International private medical insurance (IPMI) providers should take a “psycho-logical” approach when designing underwriting forms.
This is according to William Trump, founder and lead consultant at Unconventional Wisdom (pictured), who imparted three lessons to delegates about how they could up their game on behavioural science.
Trump explained these lessons include the fact that business tends to overestimate how interested clients will be in their products with insurers outsourcing the motivation to purchase to advisers, that both businesses and customers assume that customers know what they want and that businesses tend to oversimplify people.
Trump added that human beings are highly complex and their behaviour is complex specific, so firms should make sure that your idea is not just logical, but psycho-logical.
And this approach can extend to to the design of underwriting forms.
“A big conundrum is how do you nudge people to be truthful about their health?” he continued.
“If you’re being purely logical, you would assume your customers are logical.
“If they’ve decided to lie, they will lie because they want cheaper prices, so we’ll threaten them, we’ll say what happens if they don’t tell the truth and then we’ll just give them the form.
“It’s basically how the insurance industry has worked for a few decades.
“That’s logical isn’t it? You get people to fill in the form and you get them to declare at the end of the form that they gave truthful answers and make sense and are logical.”
Citing the example of smoker status, Trump urged delegates to resist asking binary questions.
“You’re either a smoker or you’re not. That’s what you’re interested in as an insurer. You ask the question in a binary way – perfectly logical.
“But it’s not psycho-logical. Because what happens when I see a binary smoker question – have you smoked in the last 12 months? Yes or no.
“My brain reads have you been good or bad? Do you want the price to go up or down?
“That’s how I read it, probably how our customers read it especially if it’s a grey area, maybe they smoke occasionally. Maybe they quit in the last six months but the definition is have you smoked in the last 12 months?
“They think I don’t want to tick yes because I will be lumping myself in with all the smokers. I’m out of that now.”
Consequently Trump and his team redesigned the form and included multiple choices,
“We were making it a bit less clear what the right and wrong answer is to these questions,” he continued.
“We now say which of these is your smoker status? I smoke every day. I smoke occasionally. I quit in the last year. I quit more than a year ago. I never smoked.
“And guess what? 4% more people now they say they smoke.
“Those people were always coming through. They were coming through the net as non smoker. We now know that they are indeed smokers according to our definition.
“And as you know smokers for example pay twice as much for their life insurance.”