The curse of knowledge

The curse of knowledge

Insurance brokers often complain that clients only buy insurance on price and not on coverage technicalities.?Many customers, if not most, in India engage multiple brokers to get competitive quotes. So the brokers are reduced to price hunters and their value addition in terms of coverage advice gets discounted or nullified.?

Are the customers solely to blame for this??

No.?

This happens due to what’s known as the curse of knowledge. It is a cognitive bias that occurs when an individual, communicating with other individuals, unknowingly assumes that the others also have the background to understand.

When I started out as a broker, I once received a proposal to source quotes for a Protection and Indemnity policy. It was my first P&I case and I was excited.?

I sourced the best quote possible in terms of coverage - 4/4th collision liability, property damage, wreck removal, pollution liability, cover for crew, towage and so on. All the jingbang of a P&I.

My objective was that the policy should cover all things I myself would buy in a P&I.?

When I presented the quote to the client, he said all he needed was a cheap, barebones cover, just to satisfy the oil company for which he was doing bunkering operations with his vessel. He wasn’t able to appreciate the additional risk exposures that he actually faced that were being addressed in my quote. My sales effort obviously flopped.?

The curse of knowledge prevents people from being able to reconstruct what a person without their knowledge would think or would act. They assume that others would learn from them and act as they would. But this is wrong and doesn’t happen in reality.?

Information asymmetry between the broker and the customer, whereby the former knows far more than the latter, need not necessarily help in the sale.

Counter intuitively, less the information asymmetry, with customers being more informed, he is likely to be persuaded to buy.?

Success in broking involves defeating the curse of knowledge.

Dipten Roychowdhury

Line Head - Liability Underwriting at Chola MS General Insurance Co Ltd

2 年

Hari sir, Your invigorating article reminds me few words from poet T.S Elliot... "......All our knowledge brings us nearer to our ignorance, All our ignorance brings us nearer to death, But nearness to death no nearer to God. Where is the Life we have lost in living? Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?"

G.V. Subhasree Nigamma, FIAI

Actuary (General Insurance / Property & Casualty)

2 年

Well captioned ????

Kumar Pherwani

Independent Insurance Professional

2 年

Hari, we all know insurance is last on priorities in scheme of personal needs or in business.. ( in A to Z, it’s always in zzzzzz sleep mode) We also accept that it is bought mainly for compliance or to satisfy contractual needs. But for this GI is rarely bought.. Indian customer always looks at it from ROI and not as a risk management tool.. alas, how many more centuries to go for customer awareness for insurance..

Nishith Kumar

Founder & Director "Samriddhi" Financial Consultants & Trainers

2 年

Well articulated! I have drawn lessons from artists who perform on stage. They adopt various tricks to gauge the mood and the depth of the crowd in general. Whether a classical song or a Kawali will be appreciated. At the end of the day regaling the crowd is the objective and they should feel “ paisa vasool “

Kartik Krishnan

General Insurance Underwriter- LIII

2 年

Beautifully explained. I really like reading all you post.

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