Saturday, April 05, 2014

FCA behavioural experiments on insurance add-ons

I blogged before about the UK Financial Conduct Authority's (FCA) initial work on behavioural economics applied to regulation. They have recently released another interesting and important study on the behavioural economics of insurance add-ons (Thanks to Zanna Iscenko for emailing these). Details of the studies are available below, including a short version. The key finding of the study is below showing that the format of how product insurance is sold has a substantial effect on consumers' ability to find value. While the experiments are on hypothetical products it provides important initial information on how these markets might be functioning. It is clear that this type of applied behavioural research in regulatory contexts is going to grow substantially over the next decade.

Iscenko, Z., Duke, C., Huck, S. and Wallace, B. (2014) How does selling insurance as an add-on affect consumer decisions? A practical application of behavioural experiments in financial regulation, FCA Occasional Paper 3.

A short graphic on some of the key results of the experiment can be found here:

Further technical details on the analysis of the findings can be found at:
London Economics (2014) Study into the sales of Add-on General Insurance Products: Experimental consumer research. A report for the FCA.

The wider market study can be found here 

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