Uncomfortable Questions: Big Lies. Little Lies.

Life insurance underwriters spend a lot of time searching for misrepresentation. Quite often they find it. In terms of human behavior that fact is not all surprising. Dan Ariely, the famed Behavioral Economist and CBO of Lemonade has shown in multiple experiments that most people lie when given the opportunity, but only a little. In fact, virtually all of us are comfortable lying up to a certain point. Especially to the IRS or giant faceless insurance companies. 

Underwriters know this better than anyone. Many customers lie just a little about their height and weight or forget the speeding ticket they had last year. Are these the little lies?

A smaller, but still meaningful proportion of customers can’t seem to accurately report their smoking status, health conditions or criminal history. Are these the big lies?

What do underwriters do we do when we find these lies? We rate or decline the case appropriately, then we move on. 

Here is my challenge question. Is making a decision on a case where the applicant has misrepresented themselves the right thing to do?

Is making a decision on a case where the applicant has misrepresented themselves the right thing to do?

I suspect that many of those so called little lies, are actually memory errors. Many people may not know their exact weight or have truly forgotten that moving violation from 4 years ago. After all scales can have substantial variations between one another and some people weigh themselves infrequently. Additionally, mental fatigue during our brutally long application process leads to a higher likelihood of glossing over minor details such a small speeding or stop sign ticket from years ago. 

But those big lies? A person who checks “No” to having a heart condition after surviving a heart attack? It’s just not so easy for me to overlook. Our customer has lied to us and objectively speaking we do nothing about it. Yes, we charge them more or sometimes decline them the policy, but should we be taking it further?

What is it we need to be asking ourselves about these customers...

• Should we be tracking their behavior? 
• Is that same customer more likely to lie to us when it comes to a disability claim? 
• Are those customers more likely to lapse or replace their coverage? 
• Do we want them to be loyal to our brands? 
• Are they quick to complain or take up customer service resources? 
• Is this the type of person you want to cross-sell a home owners policy too?
• How should customers who intentionally lie to your company be engaged post issue?

As with many challenging questions, I don’t yet know the answer. But I do think many of our future solutions can be optimized through the lens of understanding our customers. And the willingness of a person to lie, in a big way, during an initial engagement with a company is a customer profile that at minimum we should better understand.

Opinions expressed herein our own and not necessarily those of MIB.