FloodFlash behavioural science series: the framing effect


What is the framing effect?

The framing effect suggests that how we frame information can significantly influence the decisions individuals make. It therefore plays a key role in the choices people make.

Psychologists Daniel Kahneman and Amos Tversky were the first to show the impact of the framing effect in 1979. They explain the framing effect using a second theory – prospect theory. This suggests that humans weigh up equal losses and gains unequally. Typically, individuals perceive a loss to be more significant than an equivalent gain – also known as loss aversion. In fact, Kahneman and Tversky found that losses are twice as powerful compared to their equivalent gains. Therefore, framing a decision as a loss or a gain can have a significant impact on the outcome an individual makes.

As with our other behavioural science bias’ and effects, the framing effect can have both negative and positive impacts. When we unconsciously pay more attention to the framing of information rather than the information itself, it can lead to irrational or sub-optimal choices. However, individuals and businesses can use the framing effect to their advantage. By considering the impact framing has, we focus more on how we present information we want others to act on.

What are examples of the framing effect in everyday life?

The framing effect impacts all areas of life. Adverts will focus on the positive attributes of a product and yearly subscriptions will focus on the daily rather than yearly cost. Imagine two items of clothing – option A costs the full price of £50, while option B is on sale for 50% off £100. Both are the same price, but option B will likely be more popular. Not only was option B more expensive to begin with (creating the illusion that it is a higher quality product), but the framing allows customers to believe they are saving £50. Option A on the other hand frames the purchase as a loss of £50, making this option less palatable.

Unsurprisingly, the news media play an influential role in shaping public attitudes on many national and global issues. These include climate change and health to the latest political policies. When individuals are unlikely to have a thorough understanding of topics, they are more susceptible to making decisions based on framing, rather than the information.

During the COVID-19 pandemic, many media outlets framed headlines with loss aversion and the availability and affect heuristics in mind. Framing the virus using simple slogans, worrying statistics and emotive language likely encouraged more compliance with rules and regulation as people looked to avoid loss.

When it comes to climate change, there are multiple ways of framing the information, which elicit different behavioural responses. Frames can focus on the economic costs or benefits, play on social and ideological conflict, and emphasise or downplay uncertainty. Research has found that gain frames were superior to loss frames in increasing positive attitudes towards climate change mitigation.

One of the most common ways to frame climate change is using average global degree increases. While this may seem easy to understand, it comes with negative implications for climate action. For most people, a 1.5C increase may seem insignificant, or even a welcome change. Using global averages also hides the extreme changes many regions are already witnessing. Finally, it reduces climate change to warming alone, when in reality there are many varying impacts. Check out our climate change series to see how climate change will likely impact flooding and other natural disasters.

What does the framing effect mean for flood risk?

The framing effect plays a significant role in how well individuals understand their flood risk. This has significant knock-on effects for flood preparedness.

‘1-in-100 doesn’t sound too bad’

When a flood is termed a ‘1-in-100-year’ event, individuals often fairly assume that a flood will happen once every hundred years. If they have experienced a flood in the last few years, or even in their lifetime, they may believe that another flood is unlikely. This relates to the Gambler’s Fallacy. This is where individuals assume that a random event is more or less likely depending on the outcome of a previous event (see here for our full explanation). Optimistically misreading 1-in-100 can be dangerous, especially for those who have recently experience a flood. It can foster the belief that there will be 100 years until they flood again. Unfortunately, this is often not the case.

"[After the 2015 flood] we put some plans in place and thought this would never happen again. They said it was one in 100 years. This weekend, this has happened – we’ve flooded." - A FloodFlash client after flooding during Storm Franklin in 2022

‘1% chance sounds even better’

Another way of describing a 1-in-100-year flood is to say there is a 1% chance of the flood occurring each year. This framing falls victim to truncation – the idea that individuals sometimes ignore low-probability events or treat them as having zero chance of occurring. If individuals considered every low-probability event, they would become overburdened with decisions. Further, most individuals will have day-to-day concerns that are above 1% likelihood. However the impact of flooding is very large, and so warrants greater consideration.

A better way to frame risk

By framing a 1-in-100-year flood event to a more relatable timeframe, individuals may better understand their risk. For example, take an individual living in a 1-in-100-year flood zone with a 20-year mortgage. There will (roughly) be a 1-in-5 or 20% chance of one flood event occurring during their tenancy. This suddenly becomes far more understandable, even though it is based on the same statistic. 

Improving understanding

When individuals have a greater understanding around an issue, they are more likely to see through any framing, and consider the information itself. That’s why education around flood risk is so important. Recently, Flood Re called the level of flood awareness and resilience ‘stubbornly low‘ in the UK. In the US, awareness is higher due to the higher profile and risk of flooding, but still insufficient. Many blame FEMA’s outdated and incomplete flood maps, which ‘mislead communicates about their actual risk’. In fact, FEMA has only developed flood maps for 61% of America, leaving many in the dark about their risk.


About FloodFlash

FloodFlash is a new type of rapid-payout flood insurance. It uses the latest data modelling and connected tech to bring parametric insurance to the mass market for the first time. The result is fast, easy and flexible cover that pays claims within days of a flood.

FloodFlash is parametric or `event-based` insurance. When buying the cover, the client chooses the depth of flooding they wish to insure against and how much they’d receive when that flood happens. When the FloodFlash sensor installed at the property detects flood water at the selected depth, the claim is paid in full. No waiting. No haggling.

FloodFlash rapid-payouts were put to the test in February 2020 when Storm Ciara swept across the UK. Claims related to the storm were paid in full within a single day. That speed of claims payment remains the fastest and best proof of mass-market parametric insurance to date gaining acclaim at industry awards and recognition from The Times, The Telegraph and the BBC.

FloodFlash operates across Britain, is headquartered in London. Floodflash is a registered coverholder at Lloyd`s of London and is authorised and regulated by the Financial Conduct Authority.