Nudging Life Insurance Holdings in the Workplace

Timothy Harris and Aaron Yelowitz

MPRA Paper from University Library of Munich, Germany

Abstract: Using administrative data from a large public university, we analyze a policy designed to increase employer-sponsored life insurance. The University always had a supplemental life insurance plan available for its workers. In 2008, it increased its provision of basic coverage from a $10,000 to 1x salary. Workers initially paying for supplemental life insurance were in a position to completely undo the increase in basic coverage by scaling back supplemental elections, yet their default choice in 2008 was to continue at their existing level from 2007. The increased provision of basic coverage therefore represents a nudge for employees to increase life insurance. The nudge increased life insurance holdings one-for-one, both in the short and long-run, even for workers who actively made changes to other fringe benefits. New hires, who had to make an active choice, elected less supplemental coverage after 2008 relative to earlier cohorts of new hires, providing additional evidence of a significant degree of inertia among existing workers. Additionally, we find evidence of inertia for high earners constrained by the maximum limits. Data from a national sample of job changers show minimal crowd-out of individual market coverage from increased employer- sponsored life insurance. Further, we discuss the desirability of the nudge and find that the increase in basic coverage decreased life insurance dis- parities for two-thirds of employees

Keywords: Life Insurance; Inertia (search for similar items in EconPapers)
JEL-codes: D03 D31 G22 H20 J32 J33 J38 (search for similar items in EconPapers)
Date: 2015-10-09
New Economics Papers: this item is included in nep-hrm and nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: NUDGING LIFE INSURANCE HOLDINGS IN THE WORKPLACE (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:67150

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