every day, only 32% said they received personalized care.
This should be a teachable moment.
Part of the lesson from this study is simply about the importance of getting objective information, so you aren't breathing your own exhaust and exaggerating how well you're doing on important initiatives such as personalization. That point seems to have become a theme for me, based on the number of times I've hit it in these commentaries, including in a recent one about a young German soccer fan on a six-week trip with friends to watch World Cup matches. He has gone viral by providing an eye-opening look at American culture that has surprised those of us steeped in that culture.
But I think there are two other points worth making about personalization, one about playing defense, the other about playing offense. I'll start with defense, because few insurance executives seem to be focused on it.
The TransUnion survey found that 46% of respondents invested in hyperpersonalization as a way to sell more products. That's great. Growth makes the world go 'round. But only 10% invested in personalization as part of adjusting to evolving customer expectations. That's not so great.
For three decades now, companies have had to adjust to being "Amazoned." As customers became accustomed to Amazon's one-click purchasing and other innovations, they began to demand similar simplicity from other companies, even ones in far more complex industries than book selling. The CEO of Deere complained to me in the late 1990s about being held to a standard set by FedEx. He said a customer noted that when he spent $10 with FedEx, it could tell him to within 30 minutes when an envelope would be delivered, but that when he spent $350,000 with Deere, it couldn't tell him to within three months when the equipment would arrive.
The insurance industry has done a lot to make life easier for customers, but Amazon, FedEx and others are a moving target. They keep innovating, so customers keep raising their expectations, including for insurers. They aren't going to feel like they're getting personal treatment if they end a call wondering, "Why did I have to dig up my policy number and member number? Don't they recognize my phone number by now?" Or, "Why do I have to keep checking on the status of my claim? Don't they care enough about me to keep me posted?" Or any of the innumerable other questions that arise when a customer doesn't feel valued as an individual.
The effect of disaffected customers is harder to quantify than the upticks in sales that investment in personalized selling can generate, but it's still clear that unhappy customers are more likely to jump to another broker or carrier. You also undercut the brand if you brag about personalized attention, then treat people like a number. So more defensive spending on personalization — to keep customers from becoming unhappy, as their expectations keep rising — is needed.
The issues with playing offense are straightforward — but mind-numbingly hard. We all know the issue is about gathering more data, merging it with existing data streams and making the information available to whoever needs it, whenever they need it. But saying you need to break down the barriers between data silos is a lot easier than actually doing it, given the various ways data is defined and managed. And, by the by, how reliable are those external data sources?
Given that the issues are known and that money is being invested, I'll just add one thought, from "Beyond Digital," a 2022 book I helped write. The authors, PwC partners Paul Leinwand and Mahadeva Matt Mani, have a section on what they call "privileged insights" that was perhaps my favorite part of the book. The basic idea is that you construct a virtuous circle with customers. You do something useful for me, which makes me trust you enough to tell you a bit more about myself and my needs, which lets you serve me better, which....
The idea doesn't apply as well to insurance as it does to industries where interactions with customers are frequent, but the principle still applies. You warn me that hail is coming and that I'd better get my car under cover or send me a Ting sensor that spots an electrical problem in my wiring before it can cause a fire, and I'm going to become more open with you. You might find yourself creating that virtuous circle that gives you privileged insights about me that competitors can't get, no matter how much third-party data they purchase.
The drive toward personalization makes all the sense in the world, and we've published scores of articles on how to accomplish it — among my recent favorites are Reimagining Insurance Via AI and Personalization and How to Leverage the Personalization Boom. But we've all seen how theory doesn't always translate seamlessly into practice.
The TransUnion study suggests that we should spend more money and effort on using personalization to treat customers as they want to be treated and, as always, must get outside our echo chambers and see the world as our customers see it.
Cheers,
Paul