Leveraging data analytics in the assessment of the life insurance needs of retail banking customers in South Africa

Abstract

The aim of this study was to contribute to the existing body of evidence regarding the sale of life insurance through retail banks in South Africa. The first objective was to investigate the perceived accuracy of responses that individuals are likely to provide when asked questions pertinent to the assessment of the level of life insurance they may need. The second objective was to establish the perceived preference of individuals when presented with a binary choice between the option to engage with an authorised representative who asks open-ended questions to determine life insurance needs versus an indicative life insurance needs assessment, based on their interpretation of the information the customer shared with the retail bank over time. Evidence was collected by means of a self-administered questionnaire. Responses were assessed through both descriptive and inferential statistics using SPSS. The results of a one-sampled t-test showed a significant level of inaccurate responses to essential assessment questions regarding the customer’s assets, liabilities, income, expenses and dependants. A goodness-of-fit chi-squared test showed that, given a binary choice, respondents had a significant preference for an initial engagement based on open-ended questions versus an engagement based on information shared by the respondent with their retail bank over time. When comparing across demographic variables, a Mann-Whitney U test did not indicate significant differences between the accuracy responses from females and males. Similarly, there was no significant correlation between accuracy and income range. Whilst this study acknowledges the challenges faced in conducting the assessment of customer preferences in this regard. There is potential for further investigating how these perceived inaccuracies compare to actual existing customer data. There is also potential to research customer responses to the iv methods of engagement (initial engagements based on open-ended questions versus where the authorised representative uses information shared with their retail bank over time), based on results (i.e., the acceptance of the life insurance offer).