How to Use the Nudges in Your Insurance Business

A few simple nudges can save hundreds of millions for the insurance industry, what might you be able to accomplish at your company. As benny and the dektek team learned, almost all their interventions worked, but to different degrees. If they would have stopped when they found one that worked, it might have meant the difference of a hundred million pounds or more. And i'm so excited to reveal that this insurance story, along with more tips for how to use the insights from it, is featured in my brand new book, what your customer wants and can't tell you. The book will officially be released on may eleventh, 20 21, but you can order your copy right now

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Today I get the honor of introducing you to Dr. Benny Cheung, a director of DecTech. You may remember that company’s name as Dr. Henry Stott, a cofounder, joined me on the show in episode 130 to discuss some of their other work.

This conversation digs deeper on a specific project that Benny worked on to reduce opportunistic insurance fraud. You’ll get to learn all about it during the episode and I promise it is fascinating to learn how some simple nudges can help reduce a problem of, essentially, little white lies that were costing the UK insurance industry a billion pounds each year.

We also get to learn a little about Benny and the research he did studying creatures that may seem very different from humans, but whose behavior we can still learn quite a bit from. He completed a Ph.D. and a two-year postdoctoral research fellowship in the field of behavioural science at the University of Cambridge before joining Dectech. During his academic career, he was involved in commercial projects in the clinical research and biotechnology industries. His areas of expertise include retail, eCommerce, financial services, utilities, telecommunication, and advertising.

Show Notes:

[00:40] Today I get the honor of introducing you to Dr. Benny Cheung, a director of Dectech.
[03:11] Benny shares his background and how he got involved in behavioral science. He started in behavioral genomics.
[03:44] Benny joined Dectech in 2005 to apply techniques and technology in behavioral science in a commercial backdrop supporting clients to understand their consumers better. Now the mission at DecTech is to provide the tools that will allow their clients to make more accurate and cost-effective predictions about their consumer’s behavior.
[05:08] A lot of behavior we can trace back to genetics, so you inherit a lot of behavioral traits.
[05:35] Nowadays his focus is more on the commercial backdrop and consumer purchasing commercial decision making.
[06:32] Benny shares about a study he did with worms in 1999 about genetics and how intricately genetics is related to the behavioral outcome.
[07:55] In that study, feeding behavior came down to a single gene. While not all behaviors are that simple, genetics plays a very important role in behavior. Your environment also has a very important role to play.
[09:48] Benny shares about his opportunistic insurance fraud project. They focused on everyday consumers that were giving into temptations of being less than honest at a specific point during their customer life cycle.
[11:29] The project was for the Insurance Fraud Bureau in the UK.
[12:42] Opportunistic fraud is different from high-profile organized fraud because it is often undetected. That is a challenge for the industry.
[12:54] The IFB came to them and asked them to come up with a solution to fight this kind of opportunistic fraud.
[15:27] This type of fraud is typically not planned, instead it is something people choose to do at the moment.
[16:14] Nudges only work well in certain situations. You really can only nudge someone if they are sitting on the fence.
[18:47] Coming up with the intervention messages was the first task. The second task was to come up with a testing paradigm where they could test their effectiveness.
[20:41] The five principles they picked to focus their intervention methods were: norming(herding), consistency, priming, framing, and reciprocity.
[23:10] They prompted in a covert way as customers verified they were not a robot.
[26:04] When you have to focus on the words like in the captcha it has a different impact on the brain.
[26:24] For these interventions to be usable they can’t leave a negative perception or imprint.
[27:11] They tested using a randomized controlled trial. Recreating the realism of applying for motor insurance online was a very important aspect.
[29:24] By comparing peoples’ responses collectively to those contentious questions in the different conditions they could see how effective the interventions were in swaying dishonesty.
[30:13] On average the interventions were able to sway 36% of the dishonesty. An intervention in the norming category was proven most effective and had a 55% impact of dishonesty swaying.
[31:21] Of the 18 interventions they tested only one of them didn’t really work. All of them have shown some positive impact in swaying dishonesty.
[33:47] In behavioral science it is paramount to test. The Holy Grail of testing is doing a real-life trial, but they can be costly and risky to do, and hard to scale.
[36:01] It is beneficial to get out of your way and test things when it is a safe space so you can see what amazing things can come out of it.
[38:53] None of the interventions left a negative impact on the outcome of perceptions.
[40:58] Melina’s closing reflections.
[41:39] In the case of opportunistic fraud, it was important to know that this is often a decision made in the moment instead of premeditated or otherwise planned. This is why the nudges were effective: they appeared right at the moment where someone was teetering on the edge. Where does that exist in your business and what are some nudges you could implement to help encourage behavior for your customers or employees?
[42:52] Grab Melina’s brand new book, What Your Customer Wants (And Can’t Tell You), which is now on presale!

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