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Is Perception Bias Hurting Your Insurance Business?

by Precise Leads

July 12, 2017

The first step is to confront perception bias in your clients — and yourself.

Perception bias, also known as cognitive bias, refers to ingrained, sometimes irrational beliefs that shape our decisions. Perception bias takes many forms, such as bandwagon bias (the tendency to adopt a concept because many others hold the same belief), and confirmation bias (people refuse to deviate from their long-held notions). Nudging a person away from their perception biases is no easy task (just ask any marketer).

Perception bias harms every industry, writes John Pojeta, VP of Business Development at The PT Services Group. But it be can especially pervasive in insurance sales and financial services when prospects hear unfavorable stories about advisors and agents. “A few high-profile instances of negative behavior can make some prospects assume that all advisors are only in it for themselves and have no real interest in doing good for their clients,” Pojeta says.

In the insurance industry, annuity expert Jack Marrion, head of consulting firm Advantage Compendium, Ltd., explains many clients and prospects mistakenly believe insurance products are investments rather than risk management tools. Consequently, if they don’t see a return on all the premiums they’ve paid for flood or long-term-care insurance they let the policy lapse.

“The decision to drop coverage is also influenced by projection bias, meaning that since the bad thing didn’t happen in the past, we assume the odds are lower that it will happen in the future,” Marrion writes in Broker World Magazine. But as any insurance agent knows, unexpected catastrophes happen and your clients are best served by planning for any eventuality.

Confronting Perception Bias in Clients

Pojeta recommends confronting perception bias head-on by discussing any preconceived ideas a prospect or client may harbor. “We have to address the perception bias our prospects might have, and find ways to overcome it to show [them] who we really are,” he stresses.

Challenge the Status Quo

Status Quo” bias prevents clients and prospects from considering something new, like an insurance policy, because it’s unknown to them. They also fear the change buying a policy represents. In those instances, Pojeta advises talking to clients to find their pain points. Then, explain to them how insurance solves those potential hardships. Insurance takes the fear out of the equation.

Tell Stories

Selling life insurance, in particular, can be difficult at times. Many avoid thinking about their mortality. Marrion illustrates this bias with the example of a parent who spends “$9 a month to cover the lost of her $400 phone, but not to provide $100,000 to help cover her income if she dies.” Overcome the client’s preconceived aversion to life insurance by telling the story of family saved from financial ruin because the breadwinner held a life insurance policy.

Confronting Your Own Perception Bias

Just like clients, insurance agents aren’t immune from perception biases, Pojeta explains. These vary for each of your target audiences, which influences how you sell to your clients and prospects.

Overcoming perception bias requires constant education from industry experts and keeping abreast of new developments. “[We] challenge our own thinking so that we don’t get locked into a view that holds us back,” Pojeta says.

It also demands agents and advisors recognize their own biases and work to surmount them, Pojeta says. “The more you address your own perceptions and the perceptions of your prospects, the more your conversation can center on what’s actually at stake, which is a big win for any skilled advisor.”

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