What does the term 'commoditisation' refer to in insurance?

The term 'commoditisation' in insurance refers primarily to the standardization of insurance products. This process occurs when unique features and personalizations of insurance offerings diminish, leading products to become indistinguishable from one another in the eyes of consumers. As a result, insurers are often prompted to compete primarily on price, which can lead to lower pricing strategies.

When insurance products become commoditized, consumers often view them as interchangeable, and this perception can shift the focus from value-added features or personalized advice to merely obtaining the lowest price. Therefore, 'commoditisation' signifies a market dynamic where price is a more significant factor than personalized service or advice, aligning closely with the concept of low pricing without financial advice as the correct response.

The other options, such as offering personalized financial advice, bundling of insurance products, or standardization in general without a direct focus on pricing, do not encompass the full essence of how commoditisation works within the insurance sector. While related concepts, they do not accurately capture the implications of commoditisation which center predominantly around product interchangeability and price competition.