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Voluntary benefits are big business P/C agents boost profits with The Hartford's products and expertise By Elisabeth Boone, CPCU It’s no secret that the days of cradle-to-grave benefits paid for entirely by employers are gone for good. Exponential increases in health care costs put pressure on employers to balance competing interests: hire and retain good employees without going broke paying for their benefits. While most employers continue to subsidize group health insurance for their workers, industry experts point to a growing trend for companies to offer benefits like disability income and life insurance on a voluntary basis. The coverages are written on a group basis with premiums paid via payroll deduction. “The shift to voluntary benefits is real, and it’s happening very quickly,” says Barbara Howe, vice president and consumer segment business leader in The Hartford’s group benefits division. “In fact, voluntary benefits are growing at three times the rate of employer-paid benefits.” Howe likens this trend to the shift that has taken place from pension plans, paid for and administered by employers, to 401(k) retirement plans in which employees make their own investment choices and decide how much of their salary to contribute. In this environment, Howe observes, communication and education become key pieces of the equation for both employers and their agents. The need for information and tools on which to base decisions is critical, Howe points out, given the responses to two consumer surveys conducted by her company. “Literacy studies” The first survey, The Hartford Disability Literacy Study, was conducted online in 2004 among 600 U.S. professionals aged 18 to 65 working full- or part-time. The survey uncovered important misconceptions about disability income insurance. A key finding was that respondents confuse workers compensation coverage with disability income protection. The survey participants believed that workers compensation would cover them if they became disabled off the job, when, in fact, 64% of disabilities occur off the job and are not covered by workers compensation. The second survey was the 2005 Life Insurance Literacy Study of 750 consumers. Of those who participated, nearly two-thirds said life insurance is “extremely” or “very” important. Although almost nine out of ten respondents have high expectations of their life insurance benefits, some 44% said their coverage—typically $130,000—was inadequate to fulfill their hopes. Nearly 30% of those surveyed said they have little or no understanding of life insurance; in addition, 30% said they own group life coverage but don’t know what type it is. Underlining Howe’s point about education, one-third of survey participants said their employer influences their decision about life insurance. “One of the biggest benefits employers can provide their employees is solid information about the value of life insurance,” says Dick Mucci, executive vice president and director of The Hartford’s group benefits division. Products and markets As a leading provider of group life, accident, and disability insurance, The Hartford offers a broad array of both voluntary and employer-paid products to groups that range in size from two employees to hundreds of thousands, says Katie Dunnington. She is director of disability product management in the group benefits division, where, she says, “our key focus is to understand the changing needs of our customers and ensure that our products continue to evolve to meet those needs.” On the disability side, Dunnington says, “We help disabled employees focus on their goals and abilities, not just their disabilities. We provide disability administrative services as well as related services like FMLA (Family Medical Leave Act) administration.” In recent years, Howe observes, “Customers have begun requesting services that make the insurance product more attractive, like beneficiary management, EAP (Employee Assistance Programs), and will preparation.” As life insurance becomes more of a commodity sale, she continues, providing such services is a way for an employer to add value to its benefits program. Accompanying the shift toward voluntary benefits, Howe comments, is a trend toward simplified products that employees can more easily understand. “Sometimes the features that make a plan more desirable to an employer may not be as desirable to the employees who are the end consumers,” she says. In these situations, she notes, simplified products can enhance employee buy-in. Making the sale With voluntary insurance benefits, as with 401(k) plans, employees usually appreciate having the flexibility to make choices as they plan for their future. They’re often less enthusiastic, however, about paying for these products themselves instead of having their employer pick up the cost. How does The Hartford’s group benefits division help employers “make the sale” to employees about the advantages of voluntary benefits? “Employers are looking to us to communicate not only the value of the products that employees need to purchase but also the value of what the employer is providing,” Howe says. “Accessing group disability and life coverages through the workplace is probably the most convenient and affordable way for employees to acquire those products,” Dunnington says. “The very fact that the employer is offering coverages on a group basis tells employees that these benefits are important, and that kind of reinforcement is critical based on what we found in the literacy studies.” The affordability issue is key, Dunnington asserts. “Purchasing group disability coverage through the workplace costs the employee an average of $200 per year. Purchasing disability coverage on an individual basis would cost between $1,000 and $1,400 or even more.” In addition, she notes, “There’s the convenience of payroll deduction, and the fact that the employer has gone through the due diligence process to select the coverage levels as well as the provider.” Covering hourly workers Many employers offer group disability insurance to their salaried employers but not to their hourly workers, Howe says. “Katie and I often make presentations to groups of employers. We ask: ‘How many of you offer disability coverage?’ and a lot of people raise their hands. Then we ask: ‘How many offer it to their hourly workers?’ and all the hands go down. “Interestingly, the lower income workers are the ones who typically don’t purchase disability coverage, yet they are the ones who can least afford to be on disability,” Howe observes. “They usually live paycheck to paycheck—in fact, about 65% to 70% of America lives paycheck to paycheck—and if you don’t get a paycheck for six weeks, you’re going to have financial problems and you’re going to have absentee issues at work.” Howe and Dunnington use this information to show employers how they can benefit from offering voluntary group disability insurance to their hourly workers. “Because we offer a full array of product features and benefits,” Dunnington says, “we can help employers design programs that meet their hourly workers’ needs as well as those of their salaried employees who are the traditional focus for these benefits.” On-site support Once an employer has selected the voluntary benefits it wants to offer, Howe says, “We have on-site enrollment specialists who will explain the employer’s entire benefits package from The Hartford. We help employers with communication strategies and with enrollment strategies, which are two very different things. We explain how to set up and run employee meetings, what kinds of materials should be available, and anything else employers need to know about introducing voluntary benefits.” Employees also can learn about voluntary benefits by visiting a recently launched Web site (www.thehartfordatwork.com/thaw/). Here employees can find the information they need to make sound decisions about coverages to protect themselves and their families. A school for agents Equally as important as educating employers and employees about voluntary benefits, Dunnington says, is helping property/casualty agents and brokers understand the products and giving them the tools to guide clients in making the right choices. P/C producers are ideally positioned to approach their commercial insureds about voluntary benefits, and many agencies and brokerages formally coordinate sales of property/casualty and benefits products. Referring to the confusion about workers compensation and disability insurance identified in The Hartford’s disability literacy study, Howe comments, “The P/C producer is in a perfect position to explain the differences between these coverages.” “We have tailored education and communication tools for agents and brokers,” Dunnington says. “We recently piloted a producer school, which we are now conducting on a regular basis. It’s a weeklong school that teaches producers the basics of group disability in a continuing education credit format. Attendees can earn a group benefits disability specialist designation.” Experience counts At Brown & Brown, Inc., the seventh largest independent insurance intermediary organization in the U.S., Pattysue Rauh is vice president of employee benefits in the firm’s Daytona Beach retail office. Her department has a staff of 13 and operates as a self-contained unit with its own marketing, service, and accounting functions, as well as producers and enrollment coordinators. On joint calls, Rauh explains, “The property/casualty producer is portrayed as the lead individual on the account, and the employee benefits department is a specialist within the organization.” Working as a team, she says, “We can present the full capabilities of our agency and demonstrate our expertise on both P/C and benefits. “The ideal way to put a voluntary benefits program in place is to introduce it at a group meeting,” Rauh says. “Getting in front of employees at a meeting is much better than handing them a packet of information and saying, ‘Read this and decide if you want to enroll,’” she explains. “Hartford makes excellent resources available to us, as well as proving a sophisticated, well-trained sales team that goes to the worksite with us to handle the enrollments. They do a wonderful job of explaining coverages at a level that everyone can understand,” Rauh says enthusiastically. “They even customize enrollment forms so that each employee receives a form that’s preloaded with his or her income data. This allows each employee to see what his or her payroll deduction amount would be per pay period under different scenarios,” Rauh continues. “Hartford makes the enrollment process very easy, and that helps employees make appropriate decisions and feel comfortable with what they’re buying. They know before they get that first paycheck how much their coverage is going to cost.” As the trend for employers to provide voluntary benefits to their workers continues to grow, so does the opportunity for property/casualty agencies to take the lead in providing those coverages to their commercial lines clients. With sophisticated training, strong field support, and targeted educational materials, agencies can deliver important added value to clients and significantly build their own revenue. In the process, everybody wins. * “Murderball” The Hartford sponsors screenings of quad rugby film “Murderball,” a Sundance award-winning documentary about the U.S. Quadriplegic Rugby Team’s quest for gold at the 2004 Paralympic Games, which opened in the United States last summer to critical acclaim. Quadriplegic athletes in armored wheelchairs play a combination of hockey, basketball, and football, which originally was called murderball. Premieres of “Murderball” in eight cities were sponsored by The Hartford Financial Services Group, Inc., which is a long-time supporter of sports for the disabled and in 2003 became the founding corporate sponsor of the U.S. Paralympics. At the company’s invitation, group benefits producers attended each screening and had the opportunity to discuss the film with members of the U.S. Quad Rugby Team, captained by Mark Zupan, who also starred in the movie. “‘Murderball’ demystifies disability by presenting a real, unedited view of the lives of quad rugby athletes,” said Dick Mucci, executive vice president and director of The Hartford’s group benefits division. “We believe this film will kick-start a dialogue that will lead to better understanding of people with disabilities.” For more information: For more information about The Hartford’s producer school, contact Steve McConnell at stephen.mcconnell@hartfordlife.com or (860) 843-5274. |
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