Pricing through personalization: Key takeaways from Robert Nendorf at Insurance Innovators USA 2022

Robert Nendorf, Director of Data Science at Arity, took the stage at 2022’s Insurance Innovators USA to discuss personalization and pricing in the auto insurance industry. Here are his key takeaways.

The need for personalized pricing is growing

While many equate the term “personalization” solely with an enhanced customer experience, individualized pricing can be one of the most important factors to accomplish that. For consumers, pricing has always been a predominant factor when it comes to buying auto insurance. And with the current state of the economy, customers are making apples-to-apples comparisons:

• How much is my monthly payment?
• How much is my deductible?
• What discounts are available to me?

Personalized pricing drives value for the customer

Robert – known as Rob to family, friends, and colleagues – said, “People don’t want to be seen as a cohort. They want to be seen as who they are and how good of a driver they actually are.” Demonstrating to customers that their auto insurance will be priced based on how they perform on the road instead of demographic generalizations of risk is one of the best ways to stand out as an insurer. Driving behavior data is an actual measure of risk, versus proxies of risk such as credit score, age, or gender.

According to Accenture’s 2021 Insurance Consumer Study, 69% of consumers would willingly share data on their driving habits in exchange for lower prices from their insurers.

Driving behavior data is an actual measure of risk, versus proxies of risk such as credit score, age, or gender.

Mobility data drives value for insurers…at time of quote

According to Rob, using driving data to personalize pricing is important because it allows insurers to determine the precise risk of each of their customers. Instead of enrolling a customer in a telematics program and waiting to determine their driving risk level during a six-month monitoring period, insurers will already have that information upfront. This allows insurers to price accurately at time of quote. A telematics-based approach to pricing is more fair, more equitable, and is based on actual driving habits and behavior, improving the insurer’s brand perceptions.

Customers need a balance of personalization and privacy

During the panel, Rob emphasized the importance of providing transparency in how users’ data is being used: “People want respectful personalization. They want that custom user experience that really speaks to them – that makes you feel like this company cares about you. And they want you to do it without impacting their privacy.”

Insurers should focus on using telematics to get better at delivering customer value through personalization–without compromising their personal privacy. So, how do insurers accomplish a balance between personalization and privacy? Rob recommends providing clear privacy policies and giving customers the opportunity to opt in for extra personalization.

Ready to learn more about how telematics can improve auto insurers’ customer experience? Watch Rob’s Insurance Innovators USA Panel discussion above, or contact us for more information.