Insurance carriers today realize that benefits enrollment can be significantly enhanced through the use of innovative approaches that incorporate new technologies. Particularly when it comes to enrolling in voluntary benefits, providers now understand that participation rates and consumer engagement can be greatly improved by applying key principles of consumer behavior and psychology to the enrollment process.
What’s driving the market?
Currently, economic and financial pressures in the U.S. are creating stress for employees across companies of all sizes. It’s clear that American workers have never been at greater risk. Consider that almost 70 percent of employees have no income protection, according to the Consumer Federation of America (CFA), and that 76 percent of consumers live paycheck to paycheck.
In addition, a 2013 Retirement Confidence Survey showed that half of all households could not raise $2,000 within a month if they needed to. And with the average medical deductible now more than $1,000, according to the Kaiser Family Foundation’s 2013 Employer Health Benefits Survey, employees need to be careful about how they will spend their benefits dollars to protect themselves and those they love.
Unfortunately, decisions about insurance and financial products are among the most difficult for consumers, according to a 2008 study by Yale University. With so many benefits choices available to them, many employees are simply overwhelmed. In addition, many lack the necessary information needed for informed decision-making and don’t know where to turn. The good news is that the workplace is a powerful distribution channel that, when used effectively, can be the “go to” source for all employee insurance purchases. In fact, according to Gen Re, 90 percent of long-term disability coverage is currently purchased at the workplace, and according to LIMRA’s 2014 Insurance Barometer Study, 78 percent of life insurance is also purchased at the workplace. For almost all of us, the workplace is the only place to access benefits and benefits information.
Helping employees make the right decisions
With companies increasingly shifting coverage decisions and costs to employees, employers are tasked with providing benefits and enrollment methods that resonate with their workforce. Fortunately, insurance carriers are committed to helping employers present information so that enrollment options are clear and simple. Working together, providers and employers can become “choice architects” who recognize that consumer decisions greatly depend on how information and benefit choices are presented. These choice architects use key principles of how consumers learn and decide to help employees make the benefits choices that are right for them and their families, often overcoming our very human tendency to underestimate our own risk.
For example, we understand that presenting too many options can overwhelm employees and lead to decision paralysis. When confronted with too many options, workers often don’t know what they really need or where to start. Studies on buying behaviors suggest that if employees are offered just four or five benefits at a time, they can make decisions without being overwhelmed.
Choice architects also realize that a workforce is not a homogeneous whole and that participation rates vary widely, even within a single population. An enrollment analysis can show graphically which employees enroll in particular benefits based on variables such as age, income, gender and work location. Such a “heat map” offers employers feedback about how effectively they are structuring and presenting benefits choices and where they can make improvements tailored to their workforce. These heat maps often point out locations or line managers where employees may not be given the time to meet with benefits counselors or learn and enroll in available programs.
A common misperception is that employees don’t want help in choosing benefits and will disregard recommendations from their employers. However, surveys have shown that employees trust their employer to present voluntary benefits that would be meaningful for them, and depend on their employer for benefits information. Auto enrollment, in which employees are defaulted into coverage — most commonly income protection — but can opt out, is becoming an accepted enrollment method. In fact, in a 2013 survey conducted by Unum and the CFA, 85 percent of those surveyed agreed that employers should automatically enroll new employees in disability insurance, allowing them to opt out of this coverage if they did not want it.