2014
Behavioral Economics:
Good and Evil Practices in
the Insurance and Financial
Industries
Bob Thomas
Director of User E...
2014
Classical Economics:
We Are All Rational Creatures
2014
Source: CBS. This photo is used here for personal, non-commer...
2014
Behavioral Economics:
We Are Emotional and Irrational
2014
Source: CBS. This photo is used here for personal, non-com...
2014
Principles of Behavioral Economics
2014
๏ Principle 1: Mental Shortcuts
๏ Principle 2: Value Assessments
๏ Principle ...
2014
Principles of Behavioral Economics
2014
๏ Principle 1: Mental Shortcuts
Source: http://ozeanmedia.com/wp-content/uplo...
2014
Mental Shortcut:
Reliance on Defaults & Relative Choices
2014
๏ People rely on defaults as complexity increases
2014
Mental Shortcut:
Reliance on Defaults & Relative Choices
2014
๏ To help consumers, this
life insurance estimator
incl...
2014
Mental Shortcut:
Reliance on Defaults & Relative Choices
2014
๏ Relative choice: we value products based on
compariso...
2014
Mental Shortcut:
Reliance on Defaults & Relative Choices
2014
๏ Buying insurance can be very complex
๏ Potential cust...
2014
Principles of Behavioral Economics
2014
๏ Principle 2: Value Assessments
2014
Value Assessment:
Love of Free
2014
๏ “Free” triggers consumer reactions that
cause people to overlook underlying math
2014
Value Assessment:
Love of Free
2014
๏ Most people carrying
greater than $1000 in
balances instinctively
select a card...
2014
Value Assessment:
Hyperbolic Discounting
2014
๏ We buy or borrow now at the cost of
having less money in the future
2014
Principles of Behavioral Economics
2014
๏ Principle 3:
Emotional Impacts
2014
Emotional Impact:
Risk Aversion
2014
๏ People would rather save money “under the
mattress” than invest in the market
2014
Emotional Impact:
Risk Aversion
2014
๏ Progressive Insurance offers a Coverage Checker
that highlights areas where an...
2014
Emotional Impact:
Self-Control Facilitation
2014
๏ We recognize the need for self-
control but need support
๏ We are ...
2014
Emotional Impact:
Self-Control Facilitation
2014
๏ Insurethebox provides low-mileage car
insurance. They give their c...
2014
In Summary: What Behavioral
Economics Shows Us
๏ We make financial decisions intuitively,
and we’re not very good at ...
2014
Behavioral Economics:
Good and Evil Practices in the Insurance and Financial Industries
2014
Bob Thomas
Director of U...
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Behavioral Economics (Bob Thomas)

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Bob Thomas's talk from the UXPA 2014 Ignite session "Are you a Super Hero or a Super Villain? Using Design Psychology for Good (and Evil)."

Design Psychology is a powerful tool to wield and can be used to the benefit or detriment of our users; motivating them to behave in ways that can be in their interest, or our own. Our panel of experienced professionals, each with an interest in different facets of design psychology, will choose a white hat or black hat - some taking the side of good and honest intentions, with others taking the dark side where manipulation and coercion reign. On which side will you fall?

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Behavioral Economics (Bob Thomas)

  1. 1. 2014 Behavioral Economics: Good and Evil Practices in the Insurance and Financial Industries Bob Thomas Director of User Experience, Liberty Mutual Insurance (email) robertl.thomas@libertymutual.com (twitter) @bobthomas
  2. 2. 2014 Classical Economics: We Are All Rational Creatures 2014 Source: CBS. This photo is used here for personal, non-commercial use.
  3. 3. 2014 Behavioral Economics: We Are Emotional and Irrational 2014 Source: CBS. This photo is used here for personal, non-commercial use.
  4. 4. 2014 Principles of Behavioral Economics 2014 ๏ Principle 1: Mental Shortcuts ๏ Principle 2: Value Assessments ๏ Principle 3: Emotional Impacts FREE! No Annual Fee
  5. 5. 2014 Principles of Behavioral Economics 2014 ๏ Principle 1: Mental Shortcuts Source: http://ozeanmedia.com/wp-content/uploads/2013/05/brain_shortcuts.jpg. This image is used here for personal, non-commercial use.
  6. 6. 2014 Mental Shortcut: Reliance on Defaults & Relative Choices 2014 ๏ People rely on defaults as complexity increases
  7. 7. 2014 Mental Shortcut: Reliance on Defaults & Relative Choices 2014 ๏ To help consumers, this life insurance estimator includes default values
  8. 8. 2014 Mental Shortcut: Reliance on Defaults & Relative Choices 2014 ๏ Relative choice: we value products based on comparisons with other similar products
  9. 9. 2014 Mental Shortcut: Reliance on Defaults & Relative Choices 2014 ๏ Buying insurance can be very complex ๏ Potential customers may refuse to add coverages that may benefit them
  10. 10. 2014 Principles of Behavioral Economics 2014 ๏ Principle 2: Value Assessments
  11. 11. 2014 Value Assessment: Love of Free 2014 ๏ “Free” triggers consumer reactions that cause people to overlook underlying math
  12. 12. 2014 Value Assessment: Love of Free 2014 ๏ Most people carrying greater than $1000 in balances instinctively select a card offering… ๏ 15% APR + No Annual Fee Free = No Annual Fee (Example: $150 in first month) ๏ vs. 10% APR + $50 Annual Fee (Example: $100 in first month)
  13. 13. 2014 Value Assessment: Hyperbolic Discounting 2014 ๏ We buy or borrow now at the cost of having less money in the future
  14. 14. 2014 Principles of Behavioral Economics 2014 ๏ Principle 3: Emotional Impacts
  15. 15. 2014 Emotional Impact: Risk Aversion 2014 ๏ People would rather save money “under the mattress” than invest in the market
  16. 16. 2014 Emotional Impact: Risk Aversion 2014 ๏ Progressive Insurance offers a Coverage Checker that highlights areas where an individual may be buying too little (or too much) insurance
  17. 17. 2014 Emotional Impact: Self-Control Facilitation 2014 ๏ We recognize the need for self- control but need support ๏ We are often willing to accept downsides of third-party control to achieve goals
  18. 18. 2014 Emotional Impact: Self-Control Facilitation 2014 ๏ Insurethebox provides low-mileage car insurance. They give their customers a free telematics device to keep track of mileage
  19. 19. 2014 In Summary: What Behavioral Economics Shows Us ๏ We make financial decisions intuitively, and we’re not very good at it ๏ It helps to understand these principles behind our financial decisions: 1. Mental Shortcuts 2. Value Assessments 3. Emotional Impacts
  20. 20. 2014 Behavioral Economics: Good and Evil Practices in the Insurance and Financial Industries 2014 Bob Thomas Director of User Experience Liberty Mutual Insurance Email: robertl.thomas@libertymutual.com Twitter: @bobthomas Original photo source: http://3.bp.blogspot.com/- 3d5cnvWaRhw/UaYN9yTucfI/AAAAAAAAAPk/CDlSqE3DJzU/s1600/C loseUpGuard_Blog.jpg. This photo is used here for personal, non-commercial use.
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