The complexity of information in the life insurance sales journey poses significant challenges to industry growth. Past attempts to simply the process often resulted in increasing this complexity. Behavioral science offers a solution.
This article, originally published in August 2024 edition of Reinsurance News from the Society of Actuaries庐, summarizes the results of an extensive SOA/69色情片 research report.
The complexity of information in life insurance sales journeys poses significant challenges to industry growth and inclusivity. There is general industry consensus that customer journeys need to be simplified, but experience shows that such simplification is challenging, with many previous attempts having actually increased complexity.
Behavioral science offers a solution. By integrating insights from psychology, economics, neuroscience, and sociology, behavioral science helps explain how individuals process information and make decisions. These insights can then be used to increase customer understanding of life insurance products and improve the customer journey. Although behavioral science applications have been common in aspects of life insurance such as underwriting, its potential use in product development is less explored. 69色情片鈥檚 behavioral science team aims to bridge this gap.
In collaboration with the Society of Actuaries Research Institute, 69色情片鈥檚 Behavioral Science team designed two experiments with U.S.-based participants to explore how behavioral science techniques can improve comprehension in life insurance purchasing journeys. The first experiment aimed to increase understanding of term life insurance via simulated online digital journeys. Building on the findings of the first, the second experiment investigated the effects of using both human and AI-generated videos. While focused on digital delivery of term life insurance, the relevance of tested techniques extends further, providing insights for improving information presentation for other insurance products and in non-digital formats.
Our exploration yielded several innovative approaches to boosting comprehension:
While our work identified opportunities for insurers to improve customer comprehension, additional work is needed to further narrow the comprehension gap.
Life insurance, once a mainstay of financial planning in American households, now faces significant challenges. The decline of life insurance ownership, which has dropped from 63% in 2011 to 51% in 2024,1 indicates a diminishing perception of its value despite its crucial role in providing financial security after a loved one鈥檚 death. The resulting protection gap particularly affects underrepresented demographics such as women, Hispanic and Black Americans, and millennials, who often remain underinsured.
The traditional method of selling life insurance through agents and advisors, who for generations played a key role in educating and instilling confidence in consumers, is declining.
This shift toward digital channels, although convenient, often lacks the information and decision-making support necessary for customers to fully appreciate and understand life insurance benefits. As the industry faces an aging workforce and high attrition rates among new agents, insurers must innovate their marketing and sales strategies, utilizing both digital and traditional methods to effectively communicate the value of life insurance, bridge the understanding gap, and secure the industry鈥檚 future.
Humans, constrained by finite cognitive resources, juggle myriad daily tasks that require varying degrees of mental effort. These cognitive resources, crucial for functions like attention and decision-making, are not limitless.2 Still, everyday tasks are managed routinely, often without conscious deliberation. This is what psychologists call "System 1," or fast thinking.3 This automatic, fast-paced processing mode handles straightforward decisions effortlessly. More complex decisions, such as those involving mathematical calculations or intricate trade-offs, activate "System 2," or slow thinking, a more deliberate and logical approach.
To make decisions efficiently, individuals often resort to mental shortcuts known as heuristics.4 For instance, a person might decide whether to purchase a product based on the emotional appeal of the marketing rather than logically weighing benefits against drawbacks. Moreover, decisions can be swayed by the ease with which instances come to mind, a phenomenon termed the availability heuristic. This heuristic explains why many people overestimate the likelihood of rare events like terrorist or shark attacks but underestimate common risks such as car accidents. The intricate details required to make informed decisions about purchasing life insurance typically prompt the use of heuristics, many of which may be beneficial but some that may not.
For insurers, recognizing the dual roles of System 1 and System 2 thinking can improve customer comprehension and decision-making processes.
By strategically designing customer journeys that align with these mental systems, insurers can enhance the accuracy of quick, intuitive judgments and encourage more thorough, logical reasoning when required. This dual approach not only clarifies the value proposition of insurance products but also empowers customers to make well-informed decisions.
Adopting and testing behavioral science techniques that have worked in other contexts can help improve comprehension of life insurance information. The approaches we examined fall into four distinct strategies: Making information easy to understand, timely, salient and relevant.
Simplifying language, as many U.S. states mandate through plain-language requirements, ensures content is accessible and clear. Techniques such as using colloquial terms rather than technical jargon make the information more relatable and understandable. Structuring text with methods such as chunking and bullet points and crafting emotionally resonant content can significantly improve customer engagement and comprehension.
Presenting crucial insurance concepts at the moments customers need to comprehend them can increase understanding.
Drawing attention to key pieces of information through vivid imagery or structured layouts, such as layered webpage content, can greatly increase customer comprehension.
The standard approach to digital transactions often involves speeding up sales processes by minimizing information presented. However, introducing "positive friction" into these journeys鈥攄eliberately slowing down interactions to require thoughtful engagement鈥攎ay enhance customer comprehension. This concept involves designing interactions that disrupt automatic, mindless processing and foster deeper reflection and understanding.5
An example of positive friction is the use of additional verification screens in digital banking. These screens help ensure accuracy in transactions by confirming details, thus reducing errors and enhancing customer confidence. Psychological research further supports the efficacy of positive friction, demonstrating that deeper engagement with information, especially when integrated with pre-existing knowledge, significantly improves memory retention.6
To make information easier to understand, personalizing the acquisition experience is key. Insurers can personalize the process by providing tools that allow users to control and interact with the information directly, such as calculators or interactive simulators, and adapt the journey to their personal context. Examples include the Australian Securities and Investment Commission's mortgage calculator and the Organisation for Economic Co-operation and Development鈥檚 pension simulator in Chile, which empower users to manipulate inputs and explore outcomes relevant to their situations. This strategic slowing and personalization of processes boost customers鈥 understanding by transforming their journey from passive receipt of information to active, meaningful participation.
In today鈥檚 digital age, how information is delivered and who delivers that information are increasingly significant. Video is proving to be a powerful engagement tool, particularly among younger generations. Platforms like TikTok have revolutionized information dissemination, with billions of active users turning to such platforms for news and even financial advice.7,8,9
The 鈥渕essenger effect鈥 refers to how the credibility and likability of the person delivering a message can influence its reception.10,11 For example, during the COVID-19 pandemic officials turned to trusted local figures as messengers to enhance public trust and combat vaccine hesitancy. However, insurers should note that reliance on a messenger鈥檚 credibility might sometimes 鈥渁udience distract鈥 from critical details of the information provided, posing challenges in financial comprehension.12,13
Emerging as a new frontier in message delivery are avatars created via AI, which offer cost-effectiveness, customization, and rapid production. These digital messengers, while not without challenges related to the 鈥渦ncanny valley鈥14 effect, are gaining traction in fields ranging from advertising to psychological therapy and have shown potential in enhancing engagement and trust among users.15,16
AI avatars can embody diverse representations that resonate with a broader audience, potentially reducing disparities in understanding and engagement among underrepresented groups.
As insurers continue to explore and refine approaches to improve the customer journey, understanding and leveraging these dynamics 鈥 video鈥檚 engagement power, the influence of the messenger, and the emerging role of AI avatars 鈥 may be crucial in effectively delivering life insurance information.
Diving into digital purchases, 69色情片鈥檚 Behavioral Science team developed experiments with U.S.-based participants to investigate ways to improve customer comprehension of term life insurance.
In this experiment, we simulated the term life insurance purchase process for 2,001 participants, aiming to optimize comprehension through various behavioral science techniques. We developed five prototypes of a term life insurance sales journey, each differing in language, information structure, examples, and visual aids. These variations helped identify the most effective elements in enhancing user understanding and interaction.
The second experiment, involving 2,005 participants, focused on assessing the effectiveness of video (both human and AI-generated) as a communication tool in the insurance sales journey. We compared text-only formats and those including videos to evaluate improvements in customer comprehension. This experiment also explored the impact of the presenter鈥檚 identity (human vs. AI) on factors such as trustworthiness and credibility. Participants reacted to a human presenter and his AI counterpart (an avatar mimicking his appearance) to assess how the type of presenter influenced their perceptions.
Through these experiments, we aimed to identify which techniques would work best in improving comprehension of term life insurance as measured by 15 multiple choice questions.
The findings revealed that only simplifying language and numbers is not enough to significantly improve understanding; instead, a combination of simplification and other behavioral science techniques is necessary. Notably, increasing the salience of information鈥攗sing FAQs, visually appealing icons, and engaging text鈥攊mproved comprehension of all content by 21%. This underscores the value of strategic use of such techniques to highlight critical information.
Moreover, introducing "positive friction"鈥攄eliberately engaging customers with important but complex content鈥攎arkedly boosted comprehension. Until now, the industry generally has focused on streamlining the customer journey to hasten the sales process. However, this research indicates that slowing down the process and making content relevant enhances understanding significantly, increasing overall comprehension by 28%. This approach challenges traditional customer journey designs that prioritize speed over depth of understanding.
We also observed that including content in video format with a human messenger improves comprehension by an additional 15% when paired with other behavioral science techniques. Initial findings from using an AI-generated avatar in place of a human presenter suggest that it is too early to proceed in that direction. The AI messenger was seen as more unsettling and less credible than its human counterpart. However, it is possible that AI messengers could serve as a scalable alternative in customer journey design in the future as they are further improved.
These insights advocate for a shift in how insurers present information, suggesting that more engaged and informed customers can emerge from slowing down and strategically emphasizing essential content.
While these findings offer insurers paths to enhance customer comprehension, closing the gap in understanding will require additional and ongoing efforts.
While this research marks significant progress in our understanding of how employing behavioral science techniques can improve comprehension of life insurance, behavioral science鈥檚 full potential within the insurance industry remains untapped. Future researchers could delve deeper into optimizing digital and non-digital interactions and explore the expanding role of AI in providing scalable, engaging content. This research provides a useful blueprint to follow and a promising preview of all we have yet to discover.
Statements of fact and opinions expressed herein are those of the individual authors and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective authors鈥 employers.
Explore 69色情片鈥檚 behavioral science case studies to learn how implementing the underlying principles can transform small changes into big results.
