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Insurances : towards the end of the risk sharing principle ?

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There is one very important underlying principle of any insurance : risk sharing. Good drivers cover a part of the risk of bad drivers; people in good health pay for those who fall ill. Americans call this a “socialist” way of doing business. But until now insurances in Europe have always favored a group approach vs. an individualistic one.

The data revolution may be the end of this. Here’s why.

Customer data will enable user-centric approach

As we explained in an earlier post, insurances tend to harness technology to monitor driving style and adjust pricing in function of observed drivers’ behaviors. The data collected by car manufacturers will just enable to get one step beyond this and to gather an even more amazing amount of data. This is just one example in the field of car insurance.

Health insurances are no exception to this . Wearables are already collecting information that owners inadvertently make public, allowing insurances to adjust pricing. This is a rather serious ethical issue.

Better risk control will come at a cost for clients

The uncertainties of our “modern” Society put insurances under pressure. Climatic events cost billions a year and can’t be predicted anymore. Controlling risks has there become more instrumental than ever. The problem is that better risk predictions will result in insurances collecting always more data about the object or the person to insure. Our freedom is at risk, not even talking about the ethical issues those new data collection will bring with them.

From risk sharing to risk splitting

As a result, insurance companies will be able to use non-declarative data to tailor their offer and adjust risk premiums. Good drivers will stop paying for bad drivers (which may be ethical); healthy people will pay less than unhealthy people (which is less ethical). Is this the kind of Society you want to live in ?

We believe that people’s freedom is at risk and that data protection will become crucial in the years to come.

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Author: Pierre-Nicolas Schwab

Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)

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