Insurance marketing and the dangers of manufactured vulnerability

Marketing is adopting the tools of big data and some of the practices that are emerging would, if used by insurers, expose them to significant ethical risk. In this post, I’m going to explore one of the more significant developments, relating to vulnerability.

Marketing combines knowledge of the consumer with the art of persuasion. As the consumer increasingly engages with markets through the internet, firms are designing that interface to garner ever increasing levels of information. Every aspect of that interaction is tracked, stored and interpreted, in order to build personal profiles which are then used to tailor subsequent interactions for ever more profitable purchase opportunities.

manufactured vulnerability

Impulsive Purchasing

While some of that tailoring can be orientated around the consumer’s strengths, more often than not the really profitable opportunities seek to exploit the consumer’s weaknesses: those times when they are more likely to purchase impulsively. So for example, with studies pointing to Monday mornings as the time of the week when women can feel least confident about their appearance, that is becoming the time when they are most likely to find adverts for beauty products appearing on their computer screens.

Firms are gathering data not only about how we might sometimes act impulsively, but also about the context around which those impulsive moments occur. Referred to as persuasion profiling, this allows firms to then pinpoint what triggers those impulsive moments and to then have products optimally priced, ready and waiting. So for example, one trigger might be how many decisions you make in a typical day – the firm then tracks the decisions you make through your smartphone and presents its product just at the point when you’re most likely to feel most worn down by all those decisions – that can be point when you start impulse buying. It could be flowers for a friend who you’ve sent ‘get well’ wishes to on social media.

Exponential Detriment

Now, you may ask: what’s wrong with all that? It’s just the digital equivalent of all that knowledge and persuasion I mentioned earlier. And there’s something to that argument, but equally, there’s a danger that it might disguise something more pernicious. What is different about digital is the extent to which that personalisation and persuasion can be systematised to a vast extent. OK, so what’s wrong with scale, you may ask. Nothing, except that if the interests and incentives of the buyer and seller are not aligned, then that scale means consumer detriment could reach levels never before experienced. Exploiting consumer irrationality on a digital scale can generate exponential detriment and so constitute a form of market failure.

Let’s bring this discussion round to insurance. It would be quite possible for an insurer to not only use knowledge of the sophistication and resources of each consumer to optimise the price they could be willing to pay, but they could, by adopting digital marketing techniques already in use on other sectors, also use knowledge of when we could be feeling at our most risk averse, to time their personalised advert on our computer screen. In other words, to exploit our feelings of vulnerability to increase click through and conversion rates.

Now that is somewhat of a ‘pot half empty’ view, but it is simply saying that as these practices are now happening in other sectors, we should expect to see them being at least considered by insurance marketing people and in all probability, piloted.

Manufacturing Vulnerability

Let’s now bring in what I’m calling ‘manufactured vulnerability’. Firms using the full range of today’s digital marketing tactics will not only know what makes each consumer feel most vulnerable to persuasion, and not only know the context that most often triggers those feelings of vulnerability, but also know how to purposefully manufacture that context in ways that tend to guarantee that moment of most profitable vulnerability.

Why should insurers go down this road? Well, we know that insurance tends to be a reluctant purchase for many consumers, hence the ‘sold, not bought’ adage. Sit that alongside consumers who feel vulnerable only on occasion, and the temptation could arise to ‘encourage’ that occasion rather than let it drift by untapped. The firm might then rationalise away the ethical questions this would raise by talking about how much worse off the consumer would be if they didn’t have this cover at a time when they needed to claim.

As Vance Packard, author of the influential ‘The Hidden Persuaders’, once wrote, marketing people are mostly decent, likable people who want to control us just a little bit. He then raised these pertinent questions:

“When you are manipulating, where do you stop? Who is to fix the point at which manipulative attempts become socially undesirable?”

Digital marketing considerable extends the scope of firms to manipulate consumers. The very nature of insurance points to particular care being needed not to over manipulate consumers, and in particular, not to manufacture vulnerability. How they might take steps to avoid slipping down this dangerous slope is something I’ll outline in the next post.

The post owes much to Ryan Calo‘s paper ‘Digital Market Manipulation‘ in the George Washington Law Review (August 2014)

About the Author Duncan Minty

Duncan is the founder of the Ethics and Insurance blog and the author of its many posts. He's a Chartered Insurance Practitioner, having worked 18 years in the UK market. As an adviser to many firms on ethics issues, as well as a regular conference speaker, he is one of the leading voices on ethics and insurance.

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