I’m not a psychic by any means, but in June 2013, I made a prediction on this blog that behavioral economics would explode in the insurance industry. Now, two years later, it’s becoming a key method used by many insurers and brokers to enhance their understanding of clients.
Behavioral economics applies psychological insight to human behavior to determine what drives a person’s economic decision making. It explores why people sometimes make irrational decisions, and how their behavior doesn’t follow the predictions of traditional economic models. It may sound more like a college course than a business approach, but the important thing is that it works to help build a strong broker-client relationship.
We’re all human
Some have called it the latest industry trend. The truth is, behavioral economics is more than a trend that will burst onto the scene and then quickly die out. This is about human nature. Because whatever group we’re communicating with or marketing to—consumers, clients, business owners, employers, employees—the bottom line is we’re all human, and that affects our choices.
Human behavior and employee benefits
Let’s look at a few examples of how humans are human. These are general statements, and may not apply to everyone. But think about how these behavioral factors might affect your efforts to bring clients to a decision about employee benefits.
People tend to react to an emotional push.
People like being part of a club and knowing what others are doing.
People want reinforcement that they are making the right choices from people like them.
People like to follow a step-by-step process or, in some cases, even be told what to do.
People would prefer to keep doing something familiar rather than make a choice to do something new (even if it’s the right thing to do).
People want simple and people want quick. Too many choices—and too much information—can shut people down.
What can you do to help guide client decisions? You can make a conscious effort to operate according to the principles of behavioral economics—and it doesn’t have to be difficult. The principles can actually be rather intuitive, which means some who draw on them may not even know they’re doing so.
Put yourself in your clients’ shoes. Consider how you’d like to be communicated with, and then use these tips to better communicate with your clients.
1. Use authentic language — Connect with your clients. Steer clear of jargon, and be positive and transparent. Appeal to emotions, and remember that people want to do the right thing.
2. Keep it simple — Be clear and use easy-to-follow steps in verbal and written communications. Don’t complicate it with education or too much detail.
3. Personalize the solutions you offer — Through your communications and the solutions you recommend, make sure your clients feel as if you understand them. Help them feel like they are in a special club, but keep in mind that one size doesn’t fit all, and recommend options customized for each client.
4. Limit the number of choices you offer — It may seem like you should tout how many great options you can provide, but try to keep the options to no more than three. And be sure to tell them which one you recommend. When faced with too many choices, people are often unable to evaluate them all and may take no action at all.
5. Have a clear call to action — Spell out the next steps. Make sure the goals and objectives are attainable, and that the deadline gives enough time, but not so much that an action will be put off.
Simple communication simply works. It’s human nature to be drawn to what you understand. Communicate the way you’d want to be communicated with, and you’ll build stronger relationships and see better results.