2011 Voluntary Benefits Special Report
Voluntary benefits continue growing
Looming health care reform may create workplace marketing opportunities
Six out of ten American workers have no financial plan in place to deal with an unexpected and costly medical emergency, according to an Aflac study released in June. According to the report, 51% of workers say they are "not very" or "not at all" prepared to pay for out-of-pocket expenses not covered by medical insurance. The report also found that 66% of workers would purchase additional health insurance benefits to make sure they are protected and 59% said they would buy voluntary insurance.
These facts support what industry experts see as increased attention being paid to a variety of voluntary benefits by employers and employees, as well as agents and brokers. "Disability and critical illness insurance, in particular, seem to be gaining momentum," notes Thomas Petersen, RHU, vice president and senior underwriter with Petersen International Underwriters. Adds Chad Bodner, RHU, REBC, vice president, Worksite Sales at Assurity Life Insurance Company, "We have seen a significant increase in interest among traditional employee benefit brokers in offering worksite products."
Jim Foley, head of voluntary underwriting and sales support for ING Employee Benefits, has observed considerably broader appeal in the medical benefits arena. "Employers and producers are trying to figure out what health care reform means for employees," he says. "This is creating more opportunities, and it's generating interest in voluntary accident products, critical illness products and hospital indemnity products."
According to Laura Marzi, assistant vice president of marketing in The Hartford's Group Benefits operation, the market for voluntary benefits has expanded over the last several years. "These benefits are no longer just for big businesses," she explains. "Mid-sized companies and smaller firms are turning to voluntary benefits due to economic pressures—including the rising costs of health care. Employers of all sizes tend to like voluntary benefits, because they offer a way to make a variety of benefits available to employees without an additional direct cost to the company's bottom line."
Bodner adds, "In today's tough economic climate, adding extra benefits is actually some good news that companies can share with their employees."
Increased attention is generating insurer response. "Because of employers' interest," says Marzi, "we launched a voluntary stand-alone, short-term disability insurance product for smaller businesses earlier this year and are developing additional voluntary products."
Capitalize on opportunities
Given the increased market activity, agents and brokers would do well to consider how voluntary benefits might fit in their product mix. Employers appear ready to listen. "A recent LIMRA survey found that more than four in ten businesses are considering adding a new voluntary benefit within the next two years," says Marzi. "This presents a huge opportunity for agents and brokers to reach out to customers and position themselves as a source for more solutions."
The study also shows that employers who currently sponsor voluntary benefits are very satisfied with their programs and that half of employers that are not currently offering, but are aware of, voluntary benefits are receptive to making voluntary products available to employees.
Couple this with the fact that, as Marzi notes, "Barriers between traditional property and casualty and benefits brokers are also coming down, out of necessity. Producers have the opportunity to expand their footprint and offerings by considering solutions, such as voluntary benefits, that are in demand by employers." Tapping voluntary products lets agents and brokers bring a broader range of solutions to more customers, she adds.
Petersen points to health care reform as an impetus for action. "Disability is the new medical," he says. "With PPACA laws changing the way medical plans operate, uncertainty within the markets and at the consumer level is leading many people to take a 'wait and see' attitude.
"In the meantime," Petersen continues, "the need for benefits that will cover expenses related to an accident or sickness still remains. This is driving an increase in disability insurance—primary excess, supplemental, and all forms of business coverages." Petersen notes that most, if not all, states allow P-C producers to sell disability insurance without the need to obtain a separate life and health insurance license.
Response to health care reform has created situations that lend themselves to workplace benefits discussions. "The implementation of high-deductible health plans, for example, is creating gaps in coverage," Foley says. "As a result, there are opportunities for agents and brokers to talk with employers about filling those gaps."
Perhaps the agent or broker who sold the medical plan failed to mention supplemental benefits, he adds. "He or she may have not been interested in providing them. So there could be holes in the program that agents and brokers can address. Plus, they can create an additional revenue stream by introducing whole life, universal life, short-term disability or any of the other voluntary products out there. There's clearly a need for these products, particularly in what's described as Middle America, which is an underserved market."
Bodner agrees about the importance of addressing other products. "Many employers already have worksite products in place, which may or may not have been implemented by the broker," he explains. "This familiarity with voluntary products presents an opportunity for the broker to gain that market and further solidify his or her relationship with the employer."
As agents and brokers experience thinner profit margins following health care reform, this relationship bolstering is especially important, Bodner adds. "Many brokers are moving to fee-based compensation," he says. "They are acting as true consultants, offering solutions that are the best and most comprehensive in the market and presenting those solutions to illustrate their expertise and value to the client. This no longer applies only to core benefit offerings but to all employee benefits, including voluntary and worksite products."
To make the most of workplace benefits opportunities, agents and brokers need to be informed and prepared. "They need to educate themselves about voluntary benefits to be able to discuss various options with their customers," Bodner says.
Marzi concurs. "Producers need to take a proactive approach to developing a fundamental understanding not only of voluntary benefits, but also of where the products align with the needs of their clients," she explains. Many insurers offer training and educational materials to get agents up to speed on voluntary benefits.
For instance, Marzi notes, The Hartford School of Insurance offers training on group benefits topics. Also, industry organizations, such as LIMRA, are resources for research and training on voluntary benefits.
Such familiarity might help agents and brokers address a shortfall Foley has observed in the marketplace. "While we are seeing much more interest in and awareness of the products, we've also noticed less willingness on the part of agents and brokers to go in and conduct active enrollments," he explains. "That does a disservice, perhaps to the employees, but definitely to the employer. Employees tend not to want to admit they need insurance, so if you just provide information and hope they come and talk, it's not going to happen."
To make the process easier, voluntary benefits providers offer collateral sales materials and, in many cases, personal assistance. "We provide training for agents and materials for employees to be educated," Foley notes, "along with enrollment materials and electronic enrollment systems. We want to make sure employees are equipped to make the right decision and that the enrollment process works well.
"We have voluntary specialists who can meet with employees and lead them through the products and procedures," Foley adds, "and we can access a network of enrollment partners who can help complete the process."
Marzi encourages agents to not underestimate the importance of employee education. "It is critical for good participation rates," she explains, pointing to a 2011 survey her company conducted that shows that just 25% of Americans understand disability insurance completely.
She adds, "The growing trend of remote work also demands more digital tools for the employees who have less access to HR support. We're increasing our educational programs to ensure Americans are making appropriate financial protection decisions."
The time is right
According to the LIMRA study, nearly 80% of employers say they are interested in using voluntary worksite benefits because these plans carry no direct costs to them. "Employers' costs are not the only motivating factor for offering voluntary benefits," the survey notes. "Two thirds of employers said they offer voluntary benefits because it is more affordable for their employees than if they purchased the coverage on their own, and to provide them with a wider array of benefits."
This wider array presents ongoing opportunities for agents and brokers. "You don't have to offer all of the voluntary products to employees all at once," Foley explains. "A very successful strategy we've seen is to go in and identify the hot button, whether it's critical illness or accident to supplement the medical plan, and then go back year after year, offering new products." This approach lets employers add benefits over time, plus it generates new revenue each year and increases retention.
"If brokers are not discussing voluntary benefits with their clients, someone else is," Bodner notes. "Their clients should think of them first when worksite benefits are presented." Foley concurs. "If another broker comes in and gets your customer interested in these, you not only lose out on potential revenue, but you may lose the rest of the business," he explains. "It's a defensive mechanism."
Bodner sums it up this way: "Brokers can no longer ignore the opportunities that voluntary and worksite sales bring to enhance their income and improve their relationship with existing clients. Brokers can add significant value by helping clients provide an expanded benefits package without additional cost, especially at a time when employers are cutting back on other benefit spending."
Petersen's parting advice to agents and brokers about voluntary benefits is simple. "Sell more!" he says with a smile.