Jim Gallagher from USI Affinity gave a presentation on understanding the insurance buyer's mindset. He discussed how behavioral economics concepts like ambiguity aversion, choice overload, and risk preferences can impact insurance purchasing decisions. Gallagher emphasized that while people are risk averse in general, they sometimes become risk seeking when one choice is a sure loss and the other is an uncertain but potentially greater loss. He suggested insurance marketers focus on simplifying choices and the purchasing process to help customers make better decisions.
The document provides an introduction to key concepts in behavioural economics. It discusses how behavioural economics studies human psychology and decisions that sometimes diverge from rational self-interest. It outlines several cognitive biases and phenomena like loss aversion, status quo bias, herd behavior, framing effects, and anchoring. The document also contrasts the traditional economic assumptions of homo economicus with a more psychologically accurate perspective of real human behavior.
Behavioral Economics and Decision Makingneerupaharia
The document summarizes key concepts from behavioral economics relating to how human decision making is influenced by cognitive and emotional factors. It discusses how the brain has an "elephant" part driven by emotion and an "rider" part driven by rational thought, but the elephant often dominates decision making. It provides examples of how framing effects, biases, heuristics, loss aversion, reference points and more can impact judgments and choices in systematic and sometimes irrational ways compared to standard economic assumptions of rational actors.
1) The document provides a chart of various interests that may be important to consider in a negotiation. It lists 42 different interests across categories like risk, reputation, closure, and relationships.
2) Key interests commonly include reducing risk, setting precedents, respect, reputation, vindication, closure, winning, and relationships.
3) Understanding each party's interests is important to craft agreements that satisfy their underlying needs and concerns. However, interests can be hidden, parties may have multiple interests of varying importance, and they may be reluctant to share interests.
The document provides tips and strategies for improving selling skills in investing. It emphasizes that selling is as important as buying, but often more psychologically challenging. It recommends focusing on crowd psychology and volume signals, being willing to sell at a loss, and setting clear sell rules and targets to overcome emotional biases that prevent selling. The key is understanding oneself and market cycles instead of relying only on fundamentals or hoping a losing investment recovers.
The document summarizes the work of Hello Sunday Morning, an organization that aims to change Australia's culture of alcohol dependence. It was started by a man who took a year off drinking with some friends, which grew into an organization with six employees running various projects. They are not against alcohol but want a healthy drinking culture. They share stories to recruit talented people to develop solutions and change narratives around drinking culture formed over 10,000 hours by one's twenties.
Talenti provides executive search, recruitment process outsourcing (RPO), and analytics services. It connects clients to top talent through specialized recruiters with expertise in technology, applications, infrastructure, business, and niche skills like big data frameworks. Talenti's structured methodology includes conducting due diligence, developing solutions, finalizing contracts, and ensuring sustainable results through client-focused approaches. It delivers RPO services through an end-to-end recruitment lifecycle management system that sources candidates, screens and processes resumes, conducts interviews, and tracks candidates. Case studies demonstrate Talenti's ability to hire over 1,000 professionals for the Delhi International Airport project by managing the entire recruitment process and meeting key performance indicators.
The document discusses Hello Sunday Morning (HSM), a registered health promotion charity in Australia that helps people challenge their cultural dependence on alcohol. HSM supports individuals who commit to an extended period without drinking while journaling their experience of change. The typical HSM process involves someone who has grown up in a drinking culture committing to 3, 6, or 12 months without alcohol. At the end of the process, their reasons for drinking are often different, regardless of how much they drink. HSM finds that people from varied motivations participate, not just those with alcohol issues. The document then introduces Dr. Nicholas Carah to discuss the types of people willing to challenge drinking beliefs and cultures.
This is the presentation I used at a seminar given to my colleagues at the Biology Department of University of Mersin.
Subject of the seminar was "DOI: Digital Object Identifier System", which is a system is for identifying content objects in the digital environment. You can get more information from organizations web site; http://www.doi.org.
Presentation created with Microsoft PowerPoint (v12), and language used is Turkish.
The document provides an introduction to key concepts in behavioural economics. It discusses how behavioural economics studies human psychology and decisions that sometimes diverge from rational self-interest. It outlines several cognitive biases and phenomena like loss aversion, status quo bias, herd behavior, framing effects, and anchoring. The document also contrasts the traditional economic assumptions of homo economicus with a more psychologically accurate perspective of real human behavior.
Behavioral Economics and Decision Makingneerupaharia
The document summarizes key concepts from behavioral economics relating to how human decision making is influenced by cognitive and emotional factors. It discusses how the brain has an "elephant" part driven by emotion and an "rider" part driven by rational thought, but the elephant often dominates decision making. It provides examples of how framing effects, biases, heuristics, loss aversion, reference points and more can impact judgments and choices in systematic and sometimes irrational ways compared to standard economic assumptions of rational actors.
1) The document provides a chart of various interests that may be important to consider in a negotiation. It lists 42 different interests across categories like risk, reputation, closure, and relationships.
2) Key interests commonly include reducing risk, setting precedents, respect, reputation, vindication, closure, winning, and relationships.
3) Understanding each party's interests is important to craft agreements that satisfy their underlying needs and concerns. However, interests can be hidden, parties may have multiple interests of varying importance, and they may be reluctant to share interests.
The document provides tips and strategies for improving selling skills in investing. It emphasizes that selling is as important as buying, but often more psychologically challenging. It recommends focusing on crowd psychology and volume signals, being willing to sell at a loss, and setting clear sell rules and targets to overcome emotional biases that prevent selling. The key is understanding oneself and market cycles instead of relying only on fundamentals or hoping a losing investment recovers.
The document summarizes the work of Hello Sunday Morning, an organization that aims to change Australia's culture of alcohol dependence. It was started by a man who took a year off drinking with some friends, which grew into an organization with six employees running various projects. They are not against alcohol but want a healthy drinking culture. They share stories to recruit talented people to develop solutions and change narratives around drinking culture formed over 10,000 hours by one's twenties.
Talenti provides executive search, recruitment process outsourcing (RPO), and analytics services. It connects clients to top talent through specialized recruiters with expertise in technology, applications, infrastructure, business, and niche skills like big data frameworks. Talenti's structured methodology includes conducting due diligence, developing solutions, finalizing contracts, and ensuring sustainable results through client-focused approaches. It delivers RPO services through an end-to-end recruitment lifecycle management system that sources candidates, screens and processes resumes, conducts interviews, and tracks candidates. Case studies demonstrate Talenti's ability to hire over 1,000 professionals for the Delhi International Airport project by managing the entire recruitment process and meeting key performance indicators.
The document discusses Hello Sunday Morning (HSM), a registered health promotion charity in Australia that helps people challenge their cultural dependence on alcohol. HSM supports individuals who commit to an extended period without drinking while journaling their experience of change. The typical HSM process involves someone who has grown up in a drinking culture committing to 3, 6, or 12 months without alcohol. At the end of the process, their reasons for drinking are often different, regardless of how much they drink. HSM finds that people from varied motivations participate, not just those with alcohol issues. The document then introduces Dr. Nicholas Carah to discuss the types of people willing to challenge drinking beliefs and cultures.
This is the presentation I used at a seminar given to my colleagues at the Biology Department of University of Mersin.
Subject of the seminar was "DOI: Digital Object Identifier System", which is a system is for identifying content objects in the digital environment. You can get more information from organizations web site; http://www.doi.org.
Presentation created with Microsoft PowerPoint (v12), and language used is Turkish.
20 cognitive biases that affect your decisionAlan Haller
This document summarizes 20 cognitive biases that affect human decision-making. It describes biases such as anchoring bias, availability heuristics, bandwagon effect, blind-spot bias, choice-supportive bias, clustering illusion, confirmation bias, conservatism bias, information bias, ostrich effect, outcome bias, overconfidence, placebo effect, pro-innovation bias, recency bias, salience bias, selective perception, stereotyping, survivorship bias, and zero-risk bias. For each bias, it provides a brief explanation and example of how the bias can influence judgments and decisions.
This document discusses decision making with limited time and information. It provides examples of good and bad decisions based on outcomes. The speaker advocates making decisions based on hypotheses, pre-mortems, and calibrating beliefs using feedback rather than outcomes alone. Decision types - type 1 being consequential and type 2 being reversible - are introduced. Examples of decisions around privacy policies and identity monitoring are presented, showing how to structure the decision making process. The key takeaways are that good decisions increase the likelihood of good outcomes even if not guaranteed, and most decisions are reversible so it is important to drive decisions quickly while focusing on being right for important decisions.
As an Investment Advisor, you will have to play an important role in enabling your clients to reach their financial goals without the emotions of fear or greed playing havoc. It is essential to understand Behavioural Finance, especially Heuristics and Biases that creep into financial decision making.
This document discusses various strategies for money management and wealth creation. It covers topics such as the importance of saving money, the power of compounding returns, different investment avenues like stocks and real estate, and factors that impact wealth creation like inflation and taxes. The document emphasizes developing the right mindset for long-term wealth building and value investing. It also discusses behavioral biases that can influence financial decision-making and recommends developing a latticework of mental models from different disciplines to overcome cognitive biases.
Rational versus emotional – inside the mind of your buyerB2B Marketing
This document discusses how emotion is important in B2B marketing because business people are still people with emotions even at work. It argues that the common assumptions that business decisions are made entirely rationally and through a single logical decision are flawed, as purchasing decisions actually involve many "micro-yesses" that are highly emotive. The document introduces behavioural economics as a framework that combines neuroscience and psychology to understand how people actually think and make decisions using two systems - fast, intuitive thinking and slow, rational thinking. It discusses various cognitive biases and techniques like framing, cognitive ease and implicit/explicit goals that can influence purchasing decisions in emotionally-driven ways.
The document provides tips for becoming a better influencer in sales, outlining traits of effective influencers like being open, honest, and trustworthy. It discusses psychological principles of influence like reciprocation, commitment and consistency, social proof, and the laws of liking and authority. The document advises influencers to understand different personality types and tailor their communication style accordingly.
Barry Ritholtz Presentation on Behavioral Economics (CFA Toronto 2013)Chand Sooran
A good introduction to key issues in behavioral economics from Barry Ritholtz in a presentation made to the CFA Toronto Group. Pithy, entertaining and informative.
System 1 is our fast, automatic thinking which relies on mental shortcuts and biases. System 2 is our slow, effortful, logical thinking. Daniel Kahneman introduced the concept of cognitive biases that influence our judgments and decisions in irrational ways. Examples include anchoring bias where we rely too heavily on the first information we receive, availability bias where we judge likelihood based on what we can easily recall, and planning fallacy where we underestimate costs and overestimate benefits of projects. It is difficult but important to recognize our cognitive biases so we can avoid making mistakes in judgment and decision-making.
The document discusses the challenges women face in entrepreneurship, including the triple burden of domestic responsibilities, career, and caregiving duties (the "triple burden"), as well as facing contradictory expectations as either too soft or too tough (the "double bind"). It then outlines various challenges female entrepreneurs may encounter, such as financing, finding customers, managing employees and money, and offers advice for overcoming challenges through education, decision-making, inspiration, and building skills and networks. The overall message is that entrepreneurship presents unique difficulties for women that can be navigated by preparing strategically and drawing strength from other successful businesswomen.
This document provides tips for overcoming a phobia of selling. It begins by defining phobia as a type of anxiety disorder involving an irrational fear of a situation that is avoided. The document then notes common objections people have to selling like not being interested or not having time. It suggests acknowledging the fear of rejection but focusing on positioning yourself as an expert who helps clients. Specific tips are given for handling common objections, such as asking clarifying questions, setting up future meetings, and providing additional information. The key is differentiating your offering and establishing yourself as a problem-solver rather than a salesperson through a consultative approach.
These are the slides I used at the SXSW2018 presentation. The illustrator is my good friend John Conroy. The audio file of my presentation is here. https://soundcloud.com/officialsxsw/the-mediocrity-trap-sxsw-2018
Cian Mcloughlin - 'Rebirth of the Sales Industry' Keynote addressCian Mcloughlin
In this keynote for Sales Innovation Expo 2016 I share why sales people are actually selling themselves, as much if not more than the product or service they represent.
The document discusses the six principles of persuasion according to Dr. Robert Cialdini: reciprocity, social proof, commitment and consistency, liking, authority, and scarcity. These principles are commonly used in e-commerce and social media games to influence user behavior and encourage spending. Specific tactics discussed include giving small gifts to create feelings of obligation, using testimonials and social indicators to show what others are doing, limiting access, time or quantities to create a sense of urgency.
The document compares failed partnerships to zombies, suggesting they both must be avoided to thrive. It defines a partnership as a common purpose between two or more parties seeking profit, and a zombie as a reanimated corpse under supernatural control for evil purposes. Partnerships often start well but can become infected over time due to unrealistic expectations, loss of communication, or failure to uphold obligations. When problems arise, defensiveness increases and recollections change, undermining resolution efforts. To survive failed partnerships and zombie apocalypses alike, the document recommends being prepared, having backup plans, communicating openly and often, and knowing how to terminate safely if needed. The key message is that initially promising relationships can turn toxic without vigilance.
Are you thinking what you think you're thinkingLiz Calder
This document discusses cognitive biases and how they can impact business analysis work. It describes how the brain takes shortcuts called cognitive biases to process large amounts of information quickly. Some examples of cognitive biases discussed include anchoring, loss aversion, hyperbolic discounting, and the conjunction fallacy. The document suggests strategies for business analysts to reduce the impact of cognitive biases, such as getting other opinions, mixing things up, slowing down, and conducting pre-mortems before projects. Cognitive biases are most likely to influence decisions when there is too much information, not enough time to act, uncertainty around what to remember, or a lack of meaning.
This document summarizes a presentation on persuasion and influence. It discusses psychological factors that influence decision-making, such as cognitive biases and mental shortcuts. Common influence strategies are also outlined, including reciprocity, social proof, authority, and scarcity. The presentation covers how to make ideas stick through simplicity, unexpectedness, concreteness, credibility, emotions, and storytelling. The overall message is that understanding human psychology is key to effective persuasion and compliance.
This document summarizes a presentation on persuasion and influence. It discusses psychological factors that influence decision-making, such as cognitive biases and mental shortcuts. Common influence strategies are also outlined, including reciprocity, social proof, authority, and scarcity. The presentation covers how to make ideas stick through simplicity, unexpectedness, concreteness, credibility, emotions, and storytelling. The overall message is that understanding human psychology is key to effective persuasion and compliance.
More Related Content
Similar to Pima Ignite PIMA July 2012 Jim Gallagher With Notes
20 cognitive biases that affect your decisionAlan Haller
This document summarizes 20 cognitive biases that affect human decision-making. It describes biases such as anchoring bias, availability heuristics, bandwagon effect, blind-spot bias, choice-supportive bias, clustering illusion, confirmation bias, conservatism bias, information bias, ostrich effect, outcome bias, overconfidence, placebo effect, pro-innovation bias, recency bias, salience bias, selective perception, stereotyping, survivorship bias, and zero-risk bias. For each bias, it provides a brief explanation and example of how the bias can influence judgments and decisions.
This document discusses decision making with limited time and information. It provides examples of good and bad decisions based on outcomes. The speaker advocates making decisions based on hypotheses, pre-mortems, and calibrating beliefs using feedback rather than outcomes alone. Decision types - type 1 being consequential and type 2 being reversible - are introduced. Examples of decisions around privacy policies and identity monitoring are presented, showing how to structure the decision making process. The key takeaways are that good decisions increase the likelihood of good outcomes even if not guaranteed, and most decisions are reversible so it is important to drive decisions quickly while focusing on being right for important decisions.
As an Investment Advisor, you will have to play an important role in enabling your clients to reach their financial goals without the emotions of fear or greed playing havoc. It is essential to understand Behavioural Finance, especially Heuristics and Biases that creep into financial decision making.
This document discusses various strategies for money management and wealth creation. It covers topics such as the importance of saving money, the power of compounding returns, different investment avenues like stocks and real estate, and factors that impact wealth creation like inflation and taxes. The document emphasizes developing the right mindset for long-term wealth building and value investing. It also discusses behavioral biases that can influence financial decision-making and recommends developing a latticework of mental models from different disciplines to overcome cognitive biases.
Rational versus emotional – inside the mind of your buyerB2B Marketing
This document discusses how emotion is important in B2B marketing because business people are still people with emotions even at work. It argues that the common assumptions that business decisions are made entirely rationally and through a single logical decision are flawed, as purchasing decisions actually involve many "micro-yesses" that are highly emotive. The document introduces behavioural economics as a framework that combines neuroscience and psychology to understand how people actually think and make decisions using two systems - fast, intuitive thinking and slow, rational thinking. It discusses various cognitive biases and techniques like framing, cognitive ease and implicit/explicit goals that can influence purchasing decisions in emotionally-driven ways.
The document provides tips for becoming a better influencer in sales, outlining traits of effective influencers like being open, honest, and trustworthy. It discusses psychological principles of influence like reciprocation, commitment and consistency, social proof, and the laws of liking and authority. The document advises influencers to understand different personality types and tailor their communication style accordingly.
Barry Ritholtz Presentation on Behavioral Economics (CFA Toronto 2013)Chand Sooran
A good introduction to key issues in behavioral economics from Barry Ritholtz in a presentation made to the CFA Toronto Group. Pithy, entertaining and informative.
System 1 is our fast, automatic thinking which relies on mental shortcuts and biases. System 2 is our slow, effortful, logical thinking. Daniel Kahneman introduced the concept of cognitive biases that influence our judgments and decisions in irrational ways. Examples include anchoring bias where we rely too heavily on the first information we receive, availability bias where we judge likelihood based on what we can easily recall, and planning fallacy where we underestimate costs and overestimate benefits of projects. It is difficult but important to recognize our cognitive biases so we can avoid making mistakes in judgment and decision-making.
The document discusses the challenges women face in entrepreneurship, including the triple burden of domestic responsibilities, career, and caregiving duties (the "triple burden"), as well as facing contradictory expectations as either too soft or too tough (the "double bind"). It then outlines various challenges female entrepreneurs may encounter, such as financing, finding customers, managing employees and money, and offers advice for overcoming challenges through education, decision-making, inspiration, and building skills and networks. The overall message is that entrepreneurship presents unique difficulties for women that can be navigated by preparing strategically and drawing strength from other successful businesswomen.
This document provides tips for overcoming a phobia of selling. It begins by defining phobia as a type of anxiety disorder involving an irrational fear of a situation that is avoided. The document then notes common objections people have to selling like not being interested or not having time. It suggests acknowledging the fear of rejection but focusing on positioning yourself as an expert who helps clients. Specific tips are given for handling common objections, such as asking clarifying questions, setting up future meetings, and providing additional information. The key is differentiating your offering and establishing yourself as a problem-solver rather than a salesperson through a consultative approach.
These are the slides I used at the SXSW2018 presentation. The illustrator is my good friend John Conroy. The audio file of my presentation is here. https://soundcloud.com/officialsxsw/the-mediocrity-trap-sxsw-2018
Cian Mcloughlin - 'Rebirth of the Sales Industry' Keynote addressCian Mcloughlin
In this keynote for Sales Innovation Expo 2016 I share why sales people are actually selling themselves, as much if not more than the product or service they represent.
The document discusses the six principles of persuasion according to Dr. Robert Cialdini: reciprocity, social proof, commitment and consistency, liking, authority, and scarcity. These principles are commonly used in e-commerce and social media games to influence user behavior and encourage spending. Specific tactics discussed include giving small gifts to create feelings of obligation, using testimonials and social indicators to show what others are doing, limiting access, time or quantities to create a sense of urgency.
The document compares failed partnerships to zombies, suggesting they both must be avoided to thrive. It defines a partnership as a common purpose between two or more parties seeking profit, and a zombie as a reanimated corpse under supernatural control for evil purposes. Partnerships often start well but can become infected over time due to unrealistic expectations, loss of communication, or failure to uphold obligations. When problems arise, defensiveness increases and recollections change, undermining resolution efforts. To survive failed partnerships and zombie apocalypses alike, the document recommends being prepared, having backup plans, communicating openly and often, and knowing how to terminate safely if needed. The key message is that initially promising relationships can turn toxic without vigilance.
Are you thinking what you think you're thinkingLiz Calder
This document discusses cognitive biases and how they can impact business analysis work. It describes how the brain takes shortcuts called cognitive biases to process large amounts of information quickly. Some examples of cognitive biases discussed include anchoring, loss aversion, hyperbolic discounting, and the conjunction fallacy. The document suggests strategies for business analysts to reduce the impact of cognitive biases, such as getting other opinions, mixing things up, slowing down, and conducting pre-mortems before projects. Cognitive biases are most likely to influence decisions when there is too much information, not enough time to act, uncertainty around what to remember, or a lack of meaning.
This document summarizes a presentation on persuasion and influence. It discusses psychological factors that influence decision-making, such as cognitive biases and mental shortcuts. Common influence strategies are also outlined, including reciprocity, social proof, authority, and scarcity. The presentation covers how to make ideas stick through simplicity, unexpectedness, concreteness, credibility, emotions, and storytelling. The overall message is that understanding human psychology is key to effective persuasion and compliance.
This document summarizes a presentation on persuasion and influence. It discusses psychological factors that influence decision-making, such as cognitive biases and mental shortcuts. Common influence strategies are also outlined, including reciprocity, social proof, authority, and scarcity. The presentation covers how to make ideas stick through simplicity, unexpectedness, concreteness, credibility, emotions, and storytelling. The overall message is that understanding human psychology is key to effective persuasion and compliance.
Similar to Pima Ignite PIMA July 2012 Jim Gallagher With Notes (20)
4. A Paradox of
Choice
Yellow mustard -- plain
old yellow mustard…
pima
5. Let’s hope that
Life insurance blood pressure is
for $500? under control…
• Then we make it hard to find the price – we want to know a whole lot of very personal
stuff before we’ll tell you what you have to pay.
• And for some, we won’t even let them buy what we’re selling.
• That boulder is almost to the top of the hill now…
pima
6. • Adverse Selection: you should only offer health insurance to those who don’t need it
• Affect Heuristic: we use feelings not logic to make snap decisions, even when we don't need to
• Akerlof's Lemons: why the market for used cars doesn't work properly: see Akerlof's Lemons
• Ambiguity Aversion: we don't mind risk but we hate uncertainty
• Anchoring: our habit of focusing on one salient point and ignoring all others, such as the price at which we buy a stock
• Attention, Limits of: our inability to attend to multiple things, and the way this is exploited
• Authority, Appeal to: we tend to thoughtlessly obey those we regard as being in positions of authority
• Babe Ruth Effect: winning big but rarely beats winning often and small
• A Big List of Behavioral Biases
Backfire Effect: if you present some people with evidence contradicting their beliefs they will believe them all the more
• Barnum Effect: we see insightful information in random rubbish
• Beauty Effect: we attribute qualities to people based on their appearance
• from the Psy-FI Blog at www.psyfitec.com
Benford's Law: in finance numbers starting with 1 are more frequent than those starting 2 and so on
• Bias Blind Spot: we agree that everyone else is biased, but not ourselves
• Bird in the Hand Fallacy: the idea that dividends are more important than capital gains.
• Bystander Effect: people waiting for others to take the lead when someone else in is trouble
• Choice Overload: too much choice makes us indecisive
• Clever Hans Effect: we give off unconscious cues that are unconsciously picked up on
• Cocktail Party Effect: the auditory ability focus on one particular stimuli, like your own name in a noisy room
• Cognitive Dissonance: the effect of simultaneously trying to believe two incompatible things at the same time
• Commitment Bias: once we'e publicly committed ourselves to a position we find it difficult to retreat
• Confirmation Bias: we interpret evidence to support our prior beliefs and, we ignore evidence that contradicts it
• Conjunction Fallacy: the conjunction of two events is always less likely than a single event
• Conversational Bias: we tend to present ourselves in the best possible light
• Data Mining Errors: if you mine the data hard enough you can prove anything:
• Denomination Bias: we're more likely to spend small denomination notes than large ones:
• Disaster Myopia: an in-built tendency to forget really nasty stuff after it's stopped happening for a while
• Disappointment Aversion: we avoid situations that produce worse results than we wanted, even if objectively good
• Disposition Effect: we prefer to sell shares whose value has increased and keep those whose value's dropped
• Dread Risk: an irrational fear of extreme events.
• Dunning-Kruger Effect: some people never learn by experience
• Economic Reflexivity: the way that the economy changes people's behavior, which changes the economy
• Easterlin Paradox: between countries, having more money doesn't make you happier:
• Familiarity Effect: being familiar with something makes you favour it:
• Fallacy of Composition: the tendency for individuals to act in their own self interest and, in by doing so en-mass, to cause
•
•
themselves to lose out
Fallacy of Frequency: we see regular patterns where none exist:
False Memory: memory is a construction, not a direct recollection
pima
7. Two Systems of Thought
Behavioral Economics
and Insurance:
Improving Decisions in
the Most Misunderstood
Industry
pima
8. Fast and Slow – System 1
• System 1
– Thinks Fast
– Always on
– Looks for patterns and
finds them
– Answers questions,
even if it has to make
them up
– Sometimes makes
mistakes
pima
9. Fast and Slow – System 2
• System 2
– Thinks slow
– It is analytical and
reflective
– It tells stories
– It will sometimes stop
System 1 to analyze the
problem, and that’s
good
– But…
pima
10. Fast and Slow – System 2
• System 2
– Capacity limitations;
can’t review all of
System 1’s conclusions
– Sometimes creates
stories to support the
incorrect conclusions;
justify why it was good
to take the wrong
shortcut
– So, Systems 1 and 2
sometimes make
errors
pima
12. Trouble with probability and risk
People tend to
misjudge probability
Emotions like regret and
disappointment lead to
Aversion of Risk
Probability Tree Risk aversion
pima
13. Insurance essentially puts a price on risk based
on the probability something bad will happen
People misjudge probability and avoid risk
You would think that would play right into our
hands as insurance marketers
And you would be wrong…
pima
14. • Because…
• The risk aversion becomes
risk seeking in some
scenarios
• When one choice is a sure
loss, and the other choice is
a greater loss that is not
certain to happen
• People tend to take their
chances and not accept the
sure loss hoping that the
possible greater loss
doesn’t occur
pima
15. • Because…
• The risk aversion becomes
risk seeking in some
scenarios
• When one choice is a sure
loss, and the other choice is
a greater loss that is not
certain to happen
• People tend to take their
chances and not accept the
sure loss hoping that the
possible greater loss
doesn’t occur
pima
16. 100% 99.7% chance you lose $0;
chance you 0.3% chance you lose $54,000
•lose $500 one is asked to pay premium (a sure loss) in order to avoid a
Like when
possible greater loss (whatever risk is being insured)
• So guess what Sisyphus, the very people we’re trying to sell to are
hardwired to avoid buying what we’re selling
pima
17. o here we are,
rying to sell a product our prospects are
ardwired not to buy
e offer confusing choices and make it
difficult to purchase
What can we do?
pima
18. e have some control over the
choice and buying process
problems the industry has
created for itself
?
pima
19. fMRI
here it happens helps us
understand why it happens
eal vs. Claimed Response
Implicit Association
pima
20. f we can learn where
and why things happen
e can design
better roadmaps
nd help people make
better decisions
pima
24. Optimize Online
Prospects & Quote
Conversion
Brian McConnell, RedEye
MidYear Meeting
July 21, 2012
pima
25. Building a Flexible &
Relevant Product
Mary Quill, Axis Accident & Health
MidYear Meeting
July 21, 2012
pima
26. The Time is Right for
Legal
David Beldsoe, ARAG
MidYear Meeting
July 21, 2012
pima
27. Changing Ways:
Understanding “How
Buyer’s Buy” Is the Key
to Your Future Success
Robert Stagno, Paradysz
MidYear Meeting
July 21, 2012
pima
Editor's Notes
It’s hard to sell insurance. I know that’s something you already know, and probably a crappy way to start this presentation because it won’t ignite anything. But do you know why it’s hard to sell insurance? I have some thoughts about that I’d like to share with you.
As an industry, we’ve made it hard on ourselves. I’m sure we could identify many examples of hurdles we’ve created. One example is the paradox of choice -- too many companies offering too many choices without enough differentiation among them.
And I don’t know if the price is right, but I do know it’s often hidden. We don’t show the final price until after we’ve collected a lot of very personal information, some of it in the form of bodily fluids we collect. And after all that, sometimes we won’t sell at any price.
There are cognitive and behavioral biases hardwired into the brains of consumers, and some of them make it hard to sell insurance. I recently found this list of over one hundred biases which I will let you read now… The biases exist because of how the mind works.
An important thing to understand about how the mind works is that it has two systems of thought. Now, I didn’t make this up; smart people like these two Ivy League professors did. I’m just going to relay a slice of what they’ve written about.
So, back to the two systems. System 1 thinks fast. It’s always on, looking for patterns and finding them. It answers questions; if it doesn’t know the answer it will make up a different, related question that it can answer. But sometimes it makes mistakes.
Then there is System 2. It thinks slow. It is analytical and reflective. It tells stories. Sometimes it will stop System 1 to analyze a problem, which is good. But…
System 2 has capacity limitations. It can’t review all of System 1’s conclusions. When it does engage, it will tell a story about what it finds, and sometimes the stories support the incorrect conclusions or justify taking the wrong shortcut. So, Systems 1 and 2 work very well together most of the time, but even working together they sometimes make mistakes.
Our minds are prone to make mistakes judging probability and assessing risk. On the left we have a probability tree – this one happens to be related to the Monty Hall problem – number 73 from that list you read. On the right is an illustration of Prospect Theory demonstrating risk aversion.
Even a relatively simple probability tree gets complicated quickly. And asymmetrical curves result when human emotions like regret and disappointment are introduced into the decision-making process. So, the takeaway here is that people are prone misjudge probability and they have an aversion to risk.
Given that insurance essentially puts a price on risk based on the probability that something bad will happen, and that people tend to misjudge probability and avoid risk, you would think that would play right into our hands as insurance marketers. And you would be wrong…
Because the risk aversion becomes risk seeking in some scenarios. For example, when one choice is a sure loss, and the other choice is a greater loss, but one that is not certain to happen, then people tend to take their chances. They do not accept the sure loss that is small in hope that the greater loss doesn’t occur.
So what would that look like in real life? Well, it might be presented as a sure ‘loss’ of say $500 versus a loss of say $54,000 that is only 0.3% likely to happen. People would likely prefer to keep the $500 in their pocket and hope the $54,000 fire happens to their neighbor.
So guess what Sisyphus? We are trying to sell a product our prospects are hardwired not to buy. We also offer too many confusing choices and make it difficult to purchase. So, what can we do?
Well, we could try to simplify the choices, offer greater transparency in pricing and make the buying process simpler. But why bother with that when there’s still that wiring problem? What can we do about that?
As much as we would like to, we can’t just go in and change the wiring. But, we can understand better how it works and tools like fMRI and Implicit Association can help us. Knowing where something happens in the brain gets us a lot closer to understanding why it’s happening, and helps separate real response from claimed response.
If we can learn where and why things are happening, we might be able to avoid some of the cognitive and behavioral biases. We could design products that are easier for the mind to understand, and have better roadmaps to navigate them. And that will help people make better decisions about the risks they are trying to insure.
So if we can get at neuroscientist, a behavioral economist, and an actuary together in a lab to study the neuroscience of individual insurance buying decisions, then maybe at a future PIMA meeting there will be a presentation to enlighten us about what they found.
Only 15 seconds left…I hope I sparked some interest, and maybe, just maybe, ignited something. Thank you.