The shift from opt in to opt out organ donation in Wales last week is the latest high profile example of behavioural economics in action. This change will save lives as more people will follow the norm and so remain opted in rather than opting out.
More everyday real life examples of how behavioural economics is impacting on healthcare and saving lives in the UK today can be seen in this article.
Given words have the power to save lives then it seems reasonable to assume that they can help people in the insurance buying process in general and in underwriting specifically.
There are rightly questions asked about how and where these techniques can be used. The FCA is aware of this, and their 2013 paper on the issue is an excellent overview of the sort of considerations that need to be faced.
There are grey areas about how appropriate it is to use behavioural economics to make a product more appealing to a customer. Any suggestion that techniques have been used to influence a customer’s choice can and should be very closely examined. This needs to be considered when deciding on colours, wordings and positioning of much of the marketing and new business process.
When it comes to underwriting we have a much clearer boundary for what is “good”. It is a key part of an underwriter’s job to ask good questions. A good question gets a good answer. A good answer is one that is honest and accurate and affects the underwriting decision. It is no-one’s interests for a customer to give an answer that is inaccurate. We should use all means to get that good answer in the most effective way possible.
A failure to do this means people are paying the wrong amount. In extreme situations it may mean that the cover people think they have does not pay out if misrepresentation has occurred. So we need to ask more good questions, and less bad ones.
A bad question could be grammatically correct and include the relevant conditions but it may make the applicant feel:
– Abnormal – being the “other” in a drop down list
– Bored – asking a 25 year old 25 questions about angina, arthritis, blood pressure etc means they’re likely to switch off by the time a more relevant question for them about risk taking behaviour appears
– Confused – “have you been to a doctor other than your own?” – do they mean someone else in the practice?
– Defensive – “have you taken any illegal drugs?” – I better say no!
– Equivocal – needing to interpret the question – have you taken any medicine in the last 2 years? – they can’t mean stuff for colds and headaches can they?
I suspect I could complete the A-Z of bad questions but will stop there for now in the interests of your time!
This emerging science requires theories to be tested in real life situations to discover the most effective ways to get effective answers. This is beginning to happen in a focused way and should lead to improved processes for those who embrace this to help their customers. It requires people and systems that are willing and able to try different things and react to the findings quickly.
And if you’re still thinking it all sounds too difficult… You may have seen a news story this summer about Leicestershire police not investigating burglaries at odd numbered houses. This shows how one institution is prepared to trial the impact of change in a sensitive area in a big environment. If the police can do this then we must be able to try asking different questions to people in a real life environment. You could start with surnames that start with different initials, people that apply on different days of the week etc. Only through these trials will we find better ways to improve our processes and the customer experience.
Media / Blogs
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