There was a recent study that measured the average honesty of the citizens of 15 countries using sample groups in each and then testing them on how they reacted to different situations. First, all countries had significant numbers of dishonest people. Great Britain had the fewest dishonest citizens and U.S. citizens ranked less dishonest than most. Two countries ranked as most dishonest, but rather than naming names, I’ll let interested parties copy the link at the end of this article and they can go and download the study.
Although the topic is honesty, I’m not doing a sermon on truth but about decision-making biases. Dishonesty can be caused by cognitive biases. For example, if you have a negative stereotype about a group of people you are more likely to be dishonest with the particular group (or not engage with them at all). Or, if you believe that people are generally dishonest, you are more likely to be dishonest first—engaging in a “do unto others before they do it to you” inverse golden rule.
The damages caused by these biases may mean that an economic exchange between a buyer and seller does not take place because there is little trust. On a much bigger level, a nation of people may suffer because their trade and economic growth will be limited. Indeed, there are some that believe the reason why certain countries fly and others flail is because people accept that certain cultures will and do keep their word while others won’t.
A history of trust is a major reason why it is often difficult to get a prospect to leave their current advisor or agent and buy your annuity or insurance. The prospect knows how honest their current advisor is, but he doesn’t know you. This is why referrals and recommendations from people the prospect trusts are so very important. A referral envelops you in the cloak of honesty that surrounds the referrer and creates instant trust.
What if this isn’t a referral?
Disclosure, transparency and strong institutions discourage dishonesty and encourage buying. In this world, letting the prospect know that, as an agent, you are licensed by a strong institution—the state insurance commission—to act as an agent and that the state can and will revoke the license of agents using “fraudulent, coercive, or dishonest practices, or untrustworthiness in the conduct of business” (to quote the insurance statutes of many states) may help build trust. Transparency of potential costs or negatives, as well as how the agent financially benefits from the sale, helps build trust. The aside here is—do not fear transparency of showing the buyer what you are paid. In every case I’ve witnessed, sales increased after commissions became visible.
Insurance and annuity disclosures create more sales because the prospect feels any dishonesty is harder to hide, providing the aim is for fair disclosure and not full disclosure. Fair disclosure means telling the prospective buyer of features or conflicts of interest that could negatively affect the buyer; this is the intent of all of the disclosure laws passed. Full disclosure can also do this, but too often full disclosure diminishes trust by burying the buyer in pages of minutiae so they cannot find the truth.
The international study found that those groups that are more honest achieve greater financial success. Since a prospective buyer cannot gauge how honest you are—unless this is a referral—talk to them about what is required to get and keep an insurance license and then provide fair disclosure.
Study URL: http://d.repec.org/n?u=RePEc:uea:ueaeco:2015_01&r=neu
