Data bias shrouds personalisation in insurance

By Emma Olsson | 19 August 2020

The insurance industry continues to face a crisis of trust while attempting to make advances in customer personalisation, according to market participants.

“We’ve got a lot of challenges ahead of us in insurance because of personalisation,” said Sam White, chief executive of Pukka Insure during an online MoneyNext Summit panel.

“The challenge that we’ve got is a lot of the methods that we use to rate customers at the moment are naturally probably pretty discriminative. And we all engage in it because we have to because we’re competing in a very competitive market and we can’t afford not to.”

Rapid advancements in personalisation have improved policies for customers by presenting them with customised products rather than simply selling them those with the most margin, White said. But the flipside to personalisation is undue bias based on historical data.

“With things like credit scoring and that sort of real detail that we can get down to from a postcode level analysis, we are going to run the risk of actually excluding large swaths of people who really do need the support,” said White.

“If I go back to the general intent of insurance in the first instance, which was that a large group of people will come together and put money in a pot on the basis that one of us may be vulnerable at some point in the future and need a helping hand, then the biggest danger for me with personalisation is that we completely – from an ideology basis – wipe out that purpose that we had behind the industry.

“I’m not saying it’s an easy one to solve and I’m not saying that we’ve solved it, but what I am trying to do is look for other ways that we can use technology that will help support the business be more effective in the future that potentially haven’t got such negative side effects.”

According to Amy Brettel, head of customer, UK claims at Zurich Insurance Company, issues concerning personalisation are widespread, reaching beyond just the insurance industry.

“I don’t think we can think of it as an insurance bubble. Insurance is so woven into the fabric of society,” she said on the panel.

With insurers currently facing a global backlash over business interruption claims, the industry is facing a battle of customer trust. UK insurers are currently awaiting a ruling following last month’s High Court test case, set to determine insurers’ liability for coronavirus business interruption claims.  

Panellist Adam Wickens, senior vice president at insurance risk management platform Marsh, believes human interaction is imperative to maintaining customer trust.

“Human interaction will always be required. Machine learning has got so far and that’s great, but you can’t program empathy,” he said.

“You can’t program for events that haven’t happened… I think technology can be used as a tool for good and it can be used as a tool for building and maintaining trust, but it itself cannot give trust. There has to be that human element. The human race is not ready to totally embrace 100 percent trust in machines at the moment, but it can be utilised to maintain that trust.”

 

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