Economic Behavior...
The Fog That Kills Sales
Jack Marrion
March 2013

We like to think that clients make rational decisions. That they take in all of the data we are presenting, process this data, and then they reach a conclusion that maximizes the utility of their economic behavior. However, that doesn’t always happen.

Often, emotions come into play and affect our decisions. Indeed, there are people who say that decisions are completely emotional, but that isn’t true. The motivation behind a decision based purely on emotions fades away when the emotion fades away, and often the result is a canceled sale.

The biggest problem agents have is not in dealing with emotions or ensuring that clients have adequate data, it is penetrating the fog that keeps the agent’s story from being heard at all. Before the data can even get to the client’s brain to be processed it needs to penetrate a fog of mental biases that can distort the agent’s message or completely block it.

There are a couple dozen cognitive biases out there that can create a fog, resulting in less than optimal economic behavior. What I hope to do is help you clear away the fog so that your clients have the data needed to make decisions. What I’ll typically do is describe the bias and then offer a solution or two. Does the solution always work for everyone? No, with some people it can be close to impossible to eliminate a bias, but in most cases the concepts will help you get your message across.

Projection Bias is taking what happened yesterday and today and saying it will happen tomorrow. Sometimes it is right—August usually is as hot as July. Sometimes it is wrong—as in predicting the Dow at 36,000. Sometimes the bias helps a client listen to your story; e.g, a client notices that bank rates have been dropping, which is why she is now interested in the annuity idea. But often this bias gets in the way.

Suppose you have a client who is temperamentally unsuited for the stock market because such people always buy at market tops and sell at market bottoms (a perfect illustration of the problem caused by projection bias). Since the market has been heading up, as of late, the client once again wants to invest in the market. You can help the client by showing him a chart of how the stock market has performed since the century began, rather than over the last few months. Seeing the bigger picture reminds the client that he didn’t do well on this ride and may fare better on one that isn’t as volatile. Changing projection bias often simply means changing the dates on the chart. A stock market chart starting in 2008 conveys a different impression than one that starts in 2001.

Vividness Bias means the more vivid the data seems the greater our reaction, which is why the evening news doesn’t lead with the chess tournament scores. To get your story across means you need to make your strengths as vivid as possible. An example would be if your annuity has a 2 percent rate and the competitor offers a 1 percent rate, you would say you offer 100 percent more interest.

Another example would be if a client is trying to decide between a 0.3 percent bank certificate of deposit or the fixed index annuity that could earn up to 3 percent if the index cooperates. One way to explain this is to show that if rates don’t go up and even if the index annuity hits only the 3 percent mark this year and never again, the CD account won’t catch up with the index annuity until 2022. The story is, “Would you rather have your potential interest earned in 2013, or do you want to wait until 2022?”

Choice Conflict means that the client is presented with so many choices that he fails to make a decision in fear of making a bad one. That doesn’t mean telling the clients that they can’t choose from every variety in the candy store, it means helping them narrow down their choices. You can explain that they can have anything they want, but then mention that other clients with similar needs have chosen either Plan C or Plan R. Even complicated decisions can be handled by breaking them down into smaller parts with fewer choices. If at all possible, try to get the choices down to two.

You can help your client make better decisions if you eliminate or work around the cognitive biases that get in the way. My mission is to make you aware of what these are and how to deal with them so that you close more sales. 

Author's Bio
Jack Marrion
provides research and consulting services to insurance companies and financial firms in a variety of annuity areas. He also serves as director of research for the National Association for Fixed Annuities and as a research fellow for Webster University. In 1994 he wrote a book to help banks market investment and insurance solutions to their small business clients. In 1996 he produced the first independent hypothetical return monthly publication comparing all index annuities on the market, and in 1997 created the first comprehensive report of index annuity sales, products and trends, "Advantage Index Product Sales & Market Report" (quarterly). His insights on the annuity and retirement income world have appeared in hundreds of publications. In 2006 the National Association of Insurance Commissioners asked him to address their annual meeting and teach regulators the realities of index annuities. He was invited back in 2009 to talk to the NAIC about the effects of aging on senior decision-making. He is a frequent speaker at industry functions. Prior to forming Advantage Compendium, Marrion was president and owner of an NASD broker/dealer with offices in nine states. Previous to that he was vice president of a life insurance company and vice president of an NYSE investment banking firm. He has a BBA from the University of Iowa, an MBA from the University of Missouri, and a doctorate from Webster University. Marrion can be reached at Advantage Compendium, Telephone: 314-255-6531. Email:

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