By Najla Frayha, vice president of Consumerism
Quick question: A bat and ball cost $110. The bat costs $100 more than the ball. How much does the ball cost?
Did you answer $5? Most people don’t, even though that’s the right answer. The reason is that they take mental shortcuts rather than laying out the equation and doing the math. We live most of our lives using mental shortcuts and they are very effective at simplifying how we make decisions. The problem is they occasionally lead us to make the wrong choice.
The example above illustrates the importance of understanding behavioral economics and the psychology of human decision-making. We have spent the last year immersed in these concepts with a goal of helping consumers overcome the obstacles that keep them from purchasing the insurance they and their families truly need.
If we can remove factors like procrastination, choice overload, perceived hassle costs and more, we can help so many consumers make the right decisions.
It’s a significant task. Only one-third of today’s workers have disability insurance through work, leaving an estimated 75 million Americans without coverage. Yet three-quarters of workers today do not have enough emergency savings to cover six months or more of their expenses, according to a Bankrate.com survey.1 And half of all households could not raise $2,000 within a month if they needed to.2
If unexpectedly sidelined by illness or injury, these workers will face significant financial strain. The fact is they need our help.
Financial protection from disability, life, accident and critical illness insurance can be one part of the solution. Effective communications and enrollment is the way we deliver that solution. And behavioral economics is helping us learn how to do this better.
Consumers want guidance on buying decisions, particularly from other people like them. In behavioral science this is known as social norms. It’s a model you’ll recognize from businesses like Amazon that make product recommendations based on the shopping habits of other users.
This information is hard to come by in the field of insurance, however, because there isn’t an online marketplace that collects and analyzes purchasing data for financial protection options. And we rarely discuss such topics with our friends or family to draw on a shared experience like we might when deciding which car to buy.
So we’ve taken this on our own. Unum has analyzed millions of product choices and consumer demographics that factor in age, income, gender and industry. From this purchase data, we can recommend products to consumers that are typical purchases for people like them.
Getting individuals to focus on the two most relevant products for them helps to break through information overload. It creates a comfortable starting point — a shortcut to a better understanding of the benefits that may be best for them.
This is just one example of the many ways we are applying behavioral economics in our industry. It also extends to the way we are talking to consumers without industry jargon or an overload of information.
We’re recognizing, too, that some simple steps like automatically registering employees for a benefits counseling session can bring positive results. In some pilot tests, we’ve seen an uptick in attendance and enrollment.
Employee benefits have rarely been as widely discussed and considered as they have been in this era of reform. But this time of consumer-driven choices means we have a significant job to do in making it easy for American workers to make the best decisions for them.
1 Bankrate, “June 2014 Financial Security Index Charts,” (2014; accessed Jun. 25, 2014),
2 Ruth Helman et. al, “2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many,” EBRI Issue Brief (no. 384, 2013).