Behavioural economics: Predicting the irrational in a data-driven world
With COVID-19, most of us are probably washing our hands more vigorously and frequently than before. Who could have foreseen that a virus would lead to such behavioural change? Predicting human behaviour is at the core of behavioural science, which can help the re/insurance industry design better consumer journeys and create better products and services.
In our data-driven industry, behavioural science has had a hard time getting accepted as an effective tool to inform the decision-making process. I believe that is about to change as shown by our new university partnership that will incorporate behavioural economics into the customer experience in the insurance business.
Creating better customer experiences
Swiss Re Institute has partnered with the University of Toronto's Behavioural Economics in Action at Rotman (BEAR) to combine customer-centric design approaches with advanced digital analytics and our behavioural insights from our real-world tests.
One of the great things about behavioural science is that it’s practical, not abstract. In the last six years, we have conducted over 150 client trials which provided valuable insights into what drives effective consumer engagement. We also demonstrated the potential of interventions to prompt action and help consumers make better decisions, such as improving a client's claims processing times by more than 30% or another's honesty declarations in health application forms by nearly 20%. By integrating behavioural responses into the decision-making process in companies, we can support consumers in deciding which protection coverage is right for them.
The "take the stairs" challenge
It started small. In an ideation session, we brainstormed which behavioural principles could be applied to the insurance industry to improve the customer experience of our clients. We looked at the entire customer journey, from the evaluation process consumers go through when deciding which insurance products fit their needs to their claims experience.
The takeaway was to do real-life testing. The behavioural economics team decided to do a first experiment with colleagues. In one trial, the goal was to get employees to adopt a healthier lifestyle by encouraging people to take the stairs instead of the lift. As an incentive, each person who took the stairs was entered into a monthly lottery to win a gift voucher. To our surprise we saw a 36% increase in the number of stair journeys taken per month. We have since taken this "test and learn" approach to over 40 clients and completed more than 150 live trials with their insurance customers.
Filling the gap between data and consumer behaviour
In our industry, data science approaches using structured or unstructured data are the norm. But it has become clear that predictive approaches have gaps: they are backward looking and do not address the behaviour of consumers when newly designed interventions are presented to them in a different context than before. With a focus on digital transformation, the industry strives to have the best technical developments, but time and time again we see these fail. For example, people sign up for an app but never use it, or a company launches a new online product which sells poorly. This happens because, as an industry, we fail to build insurance products around real, and often, irrational humans.
We want to change this. BEAR will enable us to bring social science professionals and data scientists together to solve problems using insights from both disciplines. Finally, BEAR will bring the scientific rigour required to convince insurance executives to adopt this urgently needed interdisciplinary approach.
Join our journey
We are looking for insurers that want to partner up with us and BEAR. Do you want to get into the minds of your insurance customers and explore their decision-making process? Then join our journey and reach out to us.