This repository contains all public files for my master's thesis at the University of Mannheim.
09/2019 - 03/2020

Reviewer: Prof. Dr. Hartmut Höhle - Chair of Enterprise Systems Supervisor: Florian Pethig

When young people start their professional life there is one thing usually everyone has to take care of. But not only young professionals, also adults and elderly people are concerned with the topic. Finance and Insurance. One of the most important topics that can take a lot of worries away. But the problem is: How to decide? In this complex domain, decisions are hard to make and usually need some kind of domain expert or broker. On the other hand, making good choices is crucial, because of their long term effect in the future.

In times of digitization, the access to information is becoming easier. But not the choices itself. At the same time, the number of self services increases rapidly, so that some banks today act 100% digital and on self services.

But how to make the choices more efficient and at the same time easier for the customer? Here, digital nudging provides a very promising research stream with the possibility to make decisions easier, more transparable and more effective for every party. But is everything as easy and promising as it sounds? Recent studies have shown that marketers do not fully understand the fundamental concepts of nudging, which can result to a ticking time bomb for the company. Those negative effects of nudges in complex decisions environments need to be understood and studied in further detail.

Decisions in insurance are complex. Several studies and research streams study decision making in insurance and state that human behavior is not consistent to established theories in the field of behavioral economics. Due to the difficult composition of this choice architecture people tend to misjudge the probability of risks in combination with the value and paid premium of the insurance. There exist several anomalies on the demand side. All in all this leads to suboptimal decisions.

To facilitate the decision making a large number of marketers adopted the policy and concept of nudging which alters people’s behavior in a predictable way by changing the choice architecture accordingly. Besides the increasing interest since the release of the book “Nudge: Improving decisions about health, wealth and happiness” by Thaler and Sunstein in 2008 the question if nudging is the right tool for all decisions comes up. Recent publication have shown that nudges are a complex concept that needs to be fully understood. Otherwise it can lead to ticking “time bombs” for a company.

The Harvard Business Review article “Why Nudging Your Customers Can Backfire” by Dholakia (2016) shows several limitations in the effectiveness and efficiency of nudging in combination with possible dangers. Based on these considerations this paper aims to study the negative effect of applied nudges in insurance decision making. Based on the choice architecture and complexity of the domain, customers are oftentimes faced with a lot of product information in different forms of informational and salience nudges. The effect of such nudges should be studied by focusing on the cost of information and the resulting negative effects. One example for a negative effect could be the cancellation of the process or a negative net promoter score.

In an online field experiment with a large insurance company based in Germany, nudges should be designed and evaluated. The effect of the nudge is measured via customer behavior metrics and an additional popup survey after the interaction with the nudge. Customers are faced with a question that includes their current emotional state, right after the contact with the nudge.

The gathered data should be evaluated, presented and discussed. In the end a conclusion about the effect of nudges on customer behavior in insurance decisions should be made. This includes practical insights for managers, product designers as well marketers from other industries with regards to nudging and their negative effects. Additionally a scientific contribution to strengthen the understanding of negative effects of nudging will be made.