A few months ago, Dr. Anand Rao of PwC published an article in Carrier Management that explored a few of the psychological barriers to innovation. It was an article that stood out because it’s not really insurance-focused, but entirely relevant to insurance and its laggard approach to innovation thus far (right, Mr. Wilson from Aviva?).
Dr. Rao identifies three biases that sand the skids of change. Here they are, quoting his article:
- Status Quo Bias: Over the past couple of decades, behavioral economics has documented human bias toward the status quo. This individual bias manifests itself at the organizational level, as well—very seldom do organizations willingly want to change—and change usually occurs because of external factors.
- Risk Aversion: Evolution has programmed us to avoid risks. The amygdala, the integrative center for emotions in the brain, inclines us to avoid risks. This individual trait carries over to most institutions, except for the few that deliberately have been designed to be risk-seeking. By their very nature, most insurers are very careful about which risks to take.
- Self-Serving Bias: People often conflate what is fair with what benefits oneself. Similarly, we are open to making by gut instinct decisions that favor ourselves.