Personalization could create an actuarial/data science hybrid

Opinion: In order to personalize life insurance pricing, the lines between actuaries and data scientists will blur.

In an article I recently wrote for ITL, I outlined why I think ethical personalization is the way forward for life insurance. To clarify - when we say ethical, we mean that personalization isn’t the goal in and of itself. It doesn’t matter if coverage fits a customer like a glove if it doesn’t also serve their needs and respect their privacy.

This means that the level of personalization should benefit the business by helping them to win and retain happy customers, but also needs to genuinely benefit those customers by providing them with coverage that better suits them.

In short, personalization will help life insurers to develop stronger relationships with customers. Particularly new generations of customers who expect personalization.

In P&C, for example, this shift is already happening, with a number of car insurers providing usage based insurance, and companies like Trov allowing customers to increase or decrease coverage in real time, depending on their needs. It’s still early days for these examples, but in both cases the intentions are clear - personalized coverage to drive customer interest, satisfaction and loyalty.

Due to the nature of what we do at Montoux, I can’t help but consider this from an angle that’s not openly discussed in life insurance at the moment: If you can’t personalize your pricing, then you can’t personalize, not truly. And to make personalization possible within pricing, it makes sense for the shift to be largely data-driven.

There are already a lot of similarities between actuarial and data science, and as data science becomes more sophisticated and more ingrained in the pricing process, the roles of actuaries and data scientists are going to become more and more similar. It’s worth noting though, that actuarial is a profession, data science is not. A merging of the two is unlikely, but the lines are definitely going to become blurred.

At the very least, data science capabilities within actuarial teams will need to grow, and most insurers will need to largely transform their pricing processes to make that possible. We have some thoughts on what that transformation should look like, but regardless - Insurers wanting to move towards personalization need to consider what role actuarial will play in making that happen.

About the Author

Geoff Keast leads the North American business for Montoux. Montoux is the emerging leader in pricing transformation, helping clients to optimize their pricing and actuarial processes. Keast has global experience working in emerging markets and creating new solutions to solve complex problems.