RGA provides quarterly updates on global product developments, which can be made available upon request. Click here to view the Q4 2019 digital newsletter.
Segmentation is a process of customizing products and services to meet the specific needs of a particular group of customers. In the past, customer segmentation was done using demographic data such as age, gender, class, occupation, and income. Now customer segmentation looks at customers in relation to their individual attitudes, behaviors, motivations, and barriers. The new approach provides more effective and reliable insights and often includes more sophisticated forms of segmentation that use attitudinal or psychographic data.
Although we already have segmentation taking already takes place in the life insurance industry it is still lagging compared to behind other industries who do not focus on one variable at a time such as age, gender or wealth but are that use more multi-dimensional factors in their customer segments, for more tailored marketing and impactful experiences for the customer.
Segments are growing in size and now use multidimensional variables
Segmentation has always been a feature of insurance. Insurers now use predictive AI algorithms to develop correlations between variables such as age, gender, income, and purchasing behavior. For example, the retirement market can be segmented by age together with job tenure, job satisfaction, propensity to save, and preference for life insurance. It can also be segmented by the customer’s financial behavior together with their level of financial literacy.
Another way to segment customers is by digital behavior. They can be classified as Price Conscious, Smart, Needs Proof, Persuadable, Risk Averse, and “I‘ll get it later.” Every time a customer views a product page, adds an item to a cart, clicks through to the product features, scrolls or suddenly leaves a purchase point, they are painting a picture of who they are as a shopper. They are leaving a digital footprint.
Health insurers micro-segment customers not only on life stages but also on wellness and disease lifecycles. In the U.S., the PATH Institute has developed a model for predicting consumer healthcare attitudes and behaviors. PATH defines nine profiles of a healthcare consumer in the U.S. They are: Clinic Cynic, Avoider, Generic, Family Centered, Traditionalist, Loyalist, Ready User, Independently Healthy, and Naturalist (where they believe in natural medicines). When marketing to health insurance customers, one must consider wellness goals, needs, conditions and stages of illness, medical prognosis, and treatment-observed behaviors, as well as predicted future behaviors.
Focus on life stages
Life stages are not point-in-time events; they are small journeys in a customer’s life and can happen multiple times. There are five significant sources of data for life stages: banking behavior, driving and location stamps, social media presence with photos and context relevance, retail purchases, and mobile and telecom behavior. With the emergence of social media in the last two decades a lot has changed. Today it is possible to follow a customer’s journey through life by using their social media feed. People now regularly publicize when they get divorced, buy a pet, move, and change jobs.
One insurer has developed an offering which allows customers to express what they want to happen when they die, and to incorporate their “‘death wish” into their insurance plan. These wishes can be financial, social, practical, self-indulgent, or even bizarre, and form the basis of an insurance plan. This insurer offers inexpensive pay-as-you-go life insurance, which is easy and flexible. The policy can also be changed or cancelled in a matter of seconds.
More information is gathered online at the start of an application
With the emergence of digital life insurers, customers can now apply online, get approved, and be immediately covered within five minutes. Insurers are partnering with AI providers such as Lapetus Solutions, which created the new facial analytics technology. Mobile-enabled customers can take a selfie where highly accurate gender, age, and BMI can be assessed and from which an online quote, application, and purchase process can take place.
Health IQ partners with insurers to use information obtained from an individual’s answers to their online quiz. The proprietary quiz data identifies customers who lead healthy lives and offers them discounted life insurance. Receiving a passing score on the Health IQ online quiz indicates health literacy and proves current fitness levels.
More frequent touchpoints during the insurance journey
Today and in the future, a relationship with a customer is vital both at point of sale and over the customer’s life time. The insurer must take a more holistic view of the customer. An active dialogue with the customer is necessary all the way along the customer’s journey. Customer desire for a more personalized offering when buying both life and health insurance is a trend that will continue to grow. Customers also value simplicity and a seamless buying experience. Atidot offers an easy-to-use SaaS predictive analytics platform which enables life insurers to use data to find touchpoints, where existing policyholder data, combined with open source information, can build a complete picture of the policyholder and predict their behavior, allowing carriers to offer the best possible service and strategy.
Channel variety and preference
A wide variety of channels offer flexibility in making choices, ensuring customer engagement and easy communication throughout all life stages. All channels, both traditional and digital, must be well-developed in order to offer a continuous experience. Insurers are making use of their data science resources and technical capabilities to reach and tailor messages to customers through a variety of channels. Customers expect to move seamlessly between these channels for both sales and claims processes. Due to the complex nature of some insurance products, meeting a customer’s need for advice and some level of personal interaction remains an important component of channel strategy.
An insurer in India offers a “phygital” experience consisting of a virtual reality platform which ‘transports’ the customer into an insurance expert’s office where they can talk across the table. Another India insurer has introduced personalized experiences for its customers across multiple marketing channels. It uses as an AI prediction algorithm, ‘Ramanujan,’ devised by Vizury, an AI-driven omnichannel marketing platform. It is a set of algorithms that helps brands infuse AI into customer segmentation and the customer journey. The insurer can now predict the channels a customer is most likely to respond to, and target those channels.
The demand for a more personalized approach when considering an insurance plan has led insurers to offer experiences tailored to ‘personas.’ A buyer persona is a composite representation of customer types based upon existing client profiles, preferred prospect profiles, and market research. Personas, among other things, help customers quickly establish their insurance needs by allowing them to identify with a persona type. There is considerable variation in the type of experience valued by different customer segments. According to Accenture’s Global Survey, there are four personas that characterize banking and insurance customers: Pioneers, Pragmatists, Skeptics, and Traditionalists. Pioneers are young, tech-savvy risk takers who trust their institutions. Pragmatists are evenly distributed across age and demographics, are channel-agnostic, and trusting of their providers. Skeptics want to use new channels but are tech-wary and dissatisfied with their current experience. Traditionalists are in the 55-plus age group, are tech avoiders, value human interaction, and are losing trust with their current providers.
The Wharton School has also defined six personas based on financial institution customers. They are segmented along the two axes of trust in sharing data and digital capability. The six personas are Analogues, Wannabes, Mainstreamers, Paranoids, Chameleons, and Digital Nomads. Insurers can create their own digital personas based on three core dimensions: customers’ level of trust, their digital proficiency, and the breadth and depth of their relationship with the insurer.
A life insurer in South Africa has created a series of videos called the Patrick Chapters. We follow Patrick as he goes through the following life stages Early earners, Adulting, Mid lifer, Empty nester and Retiree. At each stage Patrick takes a reality check quiz to ensure he remains on track with his life goals.
Building loyalty - insurance ecosystems
Today customers expect a much higher standard of customer service than in the past. Insurers will have to get used to the fact that customers will rate their products and services online just as they do their hotel and entertainment experiences. Products will have to be simpler and more transparent.
Customers are looking for value as well as more personalized and better offerings, and they are willing to share their data if it leads to the kinds of products they want. The product must also meet their specific needs and be presented on their preferred channel. An omnichannel experience that allows consumers to switch seamlessly between physical and digital channels is something insurers will have to consider.
Insurers need to go beyond insurance and build an ecosystem of interconnected services to attract customers and build loyalty. Such an ecosystem allows users to fulfill a variety of needs in one integrated experience. For health insurers, it could be a one-stop shop to address core health insurance products and personal well-being. Vitality UK, for instance, promotes and rewards healthy living by offering discounts for preventative exams and screenings, fitness club membership, health food, active travel warnings, and wearables. Building an ecosystem is a vital part of becoming an adaptive, living business that responds to changing customer needs and behaviors.
Stay tuned for future releases of our quarterly newsletter to see where the next innovations will take us.