Purchasing insurance is completely different from any other shopping experience, mainly because it is intangible. Unlike a pair of shoes or a new dress, insurance isn't something you can wear out on the town or show off to your friends. Rather, it lingers as an invisible safety shield, ready to offer protection in a time of need.
Most consumers buy products or services because it brings them pleasure, but insurance is bought to prevent or ease loss. While having insurance might bring relief in the event of a disaster, it isn't exactly something consumers jump for joy about when they've purchased it.
On top of that, much of the reason consumers buy insurance in the first place is because it is legally required. But what if nothing happens that causes you to have coverage?
In this case, it can feel like a waste of money and lead to consumers lowering or cancelling their policy. When people develop this mindset, it can have far-reaching consequences.
This is due to our perception of risk. As humans, we tend to overlook risks even when the facts stare us straight in the face.
David Ropeik, an international consultant in risk perception and communication, explains this theory in a Soapbox Science blog post. He talks about how human risk perception evolved, its impacts, and how we can improve it.
Ropeik writes, "No matter what the hard risk sciences may tell us the facts are about a risk, the social sciences tell us that out interpretation of those facts is ultimately subjective."
Let's break it down even more. No matter how right we feel in our perceptions, we still tend to be wrong about risk.
Ropeik attributes this to the fact that we worry about certain issues more than we should, such as vaccines or nuclear radiation. Those issues are so broad and so far-fetched that there should be no room for worry.
Instead, we tend to worry less about some problems that need our more immediate attention. Issues like climate change and obesity are only getting worse. Yet, we turn a blind eye because they don't seem to be as big of a global issue. Little do we realize that these "smaller" problems can and will increase our risks much more than the "bigger" issues.
Briefly summarized here are several reasons why the human perception of risk is highly subjective and imperfect:
- Human brain chemistry confirms that “…instinct and affect (feelings) play a significant role, sometimes the primary role, in how we perceive and respond to danger”
- Our perception of risk is meant to protect us from imminent physical danger. Instincts and mental shortcuts happen outside of and sometimes before a conscious analysis of risk can occur
- Psychological factors make some risks feel more or less threatening than they actually are
- There is a cultural component to risk perception. Our thoughts and opinions tend to mirror those with whom we most closely identify, based on how our culture thinks society should work
So how are you, the insurance agent, supposed to help your clients overcome these false perceptions? The answer is by presenting facts and analysis.
Admittedly, it’s a bit of a tightrope. You don't want to scare off a potential client with gloomy scenarios, but you also shouldn't sell a policy without addressing false risk perceptions. Many think they'll be that tiny percent, and that's where you must emphasize the importance of "better safe than sorry."
In this delicate scenario, there are two basic approaches. First, conveying to consumers that coverage is cheaper than they think. Second, that their risk is higher than they realize.
A common objection is that insurance is "too expensive." Well, while that may depend on the amount of coverage or the amount of times you have accidents, it isn't all true.
Actually, insurance rates can cost as low as $13 a month, depending on the type of insurance and policy. Some consumers spend more on coffee per month than they would paying their insurance bills, they just don't realize it. Commodities like a daily cup of coffee, eating out for lunch or dinner, and monthly subscriptions to TV channels or magazines all add up and can cost much more than a monthly insurance rate.
In any case, ask your customers how much they value protection. Odds are they will say they highly value it, and that's where you enter with the argument that insurance is practical and affordable.
Likewise, consumers can choose not to buy insurance because they believe nothing bad will ever happen. It is incredibly important to steer your clients away from this mentality and change their risk perception.
That's not to say being pessimistic and telling them they are going to get into a fatal car accident is the right way to go. Rather, encourage them to think logically and to think forward. Having the "it'll never happen to me" mentality is just another way to ignore the facts.
In situations like these, it's more sensible to go off of hard evidence than off of gut feelings. Buying insurance is thinking ahead and ensuring their and their family's protection. Even if they never experience a hardship or accident in the remainder of their lives, they'll still be thankful that they always had the proper coverage.
All that being said, it's worth it for your customers to know the consequences of not buying insurance. It is also important for them to understand the benefits of having insurance to protect them.
The world we live in as well as the people who inhabit it are unpredictable. We never know when something might happen. What we do know, however, is that with insurance, we will be ready and protected.