Leveraging Behavioural Science in Insurance: A Systematic Review

Over the past decade, the U.S. insurance industry has faced stagnant growth due to limited technological advancement, information asymmetry and waning customer satisfaction. Collectively, these factors, among many other structural drivers, impede incumbent players to attract and retain their customer base. In recent years, a number of insurance technology “insurtech” firms have emerged, seeking to disrupt and make existing activities within the insurance value chain more efficient, primarily through digital innovation. The discussion in this white paper is structured twofold. First, I walk through the current U.S. insurance landscape, innovations, and challenges within the value chain. In particular, I focus on the underwriting and claims activities in the context of property & casualty insurance. Second, I illustrate how behavioural science serves as a valuable use-case to improve customer engagement and retention. Through a combination of meta-study methods and case studies, I identify five key areas of behavioural change: reducing switching behaviour, managing uncertainty, increasing trust, encouraging accurate information disclosure, and providing customer autonomy. Exploration of behavioural science in insurance has meaningful implications for industry players, not only in terms of diagnosing biases, but also in terms of how they can elicit positive behavioural change in the long-run.