Every little helps
As it pushes into finance, Tesco’s Clubcard gives it a competitive edge
SOME young drivers get tanked up and wrap their cars round lampposts; others drive carefully, and sober. Insurers would love to collect more background information on the personal habits of those buying motor, household and life policies, but do not want to put off potential customers with intrusive questionnaires. So they end up pooling groups of people by such basic factors as age, occupation and postcode, which means that some low-risk customers are lumped in with risky ones and subsidize their cover.
If only insurers could stealthily gather a few titbits about their potential policyholders’ consumption habits. Such hints might help them more accurately target those customers least likely to make claims, and attract them with better rates. As it happens, Tesco routinely collects such information from holders of its Clubcard loyalty card. As it bulks up in financial services, that may give Britain’s largest supermarket chain an edge over traditional insurers.
To give an obvious example, it would be worth offering pet insurance to someone who has started buying kitty-litter. Buying lots of booze does not make you a drunk-driver, but someone who buys little or none seems less likely to be one. Buyers of window locks are likely to be more security-conscious, and so on.
Tesco declined to discuss how it uses Clubcard data for this article. But a group of students at the London School of Economics carried out a class project in which they made several applications for Tesco car insurance. When they gave the number of an unused Clubcard it earned a 1% discount. When they gave the same personal details but quoted the numbers of heavily used Clubcards, the discounts varied greatly, reaching 18%. To paraphrase Tesco’s slogan, it seems that every little scrap of information helps.