Geodemographic segmentation in insurance paves way for better customer engagement

25 January 2021

In recent years, the advent of GDPR (General Data Protection Regulation) has caused many insurers to not only re-evaluate how they price and underwrite risk. It’s also led them to take another look at how to target and engage with customers while keeping the protection of their personal data a top priority.

While the United Kingdom has now left the European Union, GDPR has been retained in UK law, and both government and businesses remain committed to high standards of data protection.¹

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Since GDPR came into force in 2018, geodemographic segmentation has continued to gain traction as a viable alternative for businesses to identify groups that share similar characteristics for market analysis and decision-making.

In the context of personal lines insurance, geodemographic classifications can be used to gain a better understanding of the risk profile of different segments of the population, allowing insurers to assess risk more accurately and to optimise their marketing resources with more focused and relevant products and services.

Residential neighbourhoods will vary in terms of their demographic, environmental, lifestyle, and socio-economic characteristics, and yet this is not always accurately reflected in underwriting.

Insurers may carry certain assumptions around customers in inner cities, large towns, small towns, or rural areas, although geodemographic classifications can show that these assumptions are not always accurate. For example, rural areas are not always wealthier or less prone to theft.

While many geodemographic tools are available, none have been developed specifically with the insurance industry in mind, taking into consideration how insurance needs can differ depending on which postcode a potential customer is in.

Verisk’s Resonate provides geodemographic classifications for the Great Britain and Northern Ireland personal lines insurance market and can be used to help track insurance uptake trends across your client base for actuarial decision making, underwriting, product builds, and marketing offers. Risk assessments of customers can be generated based on their claim frequency and average claim value.

Resonate consists of many different geodemographic clusters that have then been grouped into 50 distinct neighbourhood types aggregated further into 11 lifestyle groups. The types of information used to create the groups include valuable data on overcrowding, county court judgement (CCJ) rates, education level, household size and tenure, means of travel, number of dependents, and relative affluence.

Through well-defined risk segmentation, Resonate can help you rate more accurately and ultimately identify areas where you can grow your book of business, help drive marketing strategy, and enhance your product development.

Using personal data in your business or other organisation, UK Government, < https://www.gov.uk/guidance/using-personal-data-in-your-business-or-other-organisation >, accessed 4th January, 2021