Behavioral economics is an area that is making a substantial splash in many industries and insurance is no exception. Behavioral economist Matt Battersby examines how his discipline can play a role in reducing disclosure gaps.
When BE techniques are applied to insurance applications, small changes in the way that questions are designed and worded can lead to more thoughtful completion by the individual.
Slides from the presentation by Keith Brown have been posted at the the Actuaries' Club of the Southwest website.
This article from RGA considers how Behavioral Economics (BE) principles can be applied to the design of questions on insurance applications in order to elicit better responses
It seems one cannot attend a conference or pick up a trade magazine these days without finding some mention of behavioral economics (BE). From policy development and healthcare to retail and now, insurance, many industries are finding interest in this area of study. What is yet to be fully appreciated, though, is just how significantly BE can improve business outcomes for insurers.
People will alter their behavior if they see that it will bring them direct positive benefits. This contention reflects the essential principle of behavioral economics, which holds that consumers are open to influence and incentive, not just economic thoughts, when making buying choices.
In underwriting, the ability to obtain accurate health information from an applicant is paramount. The practice of asking people to report their health has been perfected over decades, yet under-reporting remains an issue in markets around the world. This leads us to consider: is it something about the way we ask the question?