Art. 15 · Where the premium goes · 3 min read
People buy insurance emotionally
These are the ordinary mental shortcuts everyone uses under uncertainty. They have a predictable price, and it is payable every year.
Anchoring. The renewal invitation arrives with last year's number on it, and every subsequent thought happens relative to that number. A 6% increase feels like the question. Whether the original figure was ever right does not come up.
Vividness. Fire is easy to picture, so it feels likely. An employment tribunal, a professional negligence allegation or a serious data breach are hard to picture and feel remote, and are, for many businesses, considerably more probable. We insure what we can imagine.
Availability. A supplier down the road had a flood, so flood moves to the top of the agenda for eighteen months. One nearby event does more to change buying behaviour than any amount of national data.
Loss framing. Raising an excess from £1,000 to £10,000 feels like giving something up, even when the premium saving is worth more than the exposure. Taking cover away feels like a loss; the money saved feels like an abstraction.
Inertia. Renewing is one email. Reviewing is a week of work. The default wins, year after year, and the drift compounds.
The fix is not to try harder to be rational in the meeting. It is to change when the thinking happens: decide against numbers you prepared before you saw the price.
Use it
- Write your own view first. A month before renewal, write down what you think each risk is worth and what you would be willing to carry. Then open the invitation.
- Review the boring policies. The ones nobody has an emotional reaction to are where the drift accumulates.
- Put the excess decision in money. "£10,000 excess saves £4,300 a year" is a decision. "Raising the excess" is a feeling.