A hurdle race.
That’s the image that comes to mind for insurance sales. Behavioural biases are the hurdles between you and the sale. That means sending the right signals throughout the sales process is crucial. It’s a subtle art.
The good news is that there are methods available to help.
Behavioural biases against insurance products
In practice, we see three main types of biases, as noted by consulting firm MSC, a specialist in social, economic and financial inclusion:
· Status quo bias
Individuals are more inclined to rely on existing risk control methods than to try new ones. For instance, to minimise the risk of breaking a smartphone, they’ll prefer a protective case over insurance – a preference that is further reinforced by recommendations from friends and family.
· Loss aversion bias
Here we have a bias that is well documented in behavioural economics: individuals tend to focus more on minor immediate losses than on significant future gains. This is why they may view an insurance product purchase as a financial loss to minimise.
· Mental accounting bias
This bias stems from the fact that consumers divide their purchases into different categories of regular expenses. And often, a ‘risk coverage’ category does not exist, or is occupied by a product other than insurance.
Additionally, insurance products are regarded as separate purchases that do not really fall into the traditional spending categories, which are:
‘Limited’ purchases: these are impulse buys, rooted in emotional drives, and are typically pleasure or entertainment purchases.
‘Extensive’ purchases: purchases considered over a long period of time, due to the considerable, long-term commitment involved. One example here would be real estate.
‘Routine’ purchases: everyday, functional purchases such as groceries.
What category do insurance products fall into? It’s hard to say. It all depends on the type of insurance and the context. Taking out an automotive insurance policy after a vehicle purchase may be considered ‘routine’, while purchasing a pet health insurance policy may hinge on emotion, like a ‘limited’ purchase. One thing is for sure: influencing the decision process means carefully sifting through different biases and objectives.
Seven factors that influence the purchase decision
What methods are available to manage these biases during the sales process? The SONCAS method is one popular approach. Inspired by Maslow’s hierarchy of needs, SONCAS is a French acronym that represents six factors: security, vanity, novelty, comfort, money and likeability. We prefer the REPERES method, which we consider better suited to the insurance sector.
As with SONCAS, ‘REPERES’ is an acronym for different factors:
R for Recognition
Or how to send your prospect the right signals to show you are treating them like a unique person. The key here is to tout the personalisation of your offer to a specific profile and context. This personalisation is vital to showing that your product is the right fit for the prospect’s objectives, thus jumping the hurdle of the status quo bias. Promote this level of personalisation at different points in the process, from product configuration (carefully tailored options) to the summary of the offer.
Accenture highlights this in a study published in early 2021: ‘More consumers (66%) would also share significant data for personalized services to prevent injury and loss – up 54% from two years ago.’
E for Ethics
This is a rising trend: consumers prefer products that demonstrate and defend ethics, whether in the form of concern for the environment or for the well-being of others. Highlighting contributions towards a cause, in line with more general commitments, is part of sending the right signals.
P for Price
This is where we jump the hurdle of loss aversion, through both transparency and education on the conditions. The objective: minimise the sense of short-term loss by stressing potential gains. Give preference to specific examples and figures, rather than empty words.
E for Emotion
While we do not want to abuse emotional tactics, depending on the product it is important to bring things back to lived experiences for the prospect (directly, or shared from friends or family). In cases of multiple similar offers, sometimes the feeling of emotional acknowledgement tips the scales.
R for Renewal
As with many sectors, insurance may create a kind of fatigue or apathy in prospects confronted with offers that are hard to tell apart. That’s why they respond well to sellers who put effort into renewal, either in the offer itself, or in the customer relationship. Providing a digital tool to take out policies contributes to this perception.
E for Efficiency
An insurance policy is not a pleasure purchase. That’s why it’s critical to ensure efficient life cycle management, with minimal friction – from taking out the policy, to subsequent supervision.
S for Safety
Due to its nature, insurance is a product that sells protection. To distinguish themselves, brokers must ask themselves how to add safety to... safety. In other words, how to offer the insured party peace of mind beyond contractual guarantees. One example here would be advertising partners or labels that inspire confidence.
How do you put the theory into practice? By applying these seven methods in every step of the sales process: whether you are catching attention and piquing interest, showing that your offer is unique and personalised, or finally closing. From landing page to email to phone call, every contact is an opportunity to overcome behavioural biases – and, ultimately, to influence the purchasing decision.