It looks like “keep it simple…” holds great credence in the world of motor insurance, if new research by behavioural science experts Decision Technology (Dectech) is to be taken to heart.
Citing people’s cognitive bias towards simplicity, the research consultancy explained the findings of randomised controlled trials conducted for its report Engine for Growth. The study found that of the consumers who were offered either four, six, eight, or 10 add-ons to choose from, those offered more were on average less likely to purchase the final insurance deal.
According to Dectech, this is because consumers are more likely to feel overwhelmed when given greater choice, resulting in them being more uncertain about the final offer and less likely to go through with the purchase. “Decision fatigue, where consumers make poorer decisions when they have to make lots of them, may also play a role,” it added.
One recommendation is to consider offering “more novel” add-ons for free, instead of selling them as extras. Examples of which are maintenance alerts and safe-driving rewards. Meanwhile the likes of windscreen and breakdown cover or courtesy cars prove to be the most popular add-ons.
“These results provide food for thought for motor insurance providers,” said Dectech director Dr Henry Stott. “While traditional market research has suggested consumers want a big ecosystem of add-ons, our behavioural research methods show that they are actually less likely to buy when offered one.
“This presents a win-win opportunity. Regulators have shown willingness to investigate add-ons in the past and may decide to restrict what providers can offer if further research confirms offering lots of extras causes decision fatigue and negatively impacts consumer outcomes.”
From Dectech’s perspective, it is in the interest of both insurers and regulators for customers to be offered a smaller, optimised range of add-ons.
“Our extensive research into how consumers behave when offered add-ons with motor insurance shows that there is appetite for extras, but providers need to be smart about how they sell them,” said Stott.
