The Anatomy of a Decision, Part 1: Patience WAS a Virtue
Building a business around speed and convenience is nothing new. Fast food drive-thrus, cell phones and FedEx overnight delivery services were just some of the predecessors to today’s Ubers, apps and same day Amazon orders. But in most of these cases, purchase decisions were based upon simple factors — “I’m hungry,” or “We need delivery of a legal document,” or “Of course it would be nice to be able to make a call from my car.”
There were other services for which people understood that immediacy wasn’t an option. Many financial decisions took time. If you wanted to earn a little extra interest by using a certificate of deposit instead of savings, you would have to wait months or years for maturity. Securing life insurance was a multi-week (sometimes multi-month) long underwriting process. Applying for a home loan with multiple credit and background checks took time. For the most part, people accepted these elongated processes and delays with resigned and good-natured patience. This was life. Important decisions required time, not only in the preparation, but also in the education and execution. Two hours with a life insurance agent would allow you to learn about all of the products available, understand their complexity and it would help the agent to best-fit products to your needs. You valued the time spent learning, understanding and choosing based on the valued, trusted relationship with your agent.
The convergence of generational shifts and technological advancement created a new mindset that rewrote expectations and priorities for many. Patience is no longer always considered a virtue. Insurance relationships are no longer always valued. Time crunched people seek timesaving services. Value is seen by those who can provide anything with immediacy, uniqueness and ease.
Enter the new generation of insurance companies redefining the insurance engagement. Lemonade, TROV, Slice, Haven Life and others who are redefining speed and value to a new generation of buyers … are placing traditional, existing insurers on notice. From purchasing a policy in less than 10 minutes to paying a claim in less than 3 minutes … speed and simplicity are the new competitive levers.
Out of necessity, this has changed an insurer’s view of competition. Insurers used to know their competitors. They understood their distinctive value propositions. They debated on what were the real product differentiators. Insurers understood the reach of their agents, their geographic limitations and the customer and agent loyalty they could count on because of their excellent service.
While all of these factors still guide current insurance operations, the competitive landscape has shifted to different factors critical to acquiring and retaining customers, resulting in insurers rethinking the “this is how insurance has always been done” view. Competition can be anything or any entity that fills the consumer brain based on their experience. Insurers are feebly groping for just a tiny bit of ad space in consumer minds —enough to plant the seed of need and just a little more to water the plant into engagement and completing a transaction — because today’s consumer isn’t going to listen well enough to grasp distinctive details. He or she is looking for an easy and quick fit.
Need. Purchase. Done. Happy.
A 2012 Pew survey of technology experts predicted what is now coming true, “the impact of networked living on today’s young will drive them to thirst for instant gratification, settle for quick choices, and lack patience….trends are leading to a future in which most people are shallow consumers of information.”
Only five years later, insurers are feeling the impact.
Americans overall are becoming less patient, and increasingly expect instant gratification in their interactions. Technology speeds up processes of all types, from the mundane to the complex. Activities that used to take hours, days or weeks now take minutes or seconds, or less. As consumers become habituated to these increased capabilities, they demand ever-faster results and expect similar capabilities from other businesses or institutions with which they interact.[i] A 2015 study of Canadian consumers estimated that the average attention span dropped to 8 seconds from 12 seconds in 2000, driven at least in part by consumers’ constant digital device-enabled connectedness. [ii]
In a report released last week, Future Trends 2017: The Shift Gains Momentum, Majesco examined how impatience is driving a shift in behavior that is causing insurers to look at the anatomy of decisions. What behaviors are relevant to purchase? To renewals? To service? How can insurers still provide risk-protection to individuals who won’t take the time to learn about complex products? We’ve drawn some of these insights out of the report for consideration here.
For one thing, insurers clearly recognize that the trends affecting them are far broader and bigger than the insurance industry. Businesses and startups across all industries are capitalizing on the lucrative opportunity afforded by meeting the ever-increasing demands for speed and simplicity made possible by technology and re-imagined business processes. Amazon Prime, Netflix, Spotify, Uber/Lyft, ApplePay/Samsung Pay, Rocket Mortgage (Quicken Loans), Twitter, Instagram and other technology-based businesses represent contemporary offerings that have simplified the customer journey.
Retailers such as Walmart, Best Buy, Staples, Amazon and even eBay, are testing same day delivery for items ordered online. Simplifying a customer’s entire journey with a company by making it “easy to do business with” is more critical than ever for insurers.
A key reason many of the new, innovative companies are appealing to consumers and SMBs is because they simplify and remove some of the cognitive effort required to make decisions about insurance. In his book, Thinking, Fast and Slow, the Nobel Prize winning behavioral economist Daniel Kahneman described human decision making and thinking as a two-part system. Greatly simplified, System 1 thinking produces quick (i.e. instantaneous and sub-conscious) reflexive, automatic decisions based on instinct and past experiences. These are “gut” reactions. System 2 thinking is slow, deliberate, reason-based and requires cognitive effort.
In general, most of the decisions we make each day are through System 1, which can be both good and bad; good because it increases the speed and efficiency of decision making, and because in most instances the outcomes are acceptable. However, not all outcomes are good, and many could have been improved had System 2 thinking been engaged. The problem with System 2 is that it takes effort, and humans naturally try to minimize effort.
So, a traditionally complex industry is intersecting with a cognitive culture that is mentally trying to simplify, reduce effort and be more intuitive. This has consequences for decisions throughout the customer’s journey with an insurance company. Good decisions about complex issues like insurance should be based on System 2 thinking. However, during the research and buying processes, the cognitive effort to do so can lead many people to choose other paths like seeking shortcuts to in-depth research and analysis or delaying a decision altogether.
What is the good news in the world of impatience? Insurers are quickly finding ways to counter the disparity between the need for speed and the need for good decisions. They are also using a bit of psychology to positively influence decisions and they are buying back some brain space with techniques that both inform and engage.
In The Anatomy of a Decision Part 2: Speed Meets Need, we will look at these techniques as well as product adaptation, framework preparation and planning for transformation that will meet the demand for quick decisions. For more in-depth information on behavioral insurance impact, download the Future Trends 2017 report today.
[i] Muther, Christopher, “Instant gratification is making us perpetually impatient,” The Boston Globe, February 2, 2013
[ii] Pilieci, Vito, “Canadians now have shorter attention span than goldfish thanks to portable devices: Microsoft study,” National Post, May 12, 2015