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Behavioral Insights for Wellness Program Design Jonathan Zinman Professor of Economics, Dartmouth College Scientific Director, U.S . Household Finance Initiative. HelloWallet Webinar. June 11, 2014. Dr. Jonathan Zinman. Key high-level assumptions . Employee wellness matters

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Behavioral Insights for

Wellness Program Design

Jonathan Zinman

Professor of Economics, Dartmouth College

Scientific Director, U.S. Household Finance Initiative

HelloWalletWebinar

June 11, 2014


Dr. Jonathan Zinman


Key high-level assumptions

  • Employee wellness matters

  • Economics of employee decisions around wellness is complex

    • Countless daily decisions that cumulate

    • Infrequent but very high-stakes decisions

  • Psychology of employee decisions around wellness is complex: http://www.dartmouth.edu/~jzinman/Papers/Behavioral_Design_101.pptx

  • Outside markets for wellness solutions suspect

  • Employer wellness benefit design matters


Key takeaways

  • There is low-hanging fruit!

  • Apply insights from behavioral economics (BE) to do better job of connecting employees with existing offerings

    • Use communications, on-ramps, and menus

    • Few additional resources needed

  • Prescription is method, not a recipe

    • Develop using BE insights and institutional knowledge

    • Test using gold-standard AB/RCT methods

    • Measure and learn

    • Tweak or re-design, and test again


Today’s Plan & Background


Plan for today, background

  • Show how this method works, using real and hypothetical examples

  • Today’s talk based on experiences working on over a dozen marketing, messaging, and onboarding projects

    • Companies of various sizes (mostly financial institutions)

    • U.S. and abroad

    • Handful of completed projects

    • Many more underway

  • More details

    • http://www.dartmouth.edu/~jzinman/

    • http://www.poverty-action.org/ushouseholdfinance


Plan for today, background

  • Focus on financial wellness

    • Happy to field questions about health, etc. later

  • Focus on immediate source of stress/distractions

    • Lack of rainy-day savings

    • Debt load and repayment problems

    • Lack of plan, or engagement with one

    • (401k’s part of the problem here rather than a solution?)

  • Why these focii?...


Background: symptoms

  • Many/most of your employees may be financially fragile:

  • Lots of borrowing (overborrowing?)

  • Mortgage crisis

  • Bubbling student loan crisis?

  • More credit card debt than any economic model can explain

  • Share of consumers with subprime credit: 56.4%1

    • More payday loans -> worse job performance (Carrell and Zinman)

  • Many without savings (undersaving?)

  • Households with insufficient liquid assets to subsist for three months at the poverty line in absence of income: 43.9%2

  • Households reporting no saving in the previous year: 48%3

  • Many pay premia for financial services (overpaying?)4

    • Assets (e.g., mutual funds)

    • Loans

    • Advice


  • Messaging solutions,with two examples


    Rainy day savings solutions:

    smarter messaging

    • Pain point for employees– low financial resiliency

    • Pain point for employers– no direct offering. But do offer…

      • Crisis hotline

      • Financial planner

      • Online financial education

      • Payroll/prepaid card with savings bucket

    • Approach: messaging, marketing, and/or process changes around these offerings


    Messaging for rainy day savings

    • “If you make… deposits, you will receive [small yield incentive]”

    • “If you miss a deposit, you will lose [small yield incentive]”

    • “If you make… deposits, you will receive [small yield incentive] that you can use to reach your saving goal of [client’s goal]”

    • “If you miss a deposit, you will lose [small yield incentive] that you could use to reach your saving goal of [client’s goal]”

    • Results:

    • 1 and 2 push

    • 3 and 4 push

    • 3 and 4 >> 1 and 2

    • Test 1. Which works better at encouraging regular savings deposits?


    Messaging for financial resiliency

    • Test 2. Which works better at controlling discretionary spending among a sample of active HelloWallet users?

    • Email every Friday re: the budget for that weekend

    • Same as #1, but every other week

    • Same as #1, but don’t start until 4 weeks after enrollment

    • Results:

    • 3 > 2 > 1


    Messaging design, why it’s hard

    • Many design elements, thousands of possible permutations:

    • Content

    • Amount of content

    • Timing

    • Frequency

    • Duration

    • Customization

    • What matters, and works best, depends critically on context

    • And context itself is a many-splendored beast!

    • Project underway to do work like this with dozens of companies worldwide. You can join us!

    • email [email protected] now!


    Messaging + Process Changes, with three examples


    Example 1. Rainy day savings

    Messaging + process change example

    • Present installment loan borrowers with the proposition: “You’re making monthly payments now… here’s an easy way to continue making those payments, to yourself, once the loan is paid off”

      • Framing: borrowing as habit formation for saving

      • Process change: give someone a one-page auto-transfer authorization at an opportune time

    • Doing this with 10 credit unions

    • You could do this by messaging to employees with:

      • Payroll card with savings bucket

      • Own bank account (could offer when someone is filling out direct deposit authorization for payroll)

    • Join in our research! [email protected]


    Example 2. Debt reduction

    • Pain point: student debt burden

    • Potential solution: messaging and on-ramps that connect employees with alternative repayment plans that reduce monthly payments

    • Pain point: repeat use of expensive debt products

    • Potential solutions:

    • messaging that informs and nudges before someone reaches point-of-sale

    • on-ramps that connect with lower-cost, longer-term loans (employer credit union, employer-intermediated loan, etc.)

    • messaging and on-ramps to PFM solutions (HelloWallet, meeting with an adviser, etc.)


    Example 3.Behavioral 401k, v3.0

    • v0.0: matching

    • v1.0: auto- (opt-out) enrollment

    • v2.0: auto-escalation

    • These solve enrollment and contribution rate problems

    • They do not solve employee wellness problems

    • To solve for wellness need greater focus on:

    • Immediate needs, and liquidity to deal with them

    • Holistic needs (whole person, or at least more of her balance sheet)

    • Wealth accumulation


    Behavioral 401k v3.0: for wellness

    • Add messaging that focuses on the whole, and the immediate

      • Don’t borrow your way to 401k contributions

      • Do use 401k as a safety net if the alternatives even pricier

    • Change menus, or add nudges, for wealth accumulation

      • Eliminate or marginalize high-fee funds

      • Provide auto-diversification options

    • Change process to nudge active, informed decisions about 401k

      • Enrollment (new employee on-boarding)

      • Open-enrollment


    Key takeaways

    • There is low-hanging fruit!

    • Apply insights from behavioral economics(BE) to improve employee (financial) wellness

      • Using communications, on-ramps, and menus

      • Few additional resources needed

    • Prescription is method, not a recipe

      • Develop using BE insights and institutional knowledge

      • Test using gold-standard AB/RCT methods

      • Measure and learn

      • Tweak or re-design, and test again


    Follow-up

    • Questions? Interested in working together?

      • [email protected]


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