Many years ago, a preacher from a small village found himself asking a rather peculiar question: How do you get a horse down the stairs?
The preacher had made a wager with a friend that he could get a horse to climb up the stairs of his house. The horse made it up quite easily and the bet was won.
But that is when the problems began – once at the top of the stairs, the horse would not come back down. Neither carrot nor stick made a difference: the animal was spooked and refused to budge. With an increasingly panicked horse stuck upstairs in his house, what could the preacher do?
After much trial and error, the preacher persuaded the horse back down by partially covering its eyes, thus blocking out the strange new environment. This calmed the animal and it could take steps downwards gingerly, until reaching the safety of solid ground. This, supposedly, is how horse blinkers were first invented… and they have been widely used ever since.
The story itself may be apocryphal – it is commonly referenced but poorly sourced. However, the lesson of the story is uncontested: blinkers reduce an animal’s peripheral vision, often to as little as 30 degrees, keeping it focused on the path ahead. In this way, it can move forward, untroubled by any potential distractions.
I am not sharing this story in case you ever find yourself having made an unwise bet involving animals. I am doing so because I believe it has important parallels for understanding human behavior and communication – parallels which can be applied to our industry.
Just like a horse, human attention, and therefore behavior, is heavily influenced by our surroundings. Most of our actions are triggered by environmental cues which we process unconsciously. It is estimated that the human brain receives around 11,000,000 bits of information per second through all our senses, but the conscious brain can only process about 40 bits per second. This means we are continually being influenced in ways of which we are not consciously aware.
For example, experiments have shown that a person’s honest and truthful disclosure can be influenced by environmental factors, such as light lux levels. In one experiment, participants were asked to score their own math tests. They would receive a cash payment for each right answer. Participants, it turned out, were about 37% less likely to be dishonest in their scoring when completing the exercise in a well-lit room as opposed to a dimly lit room. There are good and honest people but there also good and honest contexts, and too often we ignore the influence of these.
Understanding the true drivers of human behavior is essential if we are to capitalize on opportunities offered in a new era of personalized persuasion – opportunities that will enable us to reduce underinsurance, help our customers reduce their risk exposure, and deliver better risk results for our businesses. Developments in personalized communications and real-time decision prompts are enabling simple solutions that, when carefully applied, can deliver very meaningful results.
“Personalization” has become a buzzword throughout retail financial services, not just insurance. Research from Accenture suggests that 80% of insurance customers are looking for more personalized offers, policies, and recommendations from their auto, home, or life insurance providers.
In reinsurance, the focus of personalization has often been on the use of demographic and behavioral data to improve underwriting. This has already had clear benefits: for example, using credit-based scores to predict mortality or lapse likelihood provides a more sophisticated picture of each applicant’s risk profile. Such personalized propositions are demonstrably favored by customers: the same Accenture research shows that 77% are willing to provide usage and behavior data in exchange for lower premiums, quicker claims settlement, and insurance coverage recommendations.
To date, however, less attention has been paid to another very important aspect of personalization: direct communications with customers. The importance of this should not be overlooked, because persuasive communication is core to the success of the insurance industry – from selling protection to the need for honest declarations and encouragement of risk-reducing behavior.
Personalization involves tailoring communications to both the individual making a decision and the context in which their decision is made. It therefore applies to both the content and the timing of communications.Read More +