Why Customer Segmentation and Product Differentiation are Important in Insurance?

Why Customer Segmentation and Product Differentiation are Important in Insurance?

Why Customer Segmentation and Product Differentiation are Important in Insurance?

Share This News

The Indian insurance landscape is undergoing a seismic change and is rapidly evolving. Be it underwriting, claims settlement, operations, or any other element of business, the industry is witnessing a paradigm shift. Today, we will discuss one such important aspect of the insurance business that is experiencing phenomenal change: product innovation. The industry predominantly operated under the premise of a one-size-fits-all model. Traditional insurance offerings were typically designed to cater to a broad customer base with standardized policies. However, this trend is changing as insurers increasingly recognize the need to address the specific requirements of customers and tailor products accordingly. Let’s take a closer look at why customer segmentation and product differentiation in insurance are important.

With a vast population of over 140 crore, India has a diverse demography spanning different age groups, income brackets, occupations, and lifestyles. To address the requirements of such a diverse group, it is paramount for insurers to create different customer segments based on demographics, socio-economic status, and risk profiles. Product segmentation enables companies to offer more relevant offerings to their customers, and the insurance industry is no exception. Also, with the ‘Use and File’ regime and de-notification of tariffs, the regulator is rightly directing the industry towards innovation and personalization. Such measures not only lead to more variation in products but also encourage service innovation, which ultimately benefits customers. These improvements in offerings are backed by cutting-edge technologies, where insurers leverage advanced data analytics tools to better understand risks, customer needs, claims propensity, and behaviour.

You cannot craft an industry-defining service or product in a vacuum; this requires continuous research, customer, and partner interactions, & staying abreast with market and social dynamics. At Bajaj Allianz General Insurance, our focus has always been on simplifying the lives of customers, this enables us to stay ahead of the curve. Let me explain with a recent example. Over the last few years, India has seen a significant rise in affluent or High-Net-Worth Individuals (HNIs). We realized that the needs of these individuals differ from those of other customers, and we thought, why not design something that resonates better with this segment? With that in mind, we came up with Privé, a unique customer experience program crafted for those who demand the finest. To become a part of the Privé club, customers can choose from a wide range of insurance products spread across product lines like cyber, motor, home, personal accident, and health insurance. Additionally, Privé provides an unmatched service experience at every touchpoint!  

Segmentation also requires understanding the demographic shifts in the country you operate in. For instance, various studies suggest that the elderly population in India is increasing; by 2050, over 20% of Indians will be over the age of 60. In response to this shift, we launched the ‘Respect Senior Care Rider,’ a product that covers Concierge Services, Home Care services, Psychological Assistance, and more. The most notable feature is a smartwatch with fall detection technology, which monitors body vitals and, importantly, sends an alert to the service provider when a fall is detected, ensuring emergency support is provided to the insured. This product showcases how partnering with other players in the value chain allows insurers to address some of the biggest worries of customers and their loved ones. Moving to another example, we realized that there are many customers, who want absolute convenience and for them time is currency. This led us to design V-Pay, which comes with various built-in features like waiver of deductible, and electrical & mechanical breakdown (apart from accidental damages), it also offers the insured the flexibility to report multiple losses/damages in one go (during a policy period), and much more. This no-question-asked cover eliminates the need to pick from a wide array of add-on covers. These are just a few examples of how segmentation empowers insurers to sharpen their offerings.

In today’s hyper-competitive and dynamic insurance market, customer segmentation and service differentiation not only help insurers stay ahead of the curve but also allow them to serve customers better. After all, the insurance business is all about addressing the worries of customers. The more focused and relevant your products are, the more value you will be able to add to the lives of your customers.

(Article Authored By Tapan Singhel, MD & CEO, Bajaj Allianz General Insurance)