Insuring Behavior Change

Over the past decade, behavioral science has gone from a relatively unknown field to a darling of both the private and public sectors. More and more, “nudge units” (or behavioral science teams) have been popping up inside organizations big and small, including the pioneering Behavioral Insights Team (BIT) launched by the UK government in 2010. 

Whether they’re part of a company selling soft drinks or governments developing new legislation, nudge units have the potential to completely transform how organizations approach their work. So far, behavioral science units have done everything from reducing the overprescription of antipsychotic medications to increasing customer retention at one of Google’s call centers.

Nudge units have huge potential for the insurance sector in particular. Insurance companies face an uphill battle when it comes to public opinion: a 2018 survey reported that 43% of people do not trust their insurers, while only 42% believe that insurers act in the best interest of their customers. In fact, research has found that between 25–35% of people see insurance fraud as an ethical practice. It’s no wonder that dishonest claims are such a widespread problem, estimated to cost $40 billion each year in the U.S. alone. 

Behavioral science is an ideal tool to help firms to provide a better customer experience and tackle fraud. Research suggests that up to 30% of claim revenue is lost to “soft” fraud, or “smalltime cheating by normally honest people.’’ In other words, some situational factors are pushing otherwise ethical customers to fudge the numbers just a bit when they submit an insurance claim. Insurers could potentially save billions by understanding the reasons why people are so inclined to cheat, and developing nudges to counteract them.

Insurance companies (namely health and auto insurers) also have a vested interest in helping their customers consistently make healthy choices, like exercising regularly, eating a healthy diet, and driving safely — all areas where evidence-based behavioral change techniques are indispensable tools for achieving consistent and sustainable results. Services like United Healthcare’s Motion program, for example, leverage behavioral science and digital technology to incentivize customers to stay in shape. 

But adding a behavioral element into an organization’s day-to-day work can be trickier than it sounds. From hiring the right candidates, to integrating the new team with existing departments, to understanding what kind of projects to focus on first, there’s a lot of steps in the process that can be daunting, especially if the people leading the charge are new to behavioral science themselves. At the end of the day, even though nudge units have huge potential to add value and change people’s lives, inertia often holds organizations back from taking the first step.

At TDL, we’re all about democratizing the insights of behavioral science. Our goal is to help organizations overcome barriers like these, so that they can start applying research findings in their own work. In fact, this was the main focus of one of our earliest projects: partnering with a major North American insurance company to help them launch a new nudge unit, built to suit their unique organizational culture and structure. We got a little help along the way from our TDL Advisors, some of whom have spent more than a decade building nudge units inside institutions like the White House and Google.

In this project, TDL took on the role of nudge unit architects. We started out by collecting data: sitting down with executives and managers to get an in-depth understanding of the company and how it worked, interviewing leading experts on nudge units, and reviewing internal documents from the client. This helped us understand where the biggest opportunities were for behavioral science to make an impact, and where a new behavioral team could fit in.

Once we had drawn up a nudge unit blueprint, we led the charge to make it a reality. Based on our conversations with existing teams, we created a profile for the ideal candidate to head up the team, then sourced them from our networks of behavioral experts. 

Finally, we put it all to the test with a massive pilot study. We walked the new team through the process of analyzing over 170,000 hours of agent phone calls, diagnosing behavioral barriers, and developing a practical intervention to help improve the rate of successful sales calls. By the time we stepped back, we’d launched a fully functional unit poised to increase the organization’s revenue by millions, based on its first project alone.

Behavioral science can add value to virtually any project, whether that means boosting sales or boosting vaccine uptake. But there’s no one-size-fits-all roadmap to launching a nudge unit. Just think back on the different companies you’ve worked at and the teams you’ve been a part of: each had its own dynamic and its own approach to getting things done. Through partnership with organizations of all kinds, we’re hoping to kickstart a behavioral revolution, so that we can all reap the benefits of this growing field.