They think they know how

Why do some people go online and suddenly think that they are proficient in managing their own insurance?

Tuesday, October 2nd 2018, 9:00AM

by Russell Hutchinson

It’s a question that has baffled many insurance advisers.

Faced with a client that is about to throw the product baby out with the price bathwater, it can be very frustrating. This is why it happens.

There is a lot of research out there which suggests that humans have some charming characteristics that enable us, frankly, to bluff our way through a situation with just the knowledge we have. No matter how little.

If asked a question we don’t know the answer to, we often give an answer to a very similar question we do know the answer to – without even noticing. That’s according to Daniel Kahnemann and Amos Tversky.

If we look up just one or two articles on the internet, we can substantially over-estimate our knowledge of a subject - according to researchers Fisher, Goddu, and Keil. We think we know how to do difficult things, just because they can easily be seen or watched, according to researchers Kardas and O’Brien.

That was the entire basis for a TV game show in the UK.

Worse, once we think we know, our opinion can be darned hard to shift, according to professor Steve Sloman, who has studied such things “We're biased to preserve our sense of rightness”.

All that adds up to a pain in the backside for anything that looks simple, but isn’t.

It applies as much to insurance advice, as to marketing, or designing road intersections and public transport systems.

I’ve probably been as guilty as anyone, after spending time stuck in a delay due to roadworks, of criticising how the work was being done to anyone in the car with me.

What do I really know about roadworks? Not much.

Here are some clues to help you manage the situation with clients.

Provide some information up front to help them make an informed choice, based on more than just what they knew when they walked in.

Provide evidence.

Better than that: let them discover the evidence through a process that allows them to form their own changed view, rather than just arguing with them. If a client insists on some assumptions that you know are erroneous, you can dispute them, but note them as a hard scope boundary.

Lastly, check your own blind spot. It isn’t just clients that can suffer from the problem.

When did you last review your assumptions behind your views and check to see if there remains a good stack of quantitative information to back them up.

When did you last check to see if alternative views were emerging. Professor Sloman is right that you can’t do this all the time – or you’d never get out of bed and achieve anything.

But it is worth doing every so often.

Tags: Russell Hutchinson