Nudging South Africans to save for their retirement

Project name:
Encouraging South Africans to save for their retirement

Service:
Applied behavioural economics

Sector:
Financial Services

Area of Expertise:
Insurance and asset management

Client:
Global insurance provider

Date:
2015 - 2016

Country:
South Africa


In South Africa, retirement benefits accumulated through such instruments as pension and provident funds are only accessible to policy-holders at specific times, such as when they change employers. It is well documented that withdrawing funds before retirement is the main reason why most South Africans cannot afford to retire when the time comes.

The Applied Behavioural Economics (ABE) team worked with a global insurance provider’s outbound call centre to encourage more South Africans to save adequately for retirement by ‘conserving’ or reinvesting their retirement reserves rather than withdrawing them when they have the option.

Using the principles of behavioural economics, the call centre script was changed in a way that led to a 140% increase in the value of retirement benefits conserved. For the insurer, this realised considerable value, given that it will conserve close to R600-million in 2016, off a base of R250-million in 2015. The project therefore delivered a 19-times return on investment.

The team was again retained by the client recently to broaden the impact of this work within the firm by rolling out learnings across the entire contact centre. To train the entire contact centre, the ABE team established a new approach based on behavioural economics itself. The ABE team appealed to a powerful behavioural economics heuristic, the self-generation effect. In short, the self-generation effect maintains that people are more likely to remember that which they think of themselves. In this way, this heuristic was used to develop an approach that would both keep the agents engaged and ingrain the tenets of behavioural economics in their daily work.

Specifically, the team created a new training game designed to help the agents recreate customer communications through a behavioural economics lens: the agents were trained in relevant behavioural economics tenets and then, using playing cards designed by the ABE team, they were asked to determine how these tenets would fit into customer communication scenarios.

The team found that letting the agents figure out, by themselves, how to apply behavioural economics to their communications greatly improved engagement with and understanding of the work implemented. The training proved to be very successful and to date the full roll out of the behavioural economics-informed approach has shown an increase in daily funds retained by over 155%, as compared with the 140% increase experienced during the POC.

Practically the value unlocked for the client will amount to an increase in assets under management of close to R388-million by the end of the year.

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