Behavioral Economics research shows employees will gravitate toward programs if they feel they are earning money rather than simply saving it

By Patrick Toner


Key Takeaways:

  • Make your employee benefits communications more persuasive by applying lessons from behavioral economics, including framing, loss-avoidance and the windfall effect.
  • Disability income protection will be more attractive when the payout is framed in annualized terms, rather than weekly or monthly.
  • People spend freely when they feel flush. Reference an employee’s annual salary (not his or her biweekly paycheck) when suggesting they contribute to their 401(k), or select other benefit deductions.
  • Earning money makes consumers happier than simply saving it. Describe benefit pay-outs in terms of earning, e.g. “Earn money on next dental cleaning!”

A recent report from Duke University’s Common Cents Lab, run by behavioral economist Dan Ariely, offers a treasure trove of tips for the benefits marketer. The Lab works with numerous banks, credit unions and financial technology (fin-tech) firms to improve the financial well-being of low- and middle-income Americans. Of course, employee benefits programs do this already by providing financial protections to mass-market households. I strongly recommend you give the Common Cents report a read for ideas that carriers, brokers and enrollment firms can use to improve employee opt-in to their benefits programs.

Disability Example: We make spending—or saving —decisions more easily if the amount in question seems small.

A experiment found that contract workers were nearly 15 percent more likely to direct their pay to long term savings plans when benefits marketers expressed their pay as an annualized amount (say $11,400) than a weekly amount, say $275.

Benefits marketers take advantage of such “framing” techniques by expressing employee-paid premium costs on a pay-cycle basis—typically bi-weekly—so the premiums appear to be less expensive. This increases purchases. The reverse is also true when you want to frame benefit amounts in terms that make them appear larger. For example, disability benefits are typically expressed as weekly or monthly amounts, which may seem small, (or as a percentage one’s pay, which doesn’t help communicate value). Take a long term disability (LTD) policy that protects two-thirds of an employee’s $60,000 per year salary. Expressing the benefit as “$40,000 per year” will attract more interest than expressing it as “$3,333 per month.” Notice the difference?

Retirement Plan Contribution Example: Reference annual salary amounts when soliciting plan setting plan contribution rates.

The Common Cents report presents more evidence of the framing effect by sharing findings from a separate study of 401(k) contributions. Two separate web pages asked respondents the same question: “How much to do you want to contribute to your savings?” Respondents who went to the web page that expressed their pay as $35 per hour contributed on average 11 percent of their pay. Not bad. But respondents who went to the page that expressed their pay as $70,000 per year contributed on average 16 of their income to savings—5 full percentage points more.

Most 401(k) plan sponsors would be thrilled to have employees contribute 16 percent of their salaries to the retirement accounts.

Accident, Critical Illness, Dental and Vision Example: Show benefits as opportunity to “earn money”

The fin tech company EarnUp worked with Common Cents on an experiment to increase adoption of its accelerated repayment service for homeowners. EarnUp’s hypothesis was that the notion of “earning money” was more appealing to most people than the notion of “saving money.” So the company A/B tested the subject line of an email to prospective members. The subject line using the phrase “earn money” generated click-through rates 59 percent higher than subject lines using the phrase “save money.” In fact, the result of this email test was what compelled the company to change its name to Earn-up from APA Save.

Promoting indemnity-based benefits such as Accident, Vision or Dental as opportunities to earn money rather than simply save money will be more appealing. It’s part of the phenomenon known as FOMO (Fear of Missing Out). So if you want employees to feel they can “earn” money on their next trip to the emergency room, or dentist or optician, you may have to finesse it though your compliance department, but a strategy that improves enrollment by anything close to 59 percent as EarnUp experienced is certainly worth a try.


Apply lessons from behavioral economics to make benefits communications more effective. The report from the Common Cents lab offers literally dozens of case study examples from real world experiments. These lessons inform “how” we structure benefits messages, and complement the data analytics discussed in previous blog posts that inform whom to target and what content to use.

Patrick Toner is CEO of Customer Benefits Analytics, a New Jersey-based firm that connects employees to the right benefits by using advanced analytics modeling of consumer-level data to provide rich customer insights and in-depth targeting. Prior to founding CBA, Patrick spent 12 years of in employee benefits marketing, enrollment strategy and e-commerce roles at Cigna and MetLife. More information on the benefits research, “Who Buys Voluntary and Why: 2016 Enrollment Study” can be found on hereMoney where your mouth is