Can Debiasing Provided Over the Internet Improve Consumer Financial Decisions? Evidence from Experiments on Life Insurance Decisions from India and the U.S.

This paper identifies several barriers to optimal financial decision-making. It also experimentally tests whether barrier-specific financial advice messages influence consumers to make better investment decisions. On the basis of a series of online experiments conducted in India and the U.S., the paper provides the following lessons that will help design financial information packages and question the regulation of the market for financial products:

• Information gap exists both in India and the U.S., suggesting well-defined information campaigns may help;
• Only very strong and direct nudges have high influence in the Indian context. This does not, however, seem to be driven by people catering to what they think the experimenter wants, as no impact was observed of the whole life treatment;
• More subtle messages seem to have had a significant impact on the U.S. sample, suggesting that the biases identified – exponential growth, loss aversion, and narrow framing – may be important determinants of the pre-treatment choices.

The paper concludes by stating that given the low cost of giving individuals access to videos (that present the basic concepts of life insurance and the differences between the main types of policies), video-based financial advice has great potential to be a cost effective way to improve consumer decision-making.