At Gen Re, we often talk about ways to actively utilize Behavioral Economics (BE) approaches – how to put BE into action. Implementing these important tools can help insurers in many ways, from developing effective question designs for insurance applications, to improving website design and marketing. We’ve worked on many projects that utilized BE approaches.
Here are some ways you can bring BE to the forefront with small changes that can make a big difference.
Improve Your Applications
Over the years, we’ve helped many of our client companies to improve not only disclosure on their applications and Personal History Interview (PHI) scripts, but also overall application and PHI design.
It’s hard to believe that we’ve already completed over 50 initiatives using BE approaches to help the insurers we work with. There are many reasons companies put off making applications changes – salesforce pressure, cost, resource constraints, IT challenges, and filing challenges. All of these are certainly understandable. But it’s best to plan an annual review of your applications and ask the simple question: How can they be improved?
To proceed with improvements, companies will first need data to identify where to look. Some data may include which questions are amended most frequently, and why? Which questions take the most time to complete and why? And then they should also ask themselves, is that okay? Or, do we need to take another look at this?
Another suggestion is that insurers should also review which questions have the lowest “yes” answer rates. Again, it’s important to find out why this is happening and determine if the response rates are acceptable or if changes are needed.
Evaluate What Should Change
Insurers should look at where their claims are, whether claims are overly concentrated in certain medical or nonmedical areas. They need to determine whether that is related to question design, or perhaps due to questions that are missing from an application.
Also, work in conjunction with the Claims Department to find out whether the company has lost any litigation on contestable claims due to the way a question – or questions – are designed. If the answer is yes, the next step is to figure out what changes are needed.
Review Design, too
Implementing a BE based design to improve disclosure can result in evidence of insurability questions taking more time to complete. That leads companies to decide if increased disclosure and better mortality or morbidity experience are worth some extra time on application or PHI completion.
When companies go the re design route, we have usually been able to offset much, if not all, of the extra completion time through re design or elimination of other application sections.
Review Presentations and Website
Those familiar with Gen Re’s BE work will most likely think about application and Personal History Interview script design work that we have done so much of, but that’s just a sliver of the full scope. We’ve helped others improve their media presentations to sell to their clients. We really challenged their historical practices and deeply ingrained biases about the content of such presentations, and we were able to offer dramatic improvement.
BE approaches can also help with website design for client service functionality. This is fertile ground for improvement. One opportunity for client retention and engagement that many companies overlook is offering sites in a larger variety of languages.
We see English and sometimes Spanish, but rarely more languages than that. We have a diverse country with many clients whose primary language is not English. Insurers with websites that offer a broader array of languages may find it easier to attract and retain clients.
Use Nudging
Another BE concept most well-known is simplification related to nudging. Nudging is using positive reinforcement and indirect suggestions as ways to influence behavior and decision-making of individuals or groups. Simplification recognizes that complexity can be costly and potentially harmful.
Often our products and riders, forms, online instructions, application questions, and policy language are very complicated. Combining simplification with nudging can significantly improve outcomes for insurers across operational areas.