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Behavioural Insights at the SRA

By Debra Malpass on 28 February 2017

In recent blog posts, we have touched upon our plans to embed behavioural insights into our research. We now want to explain in a little more detail what behavioural insights are, and how they will apply to our work. 

What are Behavioural Insights?

The use of behavioural insights has become a popular term for the application of behavioural science research, which is a field that focuses on analysing how individuals react to different choices and situations. While fields like economics assume that people always act rationally, behavioural science recognises that people display 'biases' in their decision making, and uses this insight to understand human behaviour. 

Let's take a potentially familiar example. Economic theory states that individuals 'smooth' their consumption and income over time, ie they spend just the right amount now, and save just the right amount to spend in later life. 

In reality however, it has consistently been found that individuals in the UK are not saving enough for their retirement, and despite the provision of attractive workplace pension schemes, enrolment in these schemes has historically been very low.

In general, we find that in spite of their long term goals, people often act 'irrationally' due to a number of behavioural factors. In the case of poor saving for example, these factors range from the understandable, like a reluctance to give up current spending habits, to the more trivial, like simply forgetting to complete a pension enrolment form. Traditional models of human behaviour do not capture these 'quirks', which is why the field of behavioural science has developed.

Behavioural science takes into account the 'biases' that people use, and incorporates them into our expectations of how people actually behave. This in turn allows us to design more effective policies, processes and products.

How do they work?

Using these insights, we aim to identify how people react to specific situations or choices.

This is commonly done using tests called randomised controlled trials (RCTs). To illustrate how these work, the figure below outlines how an RCT could help us to test an initiative aimed at increasing the number of people enrolled into a workplace pension scheme. Here, we consider whether automatically enrolling employees into a workplace pension scheme, rather than them having to proactively opt in, could promote better saving behaviour.

Comparing the number of people that are enrolled in a workplace pension scheme in the two groups will tell us how effective the initiative is. If we find there are significantly more people enrolled in the initiative group, then we know that automatically enrolling individuals is successful in promoting better savings behaviour, and that policy makers should consider incorporating this in the wider market (which is exactly what the UK government did in 2012!).

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How will we use them?

In the regulation of legal services, the application of behavioural insights has remained largely unexplored up to this point. This means that there is a lot of work to be done, which is an exciting yet daunting prospect! 

We are currently focusing on a number of areas, which includes reducing the risks that firms are exposed to, and also improving the choices that consumers make. The latter is particularly important following a recent report published by the CMA , which advocated the use of consumer testing and behavioural insights to improve consumer choices. These topics are our focus for now, but over time we will expand the scope to incorporate these ideas into our ongoing regulatory design. 

Hopefully this gives you some insight into our developing research program at the SRA. 2017 is set to be an exciting year for our team, and we will have some interesting insights to share with you soon.

Debra Malpass