Increasing Consumer Engagement in the Annuities Market: Can Prompts Raise Shopping Around?
Oxera (2016). “Increasing consumer engagement in the annuities market: can prompts raise shopping around?”, Oxera report.
In June 2016, Oxera and CESS conducted an experiment focusing on the point when consumers receive an annuity quote from their pension provider. The experiment tested the impact of different prompts in the provider’s written communication in an online setting, among 1,996 people aged 55-65. Several innovative features were incorporated into the experimental environment in order to replicate, to some degree, the consumer inertia observed in the real world. The aim of the prompts was to counteract the inertia and encourage shopping around. The online setting provided the opportunity to study how prompts can influence various types of behaviour, in addition to switching provider.
The study, commissioned by the UK Financial Conduct Authority (FCA), found that personalised messages were the most effective in stimulating product comparisons, while generic messaging appealing to social norms also had a significant impact. Relative gains (the percentage gain, comparing the offer of the pension provider with those available on the open market) were found to be more important than absolute (monetary) gains. The findings of this experiment are important beyond the annuities and financial services sector, as concerns about shopping around (or a lack of it) are shared by regulators and competition authorities across markets. The Oxera/CESS study brought significant innovations in inducing and counteracting consumer inertia, which will be of wider relevance to lab experiments elsewhere.