Behavioural Economics in Insurance – Does it work?

Behavioural economics can help insurers answer the larger questions behind human decision making in insurance.

Introduction

Behavioural economics is all about knowing what makes people tick and using that knowledge to make improvements. Behavioural economics taps into unconscious biases that influence everyday actions, and discovers which of them drives customer behaviour. Ultimately, behavioural economics can improve pain points and influence behaviour by applying simple changes capable of producing surprising results – through any decision making process, and in Swiss Re's Behavioural Research Unit's case studies, across the insurance value chain. This article explains the application of behavioural
economics in insurance, both through the theoretical framework as well as in some practical examples.

How can we use behavioural economics to help our customers?

According to behavioural science, people's decisions are not always fully rational and can often be influenced by context. So the only way to understand these unconscious drivers is to move away from surveys and focus groups and see how people react in the real world. It is important to employ a test-and-learn approach, to gain new insights into many of the behaviours that are most important in insurance – from opening letters and answering calls, to giving accurate information or accepting an offer.

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