Behavioural economics for insurance nudges: quantifying the actuarial value of prevention interventions

Health insurers systematically underinvest in prevention. Programme costs are immediate but claims benefits accrue over years, and actuaries have lacked a formal mechanism to translate behavioural intervention evidence into pricing-ready claims adjustments. This paper introduces the Behavioural Adjustment Factor (BAF), a multiplicative actuarial framework that quantifies the claims impact of behavioural interventions by decomposing reach, efficacy, clinical translation, and durability into a single pricing-ready construct. To the best of the author’s knowledge, the BAF is the first actuarial framework to decompose behavioural intervention impact into condition-specific claims projections suitable for pricing and reserving. Drawing on randomised controlled trial evidence, the framework distinguishes interventions that generate reliable claims savings from those that do not. Programme architecture is shown to matter more than incentive magnitude, and the distinction between disease management and general lifestyle programmes emerges as the principal axis along which actuarial expectations should diverge. A worked hypertension example illustrates how the four BAF components combine to produce a defensible claims-adjustment range, and a sensitivity analysis highlights the dominant role of effect persistence. The framework provides confidence intervals, Monte Carlo integration for Solvency II capital modelling, a milestone-based pilot funding structure, and a clear pathway from international evidence to UK-calibrated practice.