Loss Aversion: Selling the “What-Ifs” Without Fear Mongering
People are far more motivated by avoiding losses than they are by potential gains. This is the classic behavioral economics insight into loss aversion. So, instead of framing policies solely around the idea of “gaining peace of mind,” try explaining what they stand to lose if they don’t secure coverage.
“You’re not just buying a policy; you’re buying protection against the loss of your family’s financial stability. Think of it as paying a little now to avoid a whole lot of potential financial heartbreak later.”
Remember, don’t go full doomsday prepper! Clients shouldn’t leave your office terrified, just nudged toward valuing protection a little more.
The Power of Defaults: Opt-Out, Not Opt-In
Ever notice how we don’t unsubscribe from those newsletters we never read? Defaults are powerful because we tend to stick with them. Behavioral economics suggests setting the “default option” as the most comprehensive plan, which clients can downgrade from if they choose.
“Here’s the most coverage available to you. Of course, we can scale down if this isn’t quite what you’re looking for.”
Nine times out of ten, they’ll stick with the initial option or at least feel hesitant to remove parts of their coverage. After all, downgrading just feels like losing something valuable.
Anchoring: Show the High-End Package First
People tend to base decisions on the first piece of information they see—this is called anchoring. Show your premium, high-coverage option first, even if you don’t expect them to buy it. Then, follow it up options at a lower price point.
“Here’s our best option for complete peace of mind, and these other options are scaled back slightly.”
Even if they go with a less expensive plan, it’ll seem like a bargain compared to that initial anchor—and they’ll feel like they’re getting a great deal.
The Endowment Effect: Make It Personal
The endowment effect refers to the idea that people value something more once they feel like it belongs to them. If you can get clients to envision the policy as “theirs” before they sign, they’ll be more likely to commit.
“Imagine yourself three years from now, with your family covered under this policy, feeling that sense of security.”
Or, take it a step further by personalizing hypothetical scenarios that involve their children’s education or mortgage security. This approach brings a little slice of emotional ownership into the process.
Social Proof: Everyone’s Doing It!
Social proof, aka “peer pressure” for grown-ups, is one of the strongest motivators for humans. To implement it in your sales process, try positioning coverage as the responsible choice that “many people just like them” make.
“Most families we work with in your situation choose this level of coverage to ensure they’re well-protected.”
Hearing that their peers have done the responsible thing can be the nudge your clients need to join the trend.
Present Bias: Make the Future Feel Close
Present bias is why people buy dessert even though they swore off sugar. For life insurance agents, present bias is a challenge because benefits feel distant. Bring that future into the present by emphasizing specific life events, like sending a child to college or buying a dream home.
“Imagine your family, in 10 years, using this policy to make those dreams possible—no financial stress involved.”
When you make the payoff feel just a little closer, clients start to feel like they’re securing the present, not just some distant hypothetical.
A little paradox of choice: the more options you give, the less likely people are to pick one. Too many plans, riders, and add-ons can overwhelm clients into inaction. Behavioral economists recommend the “Goldilocks Principle”: not too many choices, not too few—just right.
Present your clients with three levels of coverage. Describe them in ways that make one plan naturally appealing as the “just right” option. This will make decision-making easier and help clients feel more in control.
Ultimately, applying behavioral economics is about understanding why people make decisions the way they do and using that knowledge to guide clients toward choices that genuinely benefit them. With a few strategic nudges, you’ll be helping clients make sound, well-informed decisions—and closing more deals in the process.
