Hyper-personalization and financial well-being are hot topics in today’s business world. The question for many is “how do I build an organization to get to the beyond?” One of the distinctive ways that this is being leveraged in insurance is through the delivery of tailored nudges that offer an incentive for safer and healthier behaviors, such as driving more carefully or exercising more often.
However, this approach presents challenges, which may explain the relatively low adoption rate. There is a thin line between hyper-personal and over personal; getting it wrong could create significant damage for a carrier. In fact, according to a recent Gartner study, 38% of customers will stop doing business with a brand if they have an uncanny or negative perception of how their data is being used.
Storytelling outweighs data-driven approaches
To understand how to deliver hyper-personalized experiences and behavioral nudges that people perceive as engaging, insurance companies will need to take a step back. Studies show that data can be difficult for individuals to digest, resulting in low levels of behavioral change. Greater success is achieved through stories; yet, most nudges are primarily data-driven.
It is easy to understand how storytelling can bring about behavioral change. In a parallel reality, our instinct to protect and argue for a given position is weakened, leaving us to consider different outcomes and possibilities. This means that insurers need to develop behavioral nudges that will enable them to evolve from pure data-driven techniques to storytelling experiences. While companies are making progress in this area, they can further improve by:
- Reframing their messages on positive and common ground to get individuals more involved
- Telling stories to expand the mind, as opposed to nudging techniques that are often prescriptive in nature
- Offering multiple, slightly different engagement options to policyholders with similar goals
- Leveraging biological and social data to personalize a message based on mental state, stress level and personal preference
The role of artificial intelligence
Delivering on hyper-personalized experiences and the potential for smarter underwriting and claims will require advanced automation and artificial intelligence (AI). A key challenge to consider when implementing AI is the potential to incorporate biases. For example, a recent study found that an AI algorithm used by parole authorities in the US to predict the likelihood of criminals reoffending resulted in racial biases and profiling. For insurers, this could mean developing flawed pricing models, as well as ineffective behavioral nudges.
Given insurers often interact with customers after a loss event, AI that isn’t developed to take emotional states into consideration and that perpetrate stereotypes in its interaction could create considerable downward risk to any carrier considering its use. To tackle these challenges, insurers need to be strategic about smart data collection and data sampling techniques. They also need to explore how AI can be leveraged to deliver emotional support.
AI also provides an opportunity to rethink existing business models and how to create value for all parties involved. For instance, knowing how the data is being used and how it creates opportunities to reward individuals for their data contribution is vital. This could drive a more sustainable and fairer world, while creating a new sense of engagement and loyalty to customers and policyholders.
Shift from linear to exponential changes
Another significant challenge is that technological change is becoming exponential, and once this change hits, business models rapidly shift toward lean, liquid and networked ecosystems.
This is what we are experiencing with AI and many other technologies, but ― while the promises are here ― they are not yet delivering as expected. Insurers, who are resistant to change, might be tempted to take a “fast follower” strategy to continuously improve existing processes, rather than focus on creating new offerings that make the old obsolete.
Timing is everything. Insurance leaders need to continuously apply knowledge to be ready for that inflection moment. They need to ask: Can I envision a future where this is not true? What needs to be true for this technology to really explode? How do I start planning today to ready my organization for that future?