Scot Wid nudges protection customers to stay

Sarah Davidson

May 15, 2015

The insurer confirmed that it has begun trialling some “nudge” behaviours on its retention book with a spokesman saying: “It is an area that we think can grow to benefit the customer.”

He added that the company would like to see increased use of behavioural economics techniques to encourage GPs and specialists to return evidence more quickly; honesty codes to give permission to disclose information at application stage; and “anchoring” to help gain context on need for full disclosure.

He said: “Data is used to help target the right propositions to the right customers. It is a growing area for us to focus on.”

Behavioural economics and the related field, behavioral finance, studies and then uses an understanding of the effects of psychological, social, cognitive, and emotional factors on the economic decisions of individuals and institutions.

It includes methods such as “nudge” which manipulates the use of language, for example, to encourage certain behaviours from customers.

LV= already employs behavioural economics techniques to shape the phrasing of questions on its protection application forms to assess whether a certain ordering of questions leads to better medical disclosures.

Lisa Byrne, head of underwriting at LV=, said: “Behavioural economics is an area that many protection providers are focusing on and is increasingly being used to improve customer outcomes and reduce pain points and delays in processing applications and claims.

“Ultimately the aim of this is to ensure that customers are able to benefit from their policy when they need it.”

Aviva’s chief underwriter Robert Morrison said they continually monitor claims data to identify how the firm can improve processes for customers, both at the application stage and in the event of a claim.

He added: “We aim to have clear application questions that don’t impose unreasonable expectations on customers.

“This means we are able to get people covered more quickly, as well as ensuring that questions are answered fully and accurately which in turn keeps declined claims to an absolute minimum.”

But Phil Jeynes, head of sales and marketing at UnderwriteMe, said focus on behavioural trends to help boost the claims payout rate was a bit of a misomer.

He said: “I don’t disagree with the idea of sharing more detail on claims which are turned down. I am sceptical that it would make much difference.”

Looking at the stats from around the industry, the overwhelming majority of claims are paid – 90% plus is the norm for critical illness and nearer 100% for life.

Jeynes added: “Declined claims fall broadly into two camps: a claim not meeting the policy conditions like claiming for a broken leg under CI or, more commonly, non-disclosure.

“The latter has been seen as a big problem in the past, with insurers gaining a reputation for turning down claims based on tenuous information about a client’s medical past. This simply isn’t the case anymore (the Ombudsman wouldn’t permit it for one thing) so you’re really talking about a tiny minority of blatant non-disclosures being given as examples to try and change behaviours.

“I think people desperate enough to lie on their applications are unlikely to be swayed by any clever marketing messages or behavioural nudges.”

Peter le Beau, managing director of Le Beau Visage, said the most relevant issue was “the need to confront the optimism bias whereby people never believe they will suffer the misfortunes others do”.

He added: “As far as feeding back experience into product design my feeling is that it is still being fed back anecdotally and that few insurers are using neural networks or big data formally in this direction.”

Alan Newman, a psychologist and former direction of the Finance IT Network, said: “Psychology in general – not just behavioural economics and nudge – should be used in designing products but with (low emotional quotient) actuaries and compliance being in the ascendant I don’t see that happening any time soon.

“The smart use of psychology is to promote the best fit between a consumer’s individual psychology and the product orservice. Think Amazon. Think Google. Think MINDSPACE.”

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