Insurance Company Employees' Financial Expertise and Practices: Implications on Benefit Participation and Satisfaction

• Author: Mark L. Power,Tahira K. Hira
• DOI: http://doi.org/10.1111/j.1540-6296.2009.01171.x
• Date: 01 March 2010
• Published date: 01 March 2010

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Risk Management and Insurance Review, 2010, Vol.13, No. 1, 111-125

DOI: 10.1111/j.1540-6296.2009.01171.x

INSURANCE COMPANY EMPLOYEES’FINANCIAL EXPERTISE

AND PRACTICES:IMPLICATIONS ON BENEFIT

PARTICIPATION AND SATISFACTION

Mark L. Power

Tahira K. Hira

ABSTRACT

Employers continue to shift financial decision-making responsibility for em-

ployee benefits to employees. This article examines employees’ financial prac-

tices, financial expertise, and levels of benefit participation and overall satis-

faction. We show that there are significant differences in employees’ financial

practices and financial expertise based on socio-demographic characteristics.

While levels of benefit satisfaction and employer ranking are high, significant

differences in how employees feel towardtheir employer exist. Employees more

highly value traditional benefits than nontraditional benefits, but satisfaction

with benefits was high regardless of take-up rate. Wealso find that respondents

are more knowledgeable over experiential financial concepts than more spe-

cific financial concepts like qualifying conditions for a traditional individual

retirement account. Employer-sponsored financial education programs, which

increase employee understanding of employer-provided benefits and their im-

portance to employees’ financial well-being, should improve overall employee

satisfaction, loyalty, and productivity.

INTRODUCTION

The nature of the employment relationshipis undergoing fundamental changes that have

implications for how companies attract, motivate, and retain talent (Christensen, 2002;

Fronstin and Helman, 2000, 2003; Roehling et al., 2000). The bond between employer and

employee has shifted from a long-term relationship involving loyalty and commitment

to a contract-like economic exchange (Tsuiand Wu, 2005; Davolt, 2006). When employees

do not have the financial skills to evaluate the benefits options that are available to them,

they will push for more benefits, feel less financially secure, and be moredissatisfied with

their place of work (Keating, 1997). As employee benefit costs and complexity continue

Mark L. Power is University Professor of Finance and Principal Financial GroupFinance Professor

at Iowa State University, Ames, IA 50011; phone: (515) 294-5651; fax: (515) 294-3525; e-mail:

mpower@iatate.edu. Tahira K. Hira is Professor of Human Development and Family Studies,

Executive Assistant to the President, 1750 BeardshearHall, Iowa State University, Ames, IA 50011;

phone: (515) 294-204; fax: (515) 294-0566; e-mail:tkhira@iastate.edu. This article was subject to

double-blind peer review.

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