People don’t always make “logical” decisions about life, but insurance seems to highlight this tendency even more. Agents discuss the risks and reasonable premiums with clearly underinsured people who still say, “Let me think about it.” Or worse, they agree and then vanish off the face of the Earth.
This is where behavioral economics comes in. It’s not a theory from a dusty textbook but insight into how real people behave, especially around money, risk, and decision-making.
When you understand how people think, you can effectively guide clients to policies without feeling like a pushy salesperson. Let’s break down key behavioral principles and how you apply them in everyday sales conversations.
Loss Aversion: People Hate Losing More Than They Love Winning
Loss aversion is a psychological concept that states loss impacts people psychologically twice as much as gain. We’re motivated to avoid a loss more than to achieve a gain, with losing $500 feeling way worse than gaining $500.
How to Use Loss Aversion
Don’t just talk about what clients get; focus your discussion on what your prospect stands to lose if they don’t act. Instead of saying, “This policy gives you extra coverage for water damage,” try, “If your basement floods and you don’t have this endorsement, you could look at $15,000 in damage that your standard policy wouldn’t pay a dime to fix.”
People will act faster to avoid pain than to pursue a benefit.
Choice Overload: Too Many Options = Paralysis
Choice overload describes how people become overwhelmed by the number of choices they have to make in a decision. When people are given too many choices, they freeze and choose the easiest path of doing nothing at all.
How to Use Choice Overload
Stop giving people every option under the sun. Narrow it down to the best coverage options that solve the prospect’s problems or concerns.
Don’t say, “We’ve got five different plan structures you can look at.” Go with, “Most clients in your situation go with one of these two. I’d recommend Plan A because it gives you more long-term value, but Plan B is a little more budget-friendly. Want to walk through the differences?”
You’re the guide they chose out of trust, so cut through the noise to get them where they want to be with a solution you know they need and want.
Default Bias: People Go with the Flow
Default bias describes how people tend to stick with what feels like the “default” or regular choice because it’s safer, easier, and requires less thinking.
How to use Default Bias
When you present a prospect with what you believe are the best options, make your recommendation feel like the standard, normal choice.
“Most businesses I work with choose this level of liability, and it’s what I’d go with if I were in your shoes.” People want the assurance they’re not doing something “weird,” so frame your recommendation as the wise, safe default decision.
Present Bias: Now > Later
Present bias is simple: people want benefits sooner rather than later, even when the long-term benefit is better. This is why people buy donuts (instant gratification of the yummy treat) instead of kale (long-term, much healthier for you).
How to Use Present Bias
Insurance is a long-term safety net, but you’ve got to show short-term value too.
“Besides the coverage, this policy gives you access to 24/7 roadside assistance, home security discounts, and a multi-policy discount. So even if nothing major happens, you’re still getting value starting day one.”
Ensure they know they’re getting something now other than just “peace of mind” for something that may happen later.
Social Proof: People Do What Other People Do
Social proof is looking to others to decide what’s regular or proper, especially when unsure. We gain validation with a degree of conformity.
How to Use Social Proof
Mention what others are doing but be specific on relatable details for your prospect. “Three other business owners in your same complex just added this cyber policy after that data breach last month.”
People trust the crowd more than numbers on a spreadsheet, so let the crowd speak for you. Validation is a critical need that is much easier to accomplish with real-life examples.
Framing Effects: How You Say It Matters
The framing effect is how you present a choice that impacts how people feel about it. You have the same facts but achieve different results depending on how you present them.
How to Use Framing Effect
Let’s say you’re quoting life insurance, saying, “It’s $600 per year.” That sounds like a lot of money, so instead, say, “It’s $50/month, or less than a dinner out, and it guarantees your family won’t be financially stuck if something happens.”
You can frame it in your presentation in a relatively less painful way by breaking big numbers into smaller monthly amounts and comparing them to everyday expenses.
Anchoring: First Numbers Stick
Anchoring is a cognitive bias in which we rely too heavily on the first piece of information offered in a decision-making process. On insurance matters, the first number someone hears becomes an “anchor” in their mind that they stick to, even if it’s arbitrary.
How to Use Anchoring
Start with the higher-value option first, even if you expect them to go with the cheaper one, so they have this number in mind throughout the discussion. “Here’s the premium with the full $1 million umbrella and flood coverage, about $118/month. If that’s more than what you want to spend, we can scale it back.”
Now, $85/month feels like a deal, whereas if you started with $85, the $118 feels “expensive.” Anchoring is another way to present facts in a more relatable way to the prospect’s needs or concerns.
Bringing It All Together for a Close
You don’t need a degree in psychology to sell smarter; you need to remember a few key things about how people think:
- They fear loss.
- They want simple decisions.
- They follow others.
- They want benefits now, not later.
- And they feel their way through decisions, even when they say it’s “all about price.”
Using this guide in the emotional insurance world shows you as the calm, confident, trustful expert who “gets” how people think. This placement wants people to do business with you.
Agility Market Managers and product specialists develop these strategies and tactics daily to benefit insurance agents. Our team draws from its previous experience as insurance agents like you who need to grow business to maximize your benefit on this subject.
If you need assistance using behavioral economics to close more prospects in your agency, contact the market manager near you or the Agility product specialist expert you need directly using our Agility Sales Support page for their contact information. You can also contact Agility at (866) 590-9771 or email support@enrollinsurance.com to reach the agent support team about this assistance.
Let Agility use behavioral economics to provide the psychological edge you need to understand your prospect’s mindset.
