Talking all things behavioural economics in Las Vegas
My prize for winning the 2016 ALUCA TurksLegal Scholarship was attendance at the 2016 LIMRA/LOMA Life Insurance Conference in Las Vegas in April.
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One of the highlights of the programme for me was the presentation of the outcomes of a LIMRA research study into Behavioural Economics and Insurance Ownership. Rates of life insurance coverage are declining in the USA, and rather than the well-trodden route of tweaking sales agent scripts, LIMRA's study examined the drivers to encourage people to actually shop for life insurance. Common themes of resistance to buying life insurance were identified as 'it's too expensive' 'it's a hassle to purchase' or 'it's not for me' and alternate marketing messages were designed, using insights from behavioural economics, to improve these negative perceptions. I will share some of the results based on one particular behavioural bias.
Loss Aversion: Humans will act more strongly to avoid a loss than to earn a win of an equal amount
The number one reason the surveyed population stated for not having life insurance was that they 'can't afford it.' The survey included a measurement of response time, and half of respondents answered this item very quickly, indicating it as a particularly strongly held belief. A marketing message version to tap into loss aversion urged customers to 'act now to secure lower premiums and better terms than if you wait'. This message increased purchasing behaviour in customer groups who were already primed to be interested in purchasing (married, have children), but had no effect on customers who saw little need for life insurance (single, no children, some group cover already).
Interestingly, a similar loss aversion message with a more negative approach e.g. 'act now or you will find yourself paying high premiums or to be uninsurable' was viewed as not compelling and having little impact on the perception of cost by all customer segments.
This is a great illustration of why a test and learn approach is essential in Behavioural Economics- what works with one customer segment or demographic may not necessarily work with others, and some messages that may seem to make sense and be persuasive may lead to the opposite customer reaction and behaviour to that expected and desired.
Three further highlights of the conference:
- The fountains in front of the Bellagio perform every 30 minutes, choreographed to a changing soundtrack, which is also broadcast on a designated TV channel in your hotel room.
- One speaker at the conference distributed mocked up fake book covers titled "How to sell life insurance to people on airplanes". She said if you slip it over the real book you are reading, no one will bother you on the flight!
- The presentation that generated the biggest buzz of the week was from S. Jay Olshansky from the University of Illinios. He provided fascinating examples of the genetic, evolutionary and biological contributors to ageing and chronic diseases as well as illustrations of why the human body is not optimally designed for longevity. He concluded with a fun example of the Chronos tool that offers a prediction of your lifespan by analysing a photo of your face along with some basic health and family information; and then can proceed to offer you an insurance plan quote based on the results. Despite my grandmother living to 100, the tool analysed my face to say I can only expect to live to 82.7 years old, with an 83% chance of making 65! You too can try the demo version at http://bit.do/4sightdemo.