Inherent anti-conflicts of interest

A post some years back explored the idea of “inherent conflicts of interest,”  COIs so embedded in a situation that they are essentially impossible to resist. In an important column this week in Wired UK , the eminent behavioral ethicist Dan Ariely describes an approach he has developed which might be considered inherent anti-COIs. He writes:

An example of this, with which I am involved, is Lemonade, an insurance provider. In the standard insurance model, consumers pay fees and, when something bad happens, they file a claim. The problem is that in this model, an insurance company benefits financially when it refuses to pay out, creating a conflict of interest in its staff between the needs of consumers and the need for the company to make a profit. This is a tremendous conflict and some staff are likely to misbehave.

Lemonade, on the other hand, is not set up as a two-sided game between the consumer and company. Instead, we have made it a game with three players: the consumer, the insurance company and a charity that the consumer chooses. The consumer makes their payments. Lemonade keeps a fixed percentage, say 20 per cent, and pays claims from the remaining 80 per cent. Any money left over at the end of the year goes to the charity. Under this system, Lemonade makes the same profit whether it pays claims or not. And, if a consumer decides to inflate their claim, they are taking money from the charity they have nominated.

The shift here is a move from a system where companies simply ask customers to trust them, to a system where companies deliberately set up their business model in order to create trust.

In 2019, I believe we will see more companies using this approach and more consumers rewarding them for it. We are every day becoming more weary of the conflicts of interest and dishonesty that plagues so much of business and soon we will start choosing companies that have systems in place to avoid them.

I think that this is a terrific idea and hope that we will indeed see more examples of it in the coming year.

Finally, part of my wish list for 2019 is that we will also  learn from this experience more about what works generally and what doesn’t when it comes to messaging/marketing to turn ethical behavior to commercial advantage.  Among other things,  inherent anti-COIs should be a marketing “plus” not only in the insurance business but also in selling medical services and investment advice, among other things.  But actually making the cash register ring this way seems likely to be a real challenge.