Cognitive Bias and Its Impact on Decision-Making

CLM 2023 Focus Conference session tackles key claims and litigation issues

December 06, 2023 Photo

Research suggests that there are over 175 different types of cognitive biases. Whether we like to admit it or not, we are all biased. Cognitive bias affects both our unconscious and conscious thinking; however, when it comes to complex thinking and decision-making, we must recognize our biases to ensure fairness, justice, and ethics.

If you attended CLM’s 2023 Focus Conference in Manhattan, you may have had the chance to view the breakfast session, “Overcoming Bias in Complex Decision Making and Negotiations,” led by speakers Lee Wright, casualty claim director, Tokio Marine HCC; Scott Rembold, board certified construction lawyer, Rembold Hirschman; and Kristina Ashcraft, corporate vice president, MC Consultants. With several interactive examples, the three speakers engaged the audience in an interesting discussion about what cognitive bias is, how it impacts our thinking, and what we can do to keep it in line when making complex decisions.

Cognitive Bias: A Necessary Fact of Life

Bias, according to Wright, is not always a bad thing. In fact, it is a perfectly natural fact of life. “There are some things that we do on autopilot,” he explained. “How many of you have had [this] experience: You’re driving home, you’re a little preoccupied with something, you pull into your driveway and go, ‘How did I get here?’” This, Wright said, “is a pre-set pattern of behavior that you do not have to think about.” Some of these biases, or heuristics (rules of thumb), that we all use in decision-making are learned over a long time, while others are innate, he added.

“It does not matter [whether you’re] rich, poor, black, white, purple, green, yellow, striped, or polka dotted. Everybody has [biases], and we should be glad that we do—because if [we] didn’t, [we] could not function day-to-day,” said Wright. Driving, for instance, requires a thousand small decisions per minute that we are not aware of making; there is no way we could keep track of all of them and still be able to drive, or do much of anything successfully. However, the panelists warned, letting our complex decision-making be ruled by those fast-thinking processes can lead to negative outcomes.

The Negative Impacts of Bias

Wright referenced the story of Gazella Bensreiti, a Muslim woman who went to a Denver Nuggets game to watch her daughter’s school choir sing the National Anthem. “On her way through security, the guard approached her and said, ‘You cannot come in with that thing on your head.’” Bensreiti refused to take off her hijab, and the security guard did not let her in until management intervened.

The panelists then asked the audience to take a piece of paper and write the answers to two prompts: 1. Was Bensreiti the victim of racial discrimination/bias? 2. Name the age, sex, and race of the security guard.

After reviewing the papers handed in, Wright announced that the audience agreed Bensreiti was the victim of discrimination, and 90% agreed that the security guard was a white male. Then, he posed a couple of questions: “Would it make a difference to you if the security guard was a 71-year-old black woman? How about the fact that Ms. Bensreiti had already set off the metal detector twice?”

His point was that we all tend to have a picture in our minds. “Sometimes they’re accurate, and sometimes they’re not. We just have to be conscious of the fact that our picture is not necessarily the way that the world is.”

Rembold explained that, as lawyers and insurance professionals, “Our cognitive biases are there to help us funnel all this information that we’re getting all the time every day and make it easier for us to comprehend [it]. So, what it does, is it pushes some stuff out because the RAM up here [in our heads] isn’t going to be enough to keep all that information in. So, part of what we have to do is pull that scope back, be mindful of the stuff that we might be ignoring, and make sure that we incorporate that into our analyses.”

The Influence of Biased Perspective

The presenters handed out lists to everyone; half the room received a list of names, while the other half received a list of descriptions about people. The audience was told to make determinations, based on first impressions, as to whether each person was good or bad.

Many of the answers were surprising. For instance, those who had “Adolf Hitler” on their list labeled him as a bad person, while those who had the description, “enacted animal welfare laws and launched the world’s first anti-smoking campaign,” labeled him as a good person. Likewise, those who had Steve Jobs on their lists labeled him as a good person, while those who had the description, “denied he had a daughter, forcing her and her mother to live in poverty for years while he became immensely wealthy,” labeled him as a bad person. This exercise showed how powerful biases can truly be.

“It’s perspective and the amount of information you have that often put us in a position to make poor decisions. And it’s always important, when you get that little bit of data, to realize that’s probably not all the information you need to make that decision,” explained Wright.

Bias in the Context of Claims

 “As part of the decision-making process when it comes to claims…you have to have diverse voices. You don’t want everybody saying yes. You want to hear all the different perspectives that come into play with these things so that [you] can make complex decisions and not have it be binary,” Rembold explained. “Maybe there are some things that fill in the middle that we need to listen to. [It is important] to have patience for people who don’t have the exact same view as you have so that your biases don’t overcome the entire process.”

Ashcraft mentioned bias in analysis of claims to evaluate exposure based on age, physical features, appearance, and line of work. “The point is understanding we may have those biases and working [that understanding] into our analyses and…how we’re coming up with our decisions.”

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About The Authors
Angela Sabarese

Angela Sabarese, Associate Editor of CLM. angela.sabarese@theclm.org

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