How Insurers Can Solve the Challenge of Tradeoff Between Personalization and Data Privacy

Introduction

The insurance landscape is rapidly evolving, with the pandemic propelling the change to an entirely new level.

In the 2021 Insurance Consumer Report: A Guide to Growing Digital Demands for Insurance Providers, Levvel surveyed more than 1,000 insurance consumers for a deep dive into how consumer behavior across different demographics has evolved and how that shift creates trends shaping the future of insurance.

Personalization in the World of Insurance

Customers’ desire for personalized insurance relationships is one of the strongest themes that emerged from the 2021 report.

Millennials prefer tailored products and services, with 70% believing that insurance providers should adapt to customers’ needs through personalized offerings.

Integrating Personalization Into Web and Mobile Applications

The report reveals that the future of insurance is digital, with Millennials driving this trend. Seventy percent of respondents already have access to a web or mobile app, but the report also reveals that consumers believe existing apps don’t deliver the right functionalities.

For Millennials, the best-in-class web and mobile apps provide personalized insurance solutions with data-sharing options and features that measure behavioral habits.

Privacy is also a major concern. Consumers expect insurers to provide in-app security and data privacy options, such as facial recognition and electronic signature to enforce required security levels. Other preferred features include an in-app chat with easy access to experts, frequent status updates, and a highly transparent claims process.

Investing in Digital Transformation

To respond to the digital expectations of today’s consumers, insurance providers must build a strong technology foundation. It comes as no surprise that, despite the pandemic, technology investments show no sign of slowing down.

Insurers can jumpstart their tech initiatives by completing a modernization assessment outlined on page 43 of Levvel’s 2020 Legacy Modernization report. The assessment will help them evaluate their current technology maturity, so they can align it to their enterprise’s insurance solutions.

Achieving Personalization When Consumers Are Reluctant to Share Data

To offer personalized insurance products and services, insurance providers typically ask customers to share personal data from their wearable smart devices, car sensors, health histories, and existing data on former claims in order to better understand customer behavior.

However, while today’s insurance consumer demands personalization, they also place a premium on data privacy. Levvel’s research reveals that consumers are most protective of data collected from sensors, wearable smart devices, and social media. Less than 20% of respondents are willing to share behavioral data and lifestyle information from wearable technology or car sensors, even when it’s rewarded with perks such as discounts or more tailored policies.

In contrast, they are more willing to share basic demographics (age, gender, and nationality) and employment information—60% and around 40%, respectively.

Given this reluctance to share relevant, helpful customer data, insurance carriers can use the following three approaches to balance personalization and privacy:

1. Treating Data Anonymously to Protect Individual Privacy When customer data is anonymized, it contains no information that could reveal an individual’s identity. Insurance carriers can achieve this through de-identification, which strips the datasets of all information identifying an individual customer. They can also employ advanced analytics in which an algorithm creates a new, synthetic dataset composed of customer profiles, which is then subjected to statistical analysis.

2. Using Advanced Data Analytics to Infer Non-Disclosed Information When consumers don’t disclose certain data, analytics can help infer information from what they do share. The algorithm uses available data to identify a pattern of consumer behavior, which can then be used to draw conclusions about their undisclosed characteristics such as lifestyle, buying habits, social networks, and more.

3. Using Advanced Data Analytics to Predict Risks Advanced analytics can reveal the customer’s behavioral pattern to determine their risk profile, helping insurers develop a custom policy plan that better meets their customers’ needs. From physical location and social media activity to biometric data and real-time driving performance, anything can be used to enhance risk assessments and better inform the underwriting process.

Consumer Behavior Insights to Better Inform Decisions

One size fits all won’t cut it for today’s insurance consumers—consumers demand that the policies adapt to their current circumstances. But although consumers expect personalized products, fast service, and a seamless customer experience, they remain wary of sharing information beyond the basics, making it hard for insurers to respond to these competing forces.

Want to learn more about this growing tension and other consumer trends shaping insurance services in years to come? To prepare your business for what’s next in the insurance industry, read Levvel’s 2021 Insurance Consumer Report: A Guide to Growing Digital Demands for Insurance Providers.