Cultivating a healthier workforce through behavioural economics

Behavioural economics, unlike traditional economics, states that individuals don't always make rational choices, even if it harms them.

What is behavioural economics?

Meiqun Hu

Hu Meiqun

Senior Data Scientist,
Mercer Singapore

Hu Meiqun, a senior data scientist at Mercer Singapore, is responsible for designing data analysis methodologies and building machine learning models.

She advises on analytics approaches across problem domains, including health risks and benefits utilisation, behavioural economics and social media analytics.

Behavioural economics is an interdisciplinary field that explores how psychological, social, cognitive and emotional factors influence the economic decisions made by individuals and institutions, which in turn can impact market prices, returns and resource allocation.

Contrary to traditional economics theory, which assumes that individuals are rational and always act out of self-interest, behavioural economics unveils that we don’t always make rational choices; our decisions can be influenced by our emotions, our personal biases and our environment; we can be over-reliant on the first piece of information that’s presented to us; we’re often unduly influenced by who relays information to us; and we have a tendency to do what those around us do.

 

How can behavioural economics be applied to health interventions?

Put simply, our behaviours impact our health. Non-communicable diseases, which include cardiovascular diseases, certain cancers, chronic respiratory disorders and diabetes, account for 70% of deaths worldwide, according to the World Health Organization. These diseases are largely the result of lifestyle choices: The World Health Organization attributes nearly all premature deaths to smoking, unhealthy diet, physical inactivity and harmful use of alcohol.

These findings strongly suggest that the root cause of preventable premature deaths is poor decision-making. Making better personal decisions could help reverse this negative trend, potentially preventing millions of premature deaths per decade.

How can we encourage people to make better lifestyle choices? According to Sophia Van, Chief Technology Officer at Mercer Marsh Benefits, applying behavioural economics and gamification can help people get “hooked” on healthy behaviours, making a positive impact on health and reducing mortality risks. As just one example, the “quantified self” movement — using self-tracking technology to monitor the foods we eat and the amount of exercise we get each day — is creating opportunities to promote better health by encouraging people to adopt healthy behaviours.

Incentivising employees to make healthier choices

South Africa’s largest insurer, Discovery, in partnership with Vitality Group, has pioneered a wellness insurance programme that harnesses the power of behavioural economics to engage employees and motivate them to make better health decisions.

Discovery was among the first to incorporate lifestyle factors into its Life and Health underwriting model. The programme demonstrates that providing members with incentives helps create sustainable change. Offering rebates between 10% and 25% to members of its programme on fruits, vegetables and other healthy foods nudged members to make healthier food purchases. Earning cinema tickets on completion of the “Vitality Age” test — a survey designed to assess overall health — helped increase members’ engagement with their health. Going to the gym and staying active has reduced hospital cost by an estimated 6%-9% per member over a five-year period.

Unlike other business models built solely on wearables, Discovery’s model has proved to be sustainable because it’s based on an innovative member engagement model and analytics capabilities that offer members incentives and rewards. 

Applying behavioural economics principles to benefits

More and more employers are providing flexible benefits options, allowing employees to select benefits products ranging from medical insurance and dental/vision care to lifestyle products to suit their needs. Employees now play a more autonomous role in managing their health and benefits selections. When barriers and challenges presents, and employers can apply strategies anchored by behavioural economics principles to overcome these challenges. 

Opportunity

Strategy

Behavioural Economics Principle

Motivate employees to invest in their health and actively manage their benefits

Use a pop-up primer that reinforces the need for health benefits

The Effects of Priming
By asking employees to think about how they’d benefit from investing in their health, they’re prompted to “own” their answers and to focus more on their well-being.

Overcome decision freeze

Limit the number of recommendations displayed at once

The Dilemma of Choice
Too many choices can lead to an inability to process information — a concept known as cognitive overload. The “magic number” for cognitive capacity is 7 (+/-2).

Anchor price perception

Design an attractive pricing and bundle strategy

The Anchoring Bias

Introducing a decoy option can make the intended option seem more attractive to benefits shoppers. Take health screening products as an example: A higher premium add-on may include a more thorough assessment for specific health risks (such as risks relating to the digestive or musculoskeletal system). A pricing strategy can be designed to encourage more take-up on higher premium add-ons.

 

Promoting a healthy workplace

Putting behavioural economics principles into action can help employers overcome the obstacles that prevent their employees from being more engaged with their health and adopting healthier behaviours. Behavioural economics can help shape the way employees interact with their benefits for the better, helping organisations and their people create sustainable behaviour change and achieve their health management goals. 

 

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