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Designing to Modify Behaviour - Part II: How Behavioural Economics influences buying Car Insurance Online.

10 minutes
Post by
Geri McGann - Principal Client Advisor, Europe

Before delving into this second instalment of our behavioural economics series, why not check out the first blog entry. Part I introduced the concept of ‘behavioural economics (BE)’, and how the employment of behavioural economic ‘heuristics’ are permeating into the digital environment. You can check it out here.

Barriers to online conversion

By 2024, it is estimated that two thirds of the total value of (UK) motor insurance premiums written will come from online sales. While many would like consumers to buy online, there are key barriers to conversion that need to be addressed. The perception is that the best deals are not online.

  • 25% won’t apply online as they have questions about plans or pricing.
  • 27% think they can get a better deal over the phone.

We also need to consider the purchase context. We buy car insurance because we have to - it’s the law. However when it comes to renewal, most find the process completely overwhelming.

Q. How do you feel when it comes to having to renew your car insurance? Global Reviews Motor Insurance Ireland Fruition study Q2 2021, Desktop and Mobile N=346.

The effectiveness of different interventions we use depends heavily on the context and setting so both are important when utilising BE heuristics.

Drivers when choosing a car insurance provider

To ensure effective interventions, we need to understand not just the context and setting but the motivations and behaviours of prospective consumers. Global Review’s global benchmark of the car insurance industry, conducted in Q4 2021, with over 1,500 prospective consumers, identified the key reasons when selecting a car insurance provider.

So, if brand factors like low-cost prices and trust are important when choosing a brand, how can BE heuristics be applied to nudge consumers to stay or go and choose a brand?

Aligning BE heuristics with Brand Factors

Social Proof and ‘Bandwagon Effect’: Highlighting the action you are trying to achieve by presenting it as a social norm.

As mentioned in Part I, consumers are more likely to do something if they think other people are doing it, we ‘hop on the bandwagon’, so to speak. We also look to others in times of uncertainty. The influence exerted by others on our behaviour can be expressed as being either normative or informational.

Informational influence, occurs in ambiguous situations where we are uncertain about how to behave and look to others for information or cues. Social proof, a type of informational influence, demonstrates to prospective customers that people who are just like them — or better yet, people who are just like their aspirational selves — have already made the choice of choosing/switching to that provider. Examples of social proof online include ratings, reviews and awards. Below is a snapshot from insurance brands across the US, Australia, and Ireland.

US brand Lemonade, a relatively newcomer to the insurance market, are utilising previous supplier data to demonstrate switching stats.
US brand Progressive utilise localisation information to exert peer influence and encourage progress
Australian brand Youi tailor the content on the entire page by location on a return visit.

Trust and reciprocity: building trust and communicating fairness will build better brand loyalty

People have an inherent desire to help those who have helped them in some way. When there’s no fairness, there’s no reciprocity. When both are absent, it often causes distrust. Distrust can be one emotion that springs to mind when we think about insurance providers (and explains why the vast majority of emotions we experience are negative. ‘Will they pay out if I may a claim?’, ‘But what’s the catch?). Let me give you a personal example:

Recently I took out a policy online with an Irish motor insurance provider which was revoked a week later. Apparently, I provided ‘incorrect’ data during the online application. Initially I had gotten a quote online. I was then contacted by the provider and asked if I would like to proceed with the application. I said no because the price wasn’t competitive. So the advisor took me through the application again, during which time he ‘advised’ me that I was OK to answer ‘No’ to a question (which I had initially answered ‘yes’).
Plot Twist: Turn out they were incorrect to tell me this. I then had to manually write them a letter and state that I wanted to cancel my insurance. Needless to say I was angry. Not only did I have to write a letter and pay for postage(have you seen the stamp rates lately?), I also had to go and look for insurance again! I swore never to get a quote from this provider again.
And that was that…or so I thought. ANOTHER plot twist: a few weeks later, I get a cheque in the post for €100! My stamp costs reimbursed to use another day. This is one example where aspects such as terminology and lack of clear product definitions can lead to mistrust, but it’s also an example of the Reciprocity principle.
The reciprocity principle highlight show positive actions bring about more positive actions, while negative actions bring about more negative actions. The Reciprocity Principle is amplified when a gift is tailored, significant, and unexpected even if it is not expensive. In my story, the insurance provider gave me a very generous gift, and in return, it did make me feel more positive towards them.

Reciprocity is used to:

  • Strengthen social bonds
  • Influence behaviour
  • Increase chance of a sale

In the digital context this can come in several forms, such as giving access to the service for free for a limited time (Spotify example) or giving a ‘try before you buy’ approach, enabling customers to interact with your products online.

Spotify entice new members to their subscription service by offering 3 months fee – combined with the limited time, which plays on the scarcity principle.
BonLook, a company that sells prescription eyeglasses and sunglasses online, have a great ‘virtual try on’ tool that works well and overcomes the barrier to buying glasses without trying them on.
BonLook also provide great content and tips on finding the right type of frames for your face shape.

Reciprocity feeds into trust; one of the top trends we are seeing gaining more traction in the market place. During the COVID-19 pandemic we saw how these brands factors gained in importance as consumers faced uncertainty and unprecedented circumstances. But they continue to be important given the increase in cyber-crime, the increased focus on GDPR and “the added sense of uncertainty as technology is constantly updating and reinventing itself”.

Let's Review

So, when it comes to applying BE heuristics when purchasing car insurance that tackle barriers to online conversion, consider the context, and the provider preference drivers, there are a number of ways in which this can be done including:

  • Capitalising on competitor data capture
  • Presenting ratings and reviews at key decision points
  • Localising social proof
  • Aligning testimonials to brand benefits
  • Providing relevant value-add content and tools
  • Utilising the ‘power of free’ and giving limited access to services
  • Minimising interaction costs by minimising reading, scrolling, typing etc.

These factors, coupled with the way in which prospective feel about the insurance product they are buying helps to ensure we maximise their effectiveness and ensure we choose the most appropriate pattern.

I’ve run out of time to look at price, the second highest driver of Final Preference so I’ll leave that for my next instalment (and you won't be waiting another year for the next entry!).


1. https://www.statista.com/statistics/1060667/share-of-online-and-offline-motor-insurance-premiums-written-united-kingdom/

2. Global Reviews Energy DSE Q4 2020, N=420

3. https://www.nngroup.com/articles/reciprocity-principle/

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