Suffolk University professors are bringing their expertise in behavioral economics to Gen Re through a new business relationship designed to benefit the reinsurer’s clients in the areas of underwriting, marketing, client engagement, customer service and more.
Behavioral economics draws from the fields of psychology and economics to better understand human behavior and decision-making when they deviate from strict rationality.
Over the past several years, Gen Re has conducted and shared results of several in-house behavioral economics studies focusing on key areas of interest to insurers. The company said this research has helped its reinsurance clients improve disclosure on insurance applications and personal history interviews, as well as explore policyholder communication, financial planning presentations, marketing materials and website design.
Expanding upon the Gen Re Research team’s existing efforts, the relationship with Suffolk University will provide the ability for Gen Re clients to complete professor-developed and led behavioral economics training modules, extending from basic to advanced courses. It would also broade outreach on the topic of behavioral economics and related applications in the insurance industry. Suffolk University professors will speak at Gen Re sponsored events.
“Traditional economics is all about rational individuals, how they respond to prices, etc.,” explains Jonathan Haughton, professor of Economics at Suffolk University in Boston. “However, there are all sorts of cases where we don’t behave quite so rationally.”
Haughton and Suffolk Assistant Professor Lawrence De Geest both teach in the field of behavioral economics and are sharing their knowledge with Gen Re’s Research team. De Geest’s research examines the emergence of social norms and the effect of information on decision-making.
“All kinds of psychological factors outside of traditional economics play into people’s decision-making,” Haughton says. “For example, when it comes to health and medical disclosure, the way a question is framed in a questionnaire can make a big difference to what people choose to disclose.”
Haughton said “loss aversion” is another psychological factor that can affect economic decision-making. “People are very averse to losing things to which they have become attached, so instead of saying, ‘Save $50 a month,’ you might say ‘Stop losing $50 a month. Don’t lose your ability to support your household,'” he added.
It’s important for insurers to pay attention to behavioral factors, according to Keith Brown, senior vice president and head of Individual Life at Gen Re. “At a time of rapidly evolving underwriting approaches, uncertainty about future morbidity and mortality improvement, and increased insurer focus on client engagement, the behavioral economics training is being made available to Gen Re clients at an important industry inflection point,”
Gen Re is a Berkshire Hathaway company.
Topics Education Universities
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