We all dislike the annual insurance review. Typically for your average consumer the first reference point will be Price Comparison Websites (PCWs), currently in the news following the FCA thematic review.
What you might not realise, as you key-in your details and are presented with a multitude of offers, is that PCWs rely on a number of buying behaviours to obtain your business, six of which have been identified by the behavioural economists Atticus:
- Status Quo Bias - no not a prediliction for the aged rockers, but your tendency to do what you've done before, and resistance to change
- Authority Bias - you overvalue the opinion of someone seen to be in authority - we've all done that!
- Framing, Salience and Limited Attention - you are swayed by online guidance, for example some consumers automatically opt for the product with a green tick - surely not
- Herd Instinct and Social Norms - you are using using a PCW because everybody else does - but it's so easy to use
- Reference Dependence - you over rely on past experience, in this case the premium you paid last year
- Present Bias - this is one I think we will all recognise - the immediate gratification of quickly dealing with the chore of insurance is more important than the future consequences of a wrong decision, i.e. you get what you pay for, which invariably catches up with you when you make a claim, the very reason why you bought the insurance for in the first place!
Be aware the next time you purchase insurance online - the final buying decision may not actually have been your's alone.