How Using Behavioral Economics Can Improve Underwriting Results
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.
Insurers Turn to Behavioral Economics to Attract Fitter Customers
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.
Using Behavioral Economics in Underwriting
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?