Theres a disconnect between many employees perceptions and actions when it comes to a disabilitys impact. Prudential Insurance Company of Americas Eighth Annual Study of Employee Benefits: Today and Beyondfound that 56% of employees said having financial security in the event a wage earner could no longer work due to an injury or an illness was very important. At the same time, however, 33% of employees do not have any disability insurance, even though our research shows that the majority of employers offer short-term (85%) or long-term (82%) disability insurance.
This lack of protection affects women in particular as their role in the workforce continues to expand. Fifty-three percent of the women respondents in another recent Prudential survey report that they are the primary breadwinners in their families. Additionally, womens incomes are at a relatively higher risk than mens: The Council of Disability Awareness reports that women accounted for 54% of the new disability claims filed in 2012.
We know that employees need disability insurance and that most employers are offering a group solution. So what can we do to enhance employees adoption of their available coverage?
Making better decisions
Employees decisions with their disability coverage revolve partly around the product, but there is also a behavioral dimension. In 2013, Prudential partnered with Boston Colleges Center for Retirement Research and worked with experts in behavioral economics to study peoples behavior when they make benefit choices.
We looked specifically at the way individuals make decisions when buying disability (and life) products. For instance, do they not appreciate the importance of these products? Do they not know how much to insure for, or do they simply fail to take action?
The research design had two steps. First, we wanted to understand the decision processes people follow. Second, we used some behavioral economics-driven benefit selection scenarios to see how the positioning and framing of the offerings influenced the way people selected their insurance coverage. Heres what we learned:
Employees underestimate risks. People often fail to recognize the need for long-term disability insurance, even if they have experienced an event among their immediate friends and family. Almost everyone thinks they have a less-than-average risk of becoming disabled during their lifetime. Simply illustrating the risk of disability along with its five main causes led to a significant change in participation.
Specifics clarify and motivate. During the benefit selection process, if participants saw a checklist of expenses they should consider for selecting the coverage, the coverage level increased. We have seen similar results from comparable exercises. When we launched a needs estimator in 2012, 48% of the people who saw a needs estimator took action and they closed the gap of recommended versus selected coverage by 34%.
The decision window is short. There isnt much time to capture employees attention and help them focus on the important aspects they should keep in mind while making coverage decisions. Over 40% of people interviewed said they spend less than 30 minutes thinking about the coverage they were about to select. That means benefits information must be communicated to employees quickly and efficiently.
Offering group disability insurance products is the first step and most employers have programs in place. We believe the next and equally important step is helping employees optimize their use of those products by understanding and improving their benefits decisions.
James V. Gemus is senior vice president, products, Prudential Group Insurance.
