The vast array of information used by insurance firms to find the most profitable customers – and hit them with higher rates – is laid bare by today’s Money Mail investigation.
Insurers and comparison websites refuse to talk publicly in detail about how they use customer data to set premiums, claiming it is commercially sensitive.
But a report, prepared for insurance industry representatives by PricewaterhouseCoopers, gives the clearest insight yet into tactics used to exploit loyal customers.
London-based firm PricewaterhouseCoopers, which brought in £3.6billion in revenues last year, advises some of the country’s biggest insurance companies on how to use customer data to boost their profits
The accountancy firm, which brought in £3.6billion in revenues last year, advises some of the country’s biggest insurance companies on how to use customer data to boost their profits.
Paul Delbridge, a senior manager at the firm, wrote that firms examine whether customers are ‘time poor and cash rich’.
He said insurers were analysing customers’ credit scores and how they behaved when they got in touch with the firm to inform their views on whether the customer was likely to switch if they were hit by higher premiums.
He wrote: ‘Determining whether a customer is time poor and cash rich has historically involved considering the customer’s credit score and any financial health, social-economic or demographic information that is available.
‘Other indicators include the time of day when interactions with the customer occur as a proxy for their time poverty.’
Industry insiders said insurers penalise busy families who contact them late at night after work or who break off filling in a form to receive a quote, as this shows they are less likely to have the time to shop round.
They warn that vast amounts of information are ‘being captured’, including details of customers who regularly switch their bank account, credit card or energy tariffs.
Companies that hold this kind of data include price comparison sites. Under data protection rules they are not allowed to pass on someone’s details without permission.
However, City regulators have warned that customers frequently do not know when they are giving permission for their details to be shared.
Insurers use this information to form a judgment about how active the person is with their finances, which indicates how likely they are to shop around for their home or car cover every year.
Customers thought to be highly engaged with their finances are unlikely to accept a large increase in their premiums
Customers thought to be highly engaged with their finances are unlikely to accept a large increase in their premiums.
By contrast, those who rarely switch or who do not have time to look elsewhere could be charged far more.
Price comparison sites insist they abide by the rules.
Another source of valuable data is shopping loyalty cards, as well as information from mobile phone companies.
It is thought that this information allows insurers to work out which customers are better off or willing to accept being charged a higher premium.
Describing how it works in his blog, Mr Delbridge said: ‘Customers who purchase premium products at supermarkets or who purchase additional mobile phone data over and above the levels offered by their tariffs might be deemed to at least be willing to pay for a better offering.’