Design Guided by Psychology: A Case Study in the Digital Insurance Industry

Article header image
🧑‍💻 Emilio Ríos
📆 September 29th, 2022

A few years ago it was common to focus on being product-centric, trying to create the best possible product.

While the idea of creating exceptional products may be appealing, it actually misses one of the biggest challenges in today's insurance industry, which is to create as many products as customers. In other words, the customer needs to feel identified with the product, to see that it really meets his or her needs, and to feel that it is a product designed just for him or her.

The Ideal Insurance Product

This is probably a disclaimer, but we all know it: the ideal product does not exist. No matter how much we think about the best coverage or the best price, the digital user will not think that he is getting the best insurance product. Moreover, many times the customer himself is not aware of his needs, and these needs are created as the customer makes other types of decisions.

The experience is something that a customer can identify with much more. In fact, Harvard Business School professor Gerald Zaltman claims that 95% of our purchasing decisions take place in the subconscious.

Nowadays, decisions are made quickly, at the click of a button. People take decisions and make purchases based on feelings. Today's digital target wants to decide fast and is not looking for the best product, but for the best experience.

Moreover, experiences are relatable and shareable. In a context where it is common practice to share experiences on social media, this is a very important point to bear in mind.

A study by Harris Group found that three out of every four millennials prefer to spend money on experiences than material things. Millennials “aren’t spending our money on cars, TVs, and watches,” Taylor Smith, CEO, and co-founder of Blueboard told CNBC. “We’re renting scooters and touring Vietnam, rocking out at music festivals, or hiking Machu Picchu.”

Customer Experience or design guided by psychology

Digital design through psychology is an art, but it is also full of theories. These theories help to build a pleasant purchasing and decision-making experience. Although some may be biased, the aim is to build decisions based on subconscious emotion.

Let's review some of the most important theories that are used today to create a unique user experience. We will also see how these theories can be applied in the digital insurance industry.

Hick’s Law: Make the choice easier

Hick’s Law is simple, it just says that the more choices you have, the longer it will take you to reach a decision.

This seems like common sense, but often the number of decisions a user has to make is overwhelming. Especially when you are trying to get the user to define the insurance product he wants in a specific way. Wouldn't it be easier to present him with a few options, having detailed and processed information about his tastes and needs?

Anchoring bias

This theory is based on priming, a common effect in psychology. When you are exposed to a certain concept, the areas of the brain related to that concept remain activated at a certain level. This makes the concept easily accessible and can influence your behavior without you realizing it.

When we anchor ourselves to a particular product, we end up filtering all new information through the framework we initially developed in our head about that product, which distorts our perception.

This effect is used by brokers, the anchoring bias will make buyers give more credibility and value to the first information they receive, "anchoring" their perceptions to that initial impression.

Anchoring bias is simply a good first impression. In the absence of other information, users will rely on their initial experiences to make a decision.

Confirmation Bias

Confirmation Bias is a cognitive effect that occurs when people analyze information in a way that directly conforms to their existing beliefs or preconceptions. Confirmation bias will lead people to discard information that contradicts their existing beliefs, even if the information is factual.

What is most striking about this deviation is that it applies not only to customers but also to the industry itself. The insurance industry is an established industry with a long history. On the other hand, it has been the same for a long time, distributed in the same way and with the same dogmas, and therefore has a long way to go to overcome this Confirmation Bias effect.

We have to keep in mind that our beliefs are mostly created by what we have always seen and consumed in the same way. A paradigm shift has to rethink not only how products are offered to customers but also how the insurance industry itself creates those products.

Nudge

Authors Christoph Schneider, Markus Weinmann, and Jan vom Brocke define a digital nudge “as the use of user-interface design elements to guide people’s behavior in digital choice environments.”

This has two possible uses. One is more biased, guiding the user towards the company's interest, but the other is much more ethical, which is to help the user make better decisions. The latter option will mean that after making that choice, the user will be happy with the action taken.

In the insurance world, this form of guidance has traditionally been done through an agent. Now, thanks to the different channels to reach users at any time, it is a tool that can become tremendously useful. For example, alerting a customer when theft in their area of residence has increased by 15%, and offering them products that can help them.

And this is not only important when the customer wants to buy one of our products, but also the claims or other processes and their experience with them. If the user feels supported in processes that can be difficult, it will increase the loyalty toward our product.

The Customer Experience State in Insurance

As we have seen, the biggest challenge for the insurance industry today is the ability to identify the user accurately and consistently across all journeys.

Operational services, such as policy or claims processing, to some extent, are experiencing increasing levels of automation. This automation is still insufficient today and the industry needs to renew itself and adapt to the new digital reality.

This concerns not only the end user, but also brokers, agents, and even insurance company executives, who need to leave their anchors behind and look to a changing future where adaptability is the main competitive advantage.

Currently, many insurance brokers and agents use obsolete software to manage documentation: claims, policies, welcome kits, etc. These software programs often have limited functionality and require manual intervention.

It is important to build a new identity for insurance using from one side insights to take relevant data and from the other side human experience to bring sensory value to each interaction.

Emilio Ríos

Founding member of The Crafters Lab

Emilio is a software developer and founding member of The Crafters Lab.

lets start the transformation

Do you want to be the next?Get in touch with us.