Summer 2007 / No. 72
Too many choices or too little advice—the dawning of the Age of Confusion
For most middle-income Americans, their employer’s benefit program is the source of their financial security products. As individual insurance agents have abandoned these markets, Americans have come to rely on their employer for life, health, and disability coverages. Less likely to buy direct or through the Internet, employer-paid and voluntary coverages are the financial supermarket for many of these employees.
As time goes on, the evidence clearly suggests that more coverages will become voluntary as employers embrace a defined-contribution attitude towards benefits. Also, companies continue to add more options. And if the benefits program is the supermarket, why not? A generation ago, benefits were defined as coverages all or most employees could use. But the supermarket concept suggests that options are valued, even if a minority of employees elect them. The number of voluntary coverages will continue to grow.
Already, the number of decisions employees must make regarding these plans is overwhelming. And with the current trends, that burden will become only greater. We run the risk of experiencing choice overload, the increasing tendency of employees to drop out of the decision-making process if the number of choices becomes too great. (This tendency was examined in the article “Does too much choice kill an enrollment?” in the Spring, 2006 issue of Outside/Input, #67).
The answer to the dilemma is simple in concept but mystifying in practice. We need to find ways to help employees assess their risks, evaluate and prioritize the options, and make the best choices. This involves providing information, evaluations (calculations), and support during decision-making. The challenge is to design it, package it, price it, and pay for it. Let’s get to work.
|
