By now, insurers know they can use behavioral economics (BE) approaches to make improvements to different areas of their business, improving processes in a simple, cost-effective way.

Last year some members of our U.S. team received BE Certification from the University of Chicago Booth School of Business. Here they’ve each gathered one favorite takeaway from their BE experiences. See if one of these tips might work for you:

Joe Curtin – Nudging

One of my favorite concepts in Behavioral Economics is nudging – both discussing it and putting it into practice. A nudge subtly influences people’s choices, steering them toward specific decisions. What fascinates me is how even minor design changes can have a profound impact on decision-making. In short, small adjustments can lead to big results.

Take online shopping, for example. Have you ever browsed for clothing items and noticed a message such as “Only one left in stock”? A simple tweak like displaying inventory levels can create urgency, influencing shoppers’ decisions. It’s easy to implement yet highly effective.

Now, consider the potential of nudging in the life insurance industry. What small changes to a medical history questionnaire could encourage greater disclosure? What subtle prompts could boost sales or increase offer placement?

Gen Re would encourage carriers to ask themselves these questions. You might just be one minor adjustment away to seeing significant improvement in these areas.

Ruth Potter – Anchoring

One of my favorite concepts in Behavioral Economics is anchoring. Psychology studies tell us that people rely heavily on the first piece of information they receive. In BE, this is called “anchoring”. In our business, anchoring can have a significant impact on quoted premiums. When a customer is provided with a quote, that price becomes a point of reference, by which all future quotes are then compared. This impacts decisions regarding which policy to purchase and can affect the perceived value of a policy when compared to the original quote.

The way choices are presented to us matters a great deal. By presenting the customer with the best option first, anchoring can be used to positively impact the customer. However, there are downfalls with anchoring because it can be used to manipulate the customer. We often see this in retail – when an item is shown to have an initial high price to make lower sale prices seem more desirable.

We can reduce the risk of this type of manipulation by providing transparent pricing and encouraging our customers to get quotes from multiple insurers.

Heidi Alpren – Choice Overload

When I think of key BE concepts, the first that comes to mind is “Choice Overload”. This happens when an individual is presented with too much information all at once and becomes overwhelmed, leading to difficulty in making a decision. For example, selecting an entrée from a restaurant menu with many pages of options can be overwhelming, compared to when you are presented with a short list of “today’s specials.”

Choice overload shows up so often in our everyday lives that to me, it becomes a constant reminder (or “nudge”, as Joe already shared) of how we can improve in our work lives too.

When thinking about ways to leverage this in the insurance industry, using the mantra “less is more” can be helpful:

• For marketing messages, is your wording clear and to the point? When introducing several concepts at once, consider breaking up the messaging into smaller segments or “bite size” notes to lessen overload.
• Presentations can benefit from a review too. Instead of using many long, bulleted points on a slide, use visual boundaries to separate information into smaller chunks to help viewers digest the information. Pictures can also help to get your point across – and eliminate the need for long explanations. And, when in doubt, two slides with clear messaging are better than one long slide.
• Application questions can create overload. Gen Re’s BE research has shown that showing a long list of conditions on a single page makes it harder for applicants to prime memories. The same goes for using small groups of conditions. Using a scale/grid pattern with conditions clearly displayed in rows and diagnosis timelines in columns has been proven to increase disclosure and reduce overload.
• Project management can be clarified. Make sure your action plan is clear and understandable – break down key project elements into more manageable segments and provide defined timelines for action items. Do you have several requests coming in at all once? Streamlining by choosing one day of the week to submit project requests may help.

By keeping an eye out for how choice overload impacts your life each day, it will be easier to see how the “less is more” approach can help in so many ways.

Nudging, Anchoring, and Choice Overload are all applicable in our day-to-day work and apply in many situations beyond the suggestions shared here.

Want to learn more? Clients can get free BE training via Gen Re’s BE Academy – read more and sign up your team if you haven’t already. Or, reach out to us for other ways Gen Re can help you.