Top 7 Cognitive Biases Of Insurance Buying Customers

Cognitive biases can kill insurance and when people are stubborn, it is harder to convince them. Identifying these biases opens a new world of possibilities.

When it comes to insurance, the risk is the biggest part of the game. While most of the risk lies with the insurance companies, many people have cognitive biases that sway their decision when it comes t purchasing insurance. Whenever someone is given a call, they are already on the defensive due to the fact they will need to part with their funds.

However, there are a couple of cognitive biases that people have when it comes to buying insurance and once these are understood, it is much easier to break the barrier to the customer and help them understand that you have the best intentions. Here are 7 of the most common cognitive biases people have about buying insurance. 

• Availability Heuristic

One of the main things that influence our decisions is memories. While the mind is a wonderful thing and we tend to forget all the bad things in life, it takes time. When making a decision, the first thing that influences these decisions is memories. The stronger a memory, the stronger the emotions will be. This means that one bad encounter with insurance can lead to a cognitive bias towards all insurance. 

• Amnesia

Natural disasters and things that happen during life will play a major role in our lives. However, this is only for a short while. If you look back at the Hurricane disasters in the United States, you will find that during these times, the request for insurance spiked. However, we tend to forget about these disasters if we are not constantly reminded, which might lure people into a false sense of security to skip having insurance. 

Having life and disability insurance can be affordable and help people to avoid having to lose everything if an accident happens. 

• Myopia

Most people have a fear of the unknown and the future and myopia is something that happens to everyone. You might be stressed about the future, but we always procrastinate and worry about it at a different time. Since people think that events from the past will not repeat themselves, they often reject insurance and live in a false sense of security.

• Excessive Overconfidence

While this is not as prevalent with women as it is with men, most men have a superhero complex and they believe they can do anything. This false sense of confidence from people who have never been in these situations is one of the biases. For instance, People might reject car insurance and believe they are the best drivers and accidents will not happen.

• Over Optimistic

If you have ever met someone that has plenty of optimism, it might be attractive. However, many people are biased towards insurance and believe it is only a fraud trying to steal their money. People are confident they will have enough money to replace anything that might break when something happens. However, people rarely budget and even though people might think they are budgeting for the worst-case scenario, it can never be predicted. This is why many people will lose a lot in life based on being over-optimistic.

• Ignoring Black Swans

If you close your eyes and imagine a swan, you will most like to see a white swan. Many people take this mindset in life and they believe that bad swans do not exist. Until the Australian continent was discovered, many people only believed in white swans. However, black swans do happen and they tend to happen repeatedly. Many people prefer to believe that bad things only happen to other people and they can avoid it. 

• The Illusion Of Control

When something goes wrong in life, we often grasp at anything that seems solid, hoping to find stability. You might achieve something positive and feel like you have control over the situation. However, with countless events unfolding every second, it’s impossible to control every aspect of your surroundings. No matter how cautious you are, there’s always some level of risk. Insurance ensures that when something does go wrong, you have a safety net to protect you.

Wrap-Up

Cognitive biases can be frustrating to deal with and they might even manifest as beliefs in many people. While it can be hard to bargain with these people, it is often better to look at the situation from their perspective. People are more compliant and easier to influence once they feel understood and you have a little bit of rapport.

 

Author’s bio:

Hamna Amjad (Twitter: @HamnaAmjad)

is a blogger with features/mentions in Brit+ Co, Best Company, G2, and others. She writes on a variety of topics but is most passionate about health, diet, and technology. 

When she isn’t getting nagged by her husband or 2 kids, she spends time writing about or trying a new DIY project at her home.