April 16, 2019 By Rob Frank
Life and Health insurers in Australia and New
Zealand are ready to take their next big step in using Behavioural
Economics (BE) to improve loss duration.
BE is
about increasing interactions with customers and trying to encourage changes in
behaviour, attitude and belief – by giving the customer small nudges. Carriers
in the region have been quick to explore the potential offered by BE
techniques, particularly in relation to Income Protection (IP) insurance
claims, but the effort has yet to translate into tangible developments in
day-to-day claims management.
However,
the strategic application of BE to claims handlers’ use of digital technology
could change all that.
Today, IP
claims activity at most insurers revolves around the use of the telephone for
gathering information, building trust and establishing a rapport with the
claimant. It’s where motivational interviewing (MI) found its place in the
claims process. No longer was a claims specialist’s function restricted to
merely obtaining information. The ability to influence mindset, elicit
behavioural change and resolve ambivalence in a collaborative manner became a
focal point of the claims specialist’s role.
We
propose integrating BE with MI as a best practice embedded in claims
management, making BE complementary to MI but, at the same time, a standalone
component.
Simple
interactions that increase the number of touchpoints with the insured could be
a good place to start, establishing a partnership approach to restoring health
and a return to normal activity. And using technology in its simplest form to
“nudge” the insured toward changing attitudes and beliefs may be a good
amenable method.
SMS text
messaging is becoming a common form of communication between insurers and their
customers and with good reason. Surveys suggest that given the choice between
texting and talking, more people prefer to text, even over emails. This is
particularly true of millennials who indicate a strong preference for receiving
text messages from businesses - instead of phone calls, which they regard as
more intrusive.
Remember,
however, that text messaging should be used on a limited basis, at particular
stages during a claim, rather than as the default method of communication.
Therefore, the strength and benefit derived from strategic use of texting is
preserved and not lost by overuse. From a global perspective, standards of data
privacy regulations differ, so insurers should check their local laws before
using text messaging during the claims management process.
One
suggested point in time to employ text messaging is when the claims specialist
knows that the insured is due to attend a non-routine medical appointment, to
have tests or is having an operation. A short message wishing them good luck
and asking them to let the claims specialist know how the appointment went
would be appropriate. This message acts as a social cue, creating an
understanding that the claims specialist is concerned for, and thinking of, the
insured. Using the BE principles of pre-commitment and reciprocation, it also
presents an opportunity for a prompt update from the insured on the outcome of
the appointment.
A
milestone in the claimant’s progress could represent another opportunity to
send a short message to highlight and celebrate the milestone. For example,
this might relate to an improvement in his or her medical condition, the
reduction in symptoms, an increase in functional capability, the completion of
treatment or a rehabilitation programme, or the cessation or reduced use of
medication or assistive devices.
Yet
another idea is sending a message asking the claimant if he or she is aware of
the additional benefits within the policy and urging the insured to make
contact if he or she wishes to discuss things further. This avoids the insured
seeing the insurer as simply seeking to close claims or escape obligations
under the policy, which would create an adversarial situation where previously
the two entities enjoyed a positive relationship.
Harnessing
technology with BE is an alternative approach to both understanding and
influencing the drivers of customer behaviour. It adds emphasis to the factors
of expectation and belief, which form part of that behaviour.
We know
that many of our customers’ behaviours are driven by unconscious
decision-making processes that are not always rational; BE acknowledges and
addresses this issue, too. It therefore makes sense for insurers to use
behavioural economics principles to understand and solve problems that have
both a commercial and social impact.
The
customer base of the Australian and New Zealand life insurance industry seems
likely to be receptive to the BE-digital technology approach. Not only has the
region seen an increase in the number of older customers - who have an
appreciation for a more personal experience in communication - but it has also
experienced a rise in the number of tech-savvy clients, particularly
millennials - who are accustomed to interacting online and expect most
transactions to be high-quality digital experiences.
Digital
technologies offer significant opportunities for insurers in relation to both
groups. Incorporating digital solutions enables insurers to engage, support and
empower their customers during the claims process. In short, when BE is used
correctly, it can be a cost-effective tool for implementing positive change.
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