Voluntary products education initiatives benefit the buyer, broker & insurer
By Len Strazewski
Imagine grocery shopping with a store marketing representative following behind your shopping cart, explaining every product. Or think about trying to pick out new clothes while trying them on in a small group—while being lectured on new styles.
Voluntary benefits-personal insurance products sold at the worksite and paid by payroll deduction—are becoming increasingly popular with employers and many employees. But the way employees choose and enroll in voluntary benefits can be complicated and difficult for some employees. And, as a result, profitability growth could be stalling.
Voluntary benefit insurers usually provide communications materials and help for agents and brokers who conduct open enrollment. But effectiveness varies. Some employers allow agents to conduct small group meetings during which employees make their choices. Others conduct one-to-one counseling and record choices during or after the meetings. Some ask employees to enter their own choices in online enrollment systems. However, none of the techniques is perfect, industry leaders say, and improvements would help boost voluntary business growth.
Recent insurance industry research indicates that employers are choosing to offer more voluntary benefits—primarily to replace employer-paid group benefits. According to the 2011 LIMRA report, "Voluntary Benefits Penetration and Market Potential," about 57% of U.S. employers offer voluntary benefits and about 20% of U.S. employers are considering adding a new voluntary option within the next two years. LIMRA is an industry research organization based in Windsor, Connecticut, that represents more than 850 insurance and financial service companies in 73 countries.
The study also indicated that term life and cancer insurance are the most commonly offered benefits, followed in popularity by voluntary long-term and short-term disability insurance. Vision and dental insurance are now offered by about 20% of employers but are high on the radar of employers that are looking to expand employee-paid benefits.
The study also notes that about half of large employers (1,000 employees or more) said they are interested in moving some of their employer-paid benefits to voluntary in the near future. Among the benefits they would like to shift are group medical insurance and prescription drug coverage.
"The workplace has evolved from a niche distribution channel into a preferred venue for employees to acquire insurance products," said LIMRA assistant research director Ron Neyer, in the report release. "This is a great opportunity for carriers to take advantage of employers' desire to offer a robust benefit package to their employees while still keeping costs in check."
Another industry study confirms robust growth but also indicates that employers and employee confidence in the benefits may be lagging. Eastbridge Consulting in Avon, Connecticut, conducts a semi- annual survey that establishes a Voluntary Industry Confidence Index, measuring opinions about sales growth, industry profitability and employee enthusiasm about voluntary benefits. The overall confidence index dipped from 102.1 in late 2010 to 98.4 this year, even though respondents reported that sales exceeded expectations. About 40% said sales exceeded expectations, 30% said they met expectations and only 22% said they were below expectations.
Of overall confidence, "all three of the key measures of the index were down," noted Bonnie Brazil, vice president of Eastbridge, in the report. "The biggest dip was in the expectations around industry profitability. A higher percentage of our respondents this time feel industry profitability will be about the same or a little less profitable."
How can voluntary benefit insurers improve delivery and maximize profitability for their agents and brokers? One of the industry leaders, Unum in Chattanooga, Tennessee, rolled out a new online choice tool in 2009 that is designed to simplify voluntary benefits choices and put benefit decisions in a more personal context.
The Unum "shopping cart" tool is available at the insurer's Web site (unumbenefits.com) and features a shopping cart that shows exactly which benefits an employee has selected, what each coverage costs and the total cost for all the products. The site is now being used by about 2,250 small to mid-sized businesses with 500 or fewer employees, but it will eventually be expanded for use with larger employers.
Voluntary term life insurance and short- and long-term disability insurance are the insurer's most popular products, but the insurer also markets critical illness insurance and personal accident insurance.
"We listen to consumers, ask them what works, what doesn't and how we can most effectively support them in making benefits choices they feel good about," says Stacy Gray, assistant vice president of consumer strategy for Unum. "Our new tools are the direct result of that work."
The Web site offers the guidance of a video coach, real-time quoting, and straightforward descriptions of Unum products and how they work. The products are presented in price segments, offering a clear view of the amount of coverage available at different premium levels.
"The platform provides a flexible, consumer-friendly tool to give people the kind of online shopping experience they increasingly want and expect, whether they are enrolling themselves or with the assistance of a benefits counselor," Gray says.
The company also provides brochures and product booklets, templates for employer-distributed communication that employees can use to educate themselves about benefit choices.
"Decisions about employee benefits can be perplexing; they are also among the most crucial decisions consumers make," Gray says. "Helping individuals feel confident in their benefits decisions and comfortable with the process is a critical goal for us."
Don Wood, a Unum supplemental benefits enrollment manager in the company's Denver, Colorado, office, says agents and brokers can use the online system as part of their own benefits enrollment management. "Voluntary benefits can be a lucrative source of additional revenue for benefits agents and brokers," he says. "But managing the enrollment process can be an additional burden. Many brokers are already taking on the open enrollment process for group benefits."
Wood says the insurer will provide the pre-enrollment educational information to agents and brokers for distribution during open enrollment and then use the online system to facilitate the enrollment in voluntary benefits.
"The shopping cart tool can be used to fit into almost any enrollment environment," Wood says. Agents can set up a kiosk at the workplace and allow employees to make their benefits choices at the workplace during or after employee benefits education sessions. Or, producers can demonstrate the tool during enrollment and allow the employee to enroll online at home.
"The tool can be used to fit into almost any enrollment environment to make the voluntary benefits enrollment choice as comfortable and as efficient as possible," he says.
Wood says the insurer needs three to four weeks to set up the system for any employer and can work with agents and brokers to integrate the system into the open enrollment process.