Applicant disclosure is a basic need for accurate and fair life insurance underwriting. In recent years, companies have increased their use of behavioral science research and are incorporating its techniques into many parts of the application process to improve disclosure rates.
However, it is similarly vital that applicants have a smooth and pleasant experience when completing these forms. Behavioral techniques to improve questions often include breaking the “ask” into smaller and more digestible items. This might appear to make the question longer, although it may also make each item simpler to respond to, making the process simpler and more effective at capturing disclosures overall.
In this article, we discuss RGA’s latest behavioral science research, which assessed the trade-offs between optimizing questions for alcohol and smoking disclosure, applicants’ experience of answering the questions, and what the results might teach about designing simple and effective applications.
Research has shown that even small adjustments to certain questions on life insurance applications, informed by behavioral science techniques, can lead to better disclosure rates by mitigating certain psychological sources of misdisclosure.
The techniques can include:
- Reframing binary “yes or no” questions to conceal the underlying underwriting rule, making purposeful misdisclosure more difficult
- Cueing applicants’ memory of their behaviors by providing greater specificity in questions, for example, by asking separate questions about the various alcoholic drink types
- Reducing cognitive load (i.e., the mental effort required to answer a question) by breaking down general questions requiring complex thought into smaller pieces
- Reducing the possibility of an applicant experiencing stigma, (i.e., feelings of shame or embarrassment) around sensitive questions by providing response scales and wordings that subtly normalize the target behaviors
At first glance, these techniques might appear to make the specific questions longer, with more elements for an applicant to consider. Questions revised with these techniques might also take up more visual space. This raises concerns for some insurers about applicant experience: does it make an application more time-consuming and/or challenging to complete?
Recent RGA behavioral science research into certain aspects of application question design is determining that these concerns may be unwarranted. Despite the questions appearing to be longer, they are turning out to be cognitively and emotionally easier for applicants to provide responses to them.
Designing Simple Underwriting Questions
When it comes to question design, simplicity is generally the goal. Often, insurers assume that simplicity comes from removing information or items in a question so that it appears shorter on a page. However, a psychological view suggests that achieving optimal simplicity comes from understanding how applicants process the information needed to produce a cogent and informative answer. Hence, there may be little trade-off overall between improved disclosures and applicant experience when using questions that allow people to process smaller amounts of information in one go but appear longer. Indeed, there may even be positive impacts.
We tested this hypothesis in a study using a randomized control trial format. The study utilized a pool of 8,000 participants from the U.S., Canada, South Africa, and Australia in nationally representative samples (proportionally represented the demographic distributions of each country). Different versions of application questions were presented to the participants as part of a survey that simulated an insurance application. Subjective user experience, amount of time spent on questions, and amount of information disclosed per question format was measured. We then used regression models to explore what impact the different question types had on the amount of information provided in responses while keeping other variables, such as the devices participants used and their demographics, constant.
Here is what we found for questions on smoking and alcohol use.
We tested enhanced versions of an insurance application smoking question alongside the typical binary-style question (“Have you smoked or used nicotine products in the last two years? Yes/No”).
The enhanced versions asked: “When was the last time you smoked or used nicotine products?” and provided four, six, or eight response options. Each option is related to a different usage time period. For example, the question with four response options let the respondent choose among “in the last 12 months,” “between 12 months and 2 years ago,” “2 or more years ago”, and “never.” Those with six or eight response options let the applicant provide even greater specificity.
Providing these options both hides the underwriting rule and subtly destigmatizes smoking, making it more difficult for applicants to purposefully misdisclose and psychologically easier for them to be honest.
The enhanced versions of the questions with six or eight response options, but not the four-option version, led to significantly increased disclosure rates. Each of the two enhanced versions with more response options yielded an additional three percentage points of respondents disclosing they had smoked within the past two years compared to the typical binary question. (The four-option version also did not show an increase in disclosure.)
The key concern for insurers is whether adding more options might make for a lengthier response process. We found, however, that the difference was very small. The typical binary question took an average of one and a half seconds less to answer than the four-option version, two seconds less than the six-option enhanced version, and two and a half seconds less than the eight-option version (Figure 1).
Interestingly, those who disclosed smoking activities took slightly longer to respond to questions around smoking than those who did not, but only when answering the enhanced questions. This, perhaps, suggests that the question stimulated additional thought before producing a response. The multiple-option response technique is purposefully used in question design to help users engage mindfully. Interestingly, non-disclosers did not seem to have this issue.
This is a benefit for the applicant and the insurer, as the small increase in response time when using the enhanced questions yielded increased smoking disclosures, while response time for non-smokers was not affected.
We then explored how study participants experienced the actual process of answering the smoking question. We found no meaningful differences among the question types in terms of how easy or quick the question was to answer or how confident the participants felt about the accuracy of their responses. In fact, the enhanced questions were found to improve participants’ recall of the last time they smoked.
Overall, the tradeoffs between increased disclosure rates and applicant experience favor using behavioral science-enhanced questions: the increased response time is negligible and only present for those disclosing smoking, while the only noticeable difference in respondent perceptions of answering the enhanced questions is positive.