How to Boost Insurance Sales with Neuroscience

Imagine this: you're sitting down with a client, ready to guide them through their insurance choices. But instead of feeling confident, you notice they're struggling to keep up with all the information you're throwing their way or they just seem out right uninterested. Sound familiar?

Here's the thing: as an insurance agent, your goal is to empower your clients, not overwhelm them. But sometimes, in your eagerness to help, you end up bombarding them with too much info, like trying to fill a cup until it overflows.

Part of this response is due to the fact that people vary in their ability to absorb large quantities of information at once. But, even if they could understand every policy option thrown at them, there’s an underlying premise agents in many fields take for granted: that humans make rational decisions.

It may seem obvious, but we homo sapiens are not the hyper-rational decision makers many of us like to think we are. If this were the case, getting each person the policies that fit them best would be easy. 

What Are Cognitive Biases?

Unfortunately, we have all these emotions and faulty shortcuts that can get us in trouble when it comes to decision making. Enter cognitive biases.

Over the past 70 years, psychologists have described a number of cognitive biases—patterns of flawed thinking that affect our everyday choices, from what grabs our attention to how we vote.

Think of it this way: just as therapists help patients recognize the thinking traps they may be falling into, insurance agents like you can help clients understand their own mental hiccups that may prevent them from getting the coverage they need. By shedding light on these biases, you can help clients see the bigger picture when it comes to risks and why they might hesitate with certain policies or financial decisions. 

So, let's zero in on four key cognitive biases that significantly influence how clients perceive insurance: Normalcy Bias, the Gambler’s Fallacy, Inattentional Blindness, and the Zero Risk Bias. Understanding these biases empowers you to steer your clients towards smarter coverage decisions while fostering trust and cultivating long-lasting relationships.

Sticking to the Familiar: Normalcy Bias

Thanks to cartoons, many people believe that ostriches actually bury their heads in the sand when in danger. This is, of course, false. (I mean, have you seen an ostrich? Those things are basically the velociraptors from Jurassic Park…) But there IS another animal notorious for this behavior: humans. 

Known by cognitive psychologists as the Normalcy Bias, an extension of Willful Blindness, the ‘ostrich effect’ describes the motivated reasoning we do as a result of our deep-seated desire for life to just chug along as usual, without any nasty surprises. We seek out evidence that everything will be okay, and we avoid, ignore, or outright deny evidence to the contrary. 

Take for example, one of my friend’s and his beat-up car. He's been driving that clunker for ages, disguising the ominous sounds coming from under the hood by cranking the radio. His logic? "If I can't hear it, it's all good." 

Psychologists who study disaster preparedness often cite the normalcy bias as a significant deterrent to effective response. Those currently examining the response to Covid also note the role the Normalcy Bias played in delaying effective responses by both governments and individuals. 

It's this sort of 'hear no evil, see no evil' mindset that keeps folks from facing reality, whether it's about their health, their home, or their family's safety.

As insurance agents, you’re like reality checkers in a world of wishful thinking. By shining a light on this tendency to bury our heads in the sand, you can help your clients spot potential risks and nudge them toward the coverage they need to protect what matters most.

Flipping the Odds: Gambler’s Fallacy

Ever played the coin toss game? You know, ‘heads or tails?’ At first, it's pretty even-steven. But what happens when 'heads' wins three times in a row? Or five? Or even ten?

You'd think folks would start rooting for 'heads' like it's the MVP, right? But here's the kicker: most of the time, they actually switch sides, chanting 'tails, it's gotta be tails next!' It's what we call the Gambler's Fallacy—seeing the future as somehow influenced by past events, even when it's just a good ol' coin toss.

Think about it: if someone's had a rough patch in the past, they might feel like they've already bit that bullet once, so lightning won't strike twice. But that’s not always the case. Breaking a leg or a storm damaging a roof doesn’t reduce the probability of breaking another bone or experiencing more storm damage in the future.

Another way this can harm clients or prospects is through loss aversion. Consider a client who has been paying premiums for a whole life insurance policy for years, even though it no longer aligns with their needs. Despite recognizing this mismatch, they hesitate to let go of the policy because they fear losing out on the investment they've already made.

However, sticking with a policy that doesn't suit their current situation may actually cost them more in the long run. Although switching policies involves various considerations, the potential benefits of finding a better fit may outweigh the perceived loss of starting anew.

It’s crucial to steer your clients away from these mental traps. By debunking the Gambler's Fallacy and nudging clients toward the right coverages based on their needs, you’re not just protecting their wallets—we're giving them peace of mind.

Gorillas in Plain Sight: Inattentional Blindness

You are probably familiar with the psychology experiment in which participants were instructed to watch a video closely as players wearing different-colored jerseys pass the ball around. Sounds straightforward, doesn't it? Most people find it easy, confidently counting the passes like seasoned pros.

But here's the twist: after the video asks for the count on passes, it hits viewers with a curveball. "Did you see the gorilla?" Wait, what gorilla?

Turns out, in the original experiment, more than half of the participants were so laser-focused on counting passes that they completely missed a person in a gorilla suit waltzing into the scene, thumping his chest, and then sauntering off. Talk about a classic case of "inattention blindness" or "change blindness."

And get this—in a follow-up study, even 80% of radiologists missed a gorilla chilling in a lung X-ray. Yes, you read that correctly.

This now-famous experiment created by Daniel Simons and Christpher Chabris, shows how we can get so tunnel-visioned on a task that we're blind to what's right in front of us. It's like we're wearing blinders, unable to spot changes outside our little bubble. The more experienced we are, the more susceptible we become to this mind trick.

So why does this matter? Well, our tendency to miss the obvious can have serious consequences, whether we're driving or inspecting our homes. Focus on A reduces the likelihood that we will see B. Laser focus on getting the right car insurance might mean our clients don’t see a need for disability coverage. 

It's a reminder to stay humble and vigilant because nobody's immune to a little slip-up now and then. By highlighting risks your clients might overlook, you can ensure they have the right coverage when they need it most.

Prioritizing Safety: Zero Risk Bias

It's widely known that most people prioritize safety and security above all else. In fact, they often strive for zero risk whenever feasible, as shown by the research of Daniel Kahneman and Amos Tversky, Nobel Prize winners in Economics. They illustrated that individuals tend to perceive an option that lowers risk from 5% to 0% as more favorable than one that lowers risk from 50% to 25%, even though the latter offers a fivefold greater reduction overall.

Now, let's apply this to the world of insurance. It's a double-edged sword, really.

On one hand, there are individuals who invest in expensive policies like permanent life insurance because they believe it offers necessary additional benefits. They pay extra  for peace of mind, believing they are fully protected.

However, sometimes they end up spending money on features they don't actually need. They become so fixated on policy details like the cash value and supplementary add-ons that they overlook more suitable options for protecting their family.

As insurance professionals, it's crucial to be transparent with your clients. While it may seem counterintuitive to steer them away from a particular policy, honesty ultimately leads to significant rewards. Building trust and fostering long-term relationships are paramount. After all, would you want to continue working with someone who misled you?

Now, consider the other side of the coin: there are individuals who view insurance as a risky bet. They question why they should spend money on something they might never need. To them, the real danger lies in wasting money on coverage they deem unnecessary.

Check this out: a study from 2021 found that in poorer areas of India, families who didn't face any major health crises often skipped renewing their health insurance. They saw it as throwing money down the drain. But here's the thing: when the unexpected did happen, they were left high and dry, without a financial safety net.

When it comes to insurance, striking a balance between protection and affordability is key. This is where your expertise as an insurance professional becomes vital, ensuring that you provide your clients with the right policies tailored to their needs and budget.

Empowering Clients Through Understanding Cognitive Biases

While cognitive biases may sound like complex brain science, they're actually quite practical for insurance professionals. Think of them as mental shortcuts our brains take to make quick decisions, usually pretty handy ones. But sometimes, these shortcuts steer us in the wrong direction, leading to less-than-ideal choices.

Recognizing that our brains aren't always spot-on is the first step to making smarter decisions, especially when it comes to safeguarding our future selves.

Understanding these biases isn't just for the brainy folks; it's incredibly useful for the insurance business. When you grasp how brains work, you can guide your clients toward insurance plans that truly fit them and their families like a glove.

Sure, it might take a bit more time, but investing in understanding cognitive biases and explaining their effects to clients pays off in the long run. Clients feel more empowered in their insurance decisions, laying the groundwork for a lasting client-agent relationship.