Many Americans’ personal finances are under stress. The Pew Charitable Trusts’ 2015 report, “The Precarious State of Family Balance Sheets,” found that more than half (55%) of American households can cover less than one month’s expenses with available liquid savings. Even if the typical middle-income family used retirement and investment accounts, they could replace only four months’ lost income.

Many factors contribute to financial wellness; one important factor is preparedness for financial change. The Prudential Insurance Company of America defines preparedness for financial change as being protected against risks that are difficult to predict and may have significant financial consequences.During their working years, employees face loss of income due to premature death, illness or injury and out-of-pocket medical and nonmedical expenses. Our metric for financial wellness, the Prutection Score, estimates a group of employees’ financial preparedness for these risks by considering the resources available to them — personal funds and insurance coverage — relative to the resources needed.

The Prutection Score results support the Pew findings: the average full-time U.S. employee with medical insurance coverage cannot meet all the expenses relating to any of the three risks. Specifically, the average employee's family could cover only 72% of their financial needs in the event of the employee’s premature death; 72% of financial needs from loss of income due to illness or injury; and 48% of out-of-pocket medical and nonmedical expenses resulting from an accident or critical illness.

Addressing the need

Employers recognize that promoting financial health can have a positive impact on employees’ lives and productivity. According to Merrill Lynch/Bank of America’s 2013 Workplace Benefits Report, more than 40% of companies have implemented a financial wellness program or plan to do so. Additionally, many workers prefer to access financial products, including insurance, in the workplace. This intersection of employer awareness and employee preference has created an opportunity for employee benefit advisers.

But it’s not enough for benefits advisers and employers to simply increase the number of insurance benefits offered, because different demographic groups have different needs. Measuring financial wellness provides a way to optimize benefit programs to get the most return for benefits dollars spent.  A more productive approach is to consider adopting the following best practices for improving employees’ financial wellness:

1) Take a needs-based approach to promoting benefits.

Instead of measuring employees’ benefit-adoption rates, it can be more productive to measure employees’ financial wellness and then base adoption goals against the wellness benchmark. Prudential has started using this approach with the Prutection Score.

2) Emphasize both needs and solutions in financial wellness education.

Employees often don’t recognize the exposure they face from immediate financial risks. Helping them clearly visualize the exposures’ financial impact on their lives and showing how specific solutions mitigate those risks may help overcome the inertia that prevents them from implementing solutions.

3) Get more from existing educational tools and channels.

Integrate customizable tools with existing online enrollment systems, if possible. One way to do this is to work with benefits providers that can help employees identify and measure needs and then recommend personalized coverage.

4) Offer a full range of risk-management solutions.

A robust array of risk management benefits, including accident, critical illness, disability, life and other insurance gives employees choice and improved risk mitigation.

Fouché is CEO of Prudential Group Insurance.

The Prutection Score is a measure of how prepared a group of employees are for the risks of (1) pre-mature death, (2) loss of income due to an illness or injury and (3) out-of-pocket expenses related to an illness or injury. For each of the three risks, the Prutection Score is the ratio of funds available to funds needed, which are estimated using employee demographic information, Prudential survey data and a variety of credible external industry and government sources. The Prutection Score is not intended to advise you or any of your employees what their specific financial needs might be or the exact amount of coverage any one individual might need now or in the future. The resulting scores are to be used for an entire group of employees or large demographics within a group. Results are not to be used at an individual level. Individuals should contact a financial professional regarding your personal situation. Prudential is not responsible for uses made of this information inconsistent with the description provided here. Prutection Score is a service mark of The Prudential Insurance Company of America.

The Prudential Insurance Company of America, a Prudential Financial company, 751 Broad Street, Newark, NJ 07102.

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access