How Your Subconscious Mind Could Save You Money on Car Insurance

The games your head plays could have a serious impact on your wallet
Become a better decision-maker by making these three mental facets work for you
  • By Jeff Beckham
  • |
  • Nov. 8, 2018
  • |

How Your Subconscious Mind Could Save You Money on Car Insurance

The games your head plays could have a serious impact on your wallet
Become a better decision-maker by making these three mental facets work for you
  • By Jeff Beckham
  • |
  • Nov. 8, 2018

Think of all the choices you make on a regular basis:

What should I wear today?

Try a new restaurant or stick to an old favorite?

How should I vote in the midterm elections? New indie movie or the latest from Marvel?

How do I allocate my 401(k)?

Some of those decisions are bigger than others. But they all bounce around your brain until you take some sort of action. They all have consequences. And they’re all influenced by some factors that might surprise you.

So let’s take a closer look at what your brain does when you ask it to make a choice.

How We Decide

At The Zebra, we’re extra-motivated to understand how people make choices. That’s because we’re in the business of helping people choose which car insurance policy is right for them.

Now, granted, car insurance probably isn’t very high up in your ranking of Major Life Decisions — especially not the fun ones. But it’s a big deal. The right choice can save you a lot of money and stress.

And, as we discovered, looking at how people choose which insurance to buy can shed light on how we make other kinds of decisions, too.

We’re going to ask you to do something you probably haven’t done before, nor cared to do: Think about how you made the decision to buy your current car insurance.

If you’re like most people, familiarity was a big factor in your choice. Perhaps you stayed with your current insurer without giving the decision a lot of thought. However, if you changed insurers, you probably chose a company you already felt like you knew through their advertising.

We're going to ask you to do something you probably haven't done before, nor cared to do: Think about how you made the decision to buy your current car insurance.

Repeated exposure to a message can build positive feelings, particularly for something like car insurance, which has a lot of hidden complexities. That’s according to Sheena Iyengar, a professor at Columbia Business School and the author of “The Art of Choosing.” She’s spent years studying the factors that influence our decisions.

In other words, because people aren’t going to sit down and compare the minutiae of different policies, companies know they need to build up a sense of friendly familiarity with prospective customers.

“That’s what Geico does very well, even though it’s a complex product,” Iyengar said. “They just have lots of different kinds of narratives and they just hammer you with them no matter where you are. Maybe people don’t understand exactly what the product means, but that particular one has become so familiar that they’re willing to trust it.”

Geico isn’t alone, of course. Like their Gecko, characters like Progressive’s Flo and Allstate’s Mayhem have become pop-culture staples, and you can almost certainly sing more than one insurance commercial jingle. When market research company YouGov published their first Ad Awareness Rankings, based on a single question—”Have you seen an ad from this brand in the past two weeks?”—Geico ranked #1, ahead of mega-brands like Verizon, McDonald’s, and Walmart.

Major insurance companies pour their resources into advertising because they want to be at the top of your mind when you’re ready to buy insurance. And their strategy works. State Farm, Geico, Progressive, and Allstate accounted for more than half of all the car insurance policies sold in the United States last year. And even though there are hundreds of companies offering policies, the market remains dominated by recognizable names. Beyond the Big 4, the top 10 companies claimed more than 70% of the market, while the top 25 carriers captured more than 85%.

You can make that familiarity work in your favor, using it as a shortcut when you don’t want to spend a lot of time making a decision.

Car Insurance Ads Grab Our Attention

But It Takes More Than Funny Commercials To Get Us to Buy

Most car insurance ads are designed to get you to remember the name of the company. They can't predict when you'll be looking for a new policy, but they want to be the first name you think of when you do.

Elisabeth Honka, an assistant professor of marketing at UCLA, reviewed nine years' worth of ads and insurance surveys and found that while advertising was terrifically effective at putting those big brand names in your subconscious, it didn't affect your final buying decision. That choice was ultimately driven by other factors, like the price. One of the surprising influences is what Honka called inertia, meaning sometimes it's easier to stay with your current company than switch.

"Even though I might request price quotes from other insurance companies, in the end, I still renew with my previous insurer," Honka said. "Here, it is important to keep in mind that this is different from not shopping at all and passively renewing an insurance policy. We find inertia to matter even if consumers shop around or request a price quote from other insurance companies."

Source: S&P Global Market Intelligence; National Association of Insurance Commissioners


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Fighting Decision Fatigue

Very often, our decisions hinge on how much time we have to make them. As we touched on earlier, every day of your life is filled with choices. If you spend tremendous time and energy on every decision, you’d be exhausted. And you wouldn’t get much done. There's a word for that: decision fatigue.

Fortunately, our brains have gotten really efficient about handling decisions. When we don’t see a lot of difference between the results of our choices, we don’t invest a lot of effort trying to understand the distinctions. Art Markman, a psychology professor at the University of Texas, explained how we do a cost/benefit analysis on each decision we make, weighing the time we spend making a decision against how good we feel once it’s made.

“Time is finite and so people have to make a decision about where they want to spend their time. If you don't feel like there's that much of a difference between the products, then perhaps you just go with something you feel comfortable with,” said Markman, who co-hosts the “Two Guys on Your Head” podcast. “I think that when it comes to insurance, in many cases people feel like there's not that much of a difference. So the cost of making a bad decision isn't that great because a bad decision isn’t going to be that much worse than a good one.”

The Jam Study

Too much choice can be debilitating. One of Iyengar’s most famous experiments is called The Jam Study. She rotated the two booths at a gourmet market, one with six samples and one with 24 samples. Although more people stopped when there were 24 samples, people bought 10 times more often when there were six samples.

No Time for Negativity

There’s a final aspect of our decision-making that’s harder to accept: studies show that we spend less time on choices that involve negative feelings.

Insurance certainly has its share of those.

First, there are those who see insurance as something forced on them. After all, states make it a requirement for drivers. Yet The Zebra’s recent Insurance Awareness Survey found that people who don’t see the value in insurance also had more questions about how it works, what it means, and what role they play in it. That lack of understanding may help explain why insurance salespeople ranked near the bottom of a nationwide poll on honesty and ethical standards. And why the social media accounts of car insurance companies are filled with people recounting their bad experiences.

One potential benefit of a bad experience is that it can lead to what Markman described as exploration vs. exploitation. Exploitation is picking the option that seems best for you right now, while exploring means going out there and gathering new information and potentially trying a different option.

“You're going to explore either when you have a feeling that the option you've picked has gotten worse for some reason or you have a feeling that somehow another option is gotten a lot better,” Markman said. “Either you had a bad experience or somebody you know has. You think there’s there's a case where your option isn't a good one anymore.”

I think that when it comes to insurance, in many cases people feel like there's not that much of a difference. So the cost of making a bad decision isn't that great because a bad decision isn't going to be that much worse than a good one.

5 Steps To Making Better Decisions

Now that you know what's going on behind the scenes in your mind when you make any type of decision, big or small, here are a few strategies to turn that to your advantage and make better choices.

  • Are you a "maximizer" or a "satisficer"?

    Are you a "maximizer" or a "satisficer"?

    A maximizer considered every possible option to determine the best one. A satisficer is happy with "good enough". Science tells us that satisficers are happier with their choices. (Bonus: more free time to do other things than fret over decisions.)

  • Who's the expert?

    Who's the expert?

    If it's a problem that you've faced before, feel free to go with your intuition. You've got experience dealing with that particular decision. But if it's a difficult decision or one filled with complicated details, don't be afraid to ask for help from someone who's been in that situation before. Their experience can give you a quicker sense of the answer than doing a ton of research.

  • Know when to say when.

    Know when to say when.

    Better decisions come from constraints. Know how much information you want to gather ("I'll decide when I know A, B, and C."). Excessive details often complicate the choice and waste your time.

  • Choose your battles.

    Choose your battles.

    Some decisions definitely call for careful consideration. Others, not so much. Don't spend hours looking at all the different types of salad dressing on the grocery store shelves. If a decision doesn't have long-lasting consequences or significant risk, go ahead and make the call.

  • Track your decisions.

    Track your decisions.

    Start keeping notes about the decisions you make, comparing what you expect to happen with what actually happens. Think of it like a project. You'll likely start to see a pattern and identify where you tend to make mistakes.