2013 Voluntary Benefits Special Report
Voluntary Benefits: A natural for P&C producers
Health care reform and economic recovery open new doors for agents
By Dave Willis
Economic changes and shifts in the employee benefits and health insurance arena are opening up opportunities for retail agents and brokers to incorporate voluntary insurance products into their portfolios.
"As the economy rebounds and as health care reform moves forward, we're seeing more and more employees making their financial protection decisions at the workplace," observes John Stanley, chief marketing officer for Transamerica Employee Benefits. "Agents and brokers who are familiar with voluntary products can use them as part of their strategy to attract new business and to bolster their relationships with existing clients."
According to Neal Lucchi, senior vice president, voluntary products, at HM Insurance Group, "Changes occurring in the health market are creating greater need for voluntary products. The most common reason employers say they have not brought these products into their company is that no one has ever discussed the products with them."
"When health care reform is fully implemented, the federal government expects that as many as 94% of Americans will have access to major medical coverage," adds Ron Fields, vice president of broker sales at Aflac. "This will create a vast new market for voluntary plans designed to help with out-of-pocket or unexpected expenses."
Passage of the Patient Protection and Affordable Care Act (PPACA) is "shifting the conversation about major medical to voluntary products that can help families with unexpected expenses brought on by an accident or illness," Fields remarks.
Interest in voluntary benefits didn't start with PPACA, though. "A shift from employer-paid products to employee-paid products has been under way for a long time," says Tom Gilligan, vice president of national sales, voluntary benefits, for Sun Life Financial. "It's similar to what happened in the pension arena when employers started moving away from expensive defined benefit pension plans to 401(k) plans."
Today's shift to voluntary products has been driven in large part by ongoing health insurance cost increases. "The added expense has put pressure on employers," Gilligan notes, "and this has led to more carriers and brokers offering voluntary, employee-paid benefits."
Both employers and employees have responded positively. "Voluntary benefits are being used more and more by employers to build employee loyalty, enhance productivity and attract talent," observes Anthony Nugent, executive vice president in charge of group, voluntary and worksite sales at MetLife, which in March of this year released results of its 10th Annual Study of Employee Benefits Trends.
"Although companies of all sizes are using benefits that employees pay for, wholly or in part, a particular opportunity exists to serve somewhat smaller organizations—those with up to 500 workers," Nugent comments. "More than half of Gen Y and Gen X workers in smaller companies that were surveyed said economic conditions made them look more to employee benefits to achieve financial security—even if they had to pay all of the cost themselves."
The right products
"Voluntary insurance is already playing a key role in helping workers prepare financially for unexpected health events or high out-of-pocket expenses not covered by major medical plans," says Fields. "For example, hospital indemnity plans can help with expenses for hospital admission and confinement, emergency room visits, surgery and anesthesia, hospital intensive care, and out-of-hospital prescription drugs."
Lucchi also sees increased interest in these health-related offerings. "The products showing the greatest growth potential are critical illness, accident and hospital indemnity," he says. "Employees can use these to protect themselves from out-of-pocket exposure in high-deductible health plans."
Core products, such as life and disability income insurance, also are important, Lucchi adds. "This is especially true in situations where the employer doesn't provide these benefits on an employer-paid basis," he says.
"With life insurance sales in general at an all-time industry low, there's a huge opportunity for agents and brokers," Stanley asserts. "Agents can discuss with employers and employees why they should think about having life insurance to protect themselves and their families." In addition, he says, with interest rates at historic lows, voluntary permanent life insurance policies can be extremely attractive because of the guarantees associated with them.
He also believes disability insurance is a natural product for property/casualty agents to discuss with clients. "We offer products that protect a family's ability to earn an income and protect their dreams," Stanley says. "P&C agents are accustomed to working with commercial and personal lines clients to mitigate risks. Short-term disability insurance discussions can take the same approach."
In May of this year, Sun Life Financial released the results of a survey of worker attitudes toward long-term disability insurance. The study showed that a significant percentage of full-time workers lack LTD coverage, and that many employees do not understand how the product works. (See "Risky Business: Lack of Long-term Disability Coverage" in the July 2012 issue of Rough Notes.)
Gilligan believes that agents and brokers should "focus first on the most popular and most important voluntary products—life and disability. These are the primary components of what I'd call an employee's financial safety net." He suggests that agents and brokers next discuss what he calls "emerging" voluntary benefits, like critical illness, accident, supplemental medical and hospital indemnity products.
Gilligan recommends targeting employers that may offer less robust benefits packages. "These could include retail operations, certain blue-collar industries and other small businesses that would like to build up their benefits package without having to pay for it," he says.
In contrast, Gilligan points out, other sectors of the economy, like government and the health care industry, employ people who understand the importance of voluntary benefits and are quite receptive to them. "Even if they have a rich core benefits package, they are very interested in filling in the gaps with voluntary products," he notes.
When offering voluntary products, Nugent says, agents need to understand differences in employee demographics. "It's important to meet the different generational needs of today's diverse workforce with an array of benefits that can address many life situations," he says. The MetLife study showed that nearly three in four employees want more personalized benefits geared to their age group, and the same percentage want a greater variety of benefits from which to choose.
"For instance, a member of Gen X with children has different needs and preferences than an older Baby Boomer," Nugent comments, "but both can feel their specific situation is being addressed if their benefits choices and features are broad."
The right approach
To succeed in the voluntary market, Stanley says, agents must understand the employer's health care strategy as well as the employees' needs. "If the employer is migrating toward plans with higher deductibles and higher out-of-pocket expenses, agents should show how supplemental products can help employees offset the potential risks and added expense."
Fields adds: "Finding success with voluntary benefits requires many of the same skills agents and brokers use with other products: assessing the employer's current benefits offerings, identifying gaps and then determining how voluntary insurance can help fill those gaps."
Gilligan advises agents and brokers to incorporate benefits topics into their discovery process with both prospects and current clients. "Find out what they are doing today, what their current benefits package includes, and the extent to which they considered or incorporated voluntary benefits," he says.
Once that's done, find a way to broach the subject of voluntary products. "Explain to employers that they can improve their benefits package at no additional cost to them by using voluntary benefits," he suggests, "or show employers how they can continue to offer certain benefits, even if they have to eliminate the employer contribution."
Lucchi observes that the small group and middle market segments are significantly underpenetrated. "Helping these employers determine how voluntary products can fit within the scope of their benefits program is an opportunity for an agent or broker to provide real value," he asserts.
The key, Lucchi says, is to position voluntary products as part of the employer's overall benefits strategy. "Too often, when voluntary products are sold, this conceptual link between changes in the health plan and the role of voluntary benefits is not made," he comments. "Persistency and client satisfaction will peak when employees understand both the voluntary benefits themselves and how the products fit in their overall benefits plan."
Nugent recommends that agents and brokers encourage employers to build on the basics by offering a range of voluntary benefits. "Agents also can help by creating targeted communications that illustrate how specific features of these products can meet the needs of particular age groups," he adds.
"The enrollment process is very important, and employers will appreciate any guidance agents can provide to make it as easy as possible for employees," Nugent continues. "Agents also will find that working with a carrier that offers good service can be an attractive selling point that leads to more profitable and enduring client relationships."
Fields recommends that agents and brokers establish strategic alliances with group health and supplemental insurance carriers to help them better understand changes in health care law and how to navigate through PPACA. "Being affiliated with a trusted brand and knowledgeable partners will help position a P&C agent or broker as the 'go-to advisor' to offer cost-effective benefits solutions to their clients," he says.
Stanley concurs. "In addition to providing their own expertise, agents and brokers can make use of specialty carriers and leverage their field sales organizations to train and educate agency producers on how to be most successful in this business," he says.
Stanley points out that the delivery of voluntary benefits is changing, and technology is playing an increasingly important role. "It's easier than ever for P&C agents to distribute these products," he says. "Technology tools are in place to complement the agent's knowledge and to streamline the sales and enrollment processes."
"Agents and brokers who offer comprehensive benefits options, including voluntary insurance products, show their clients they are leaving no stone unturned," Fields declares. "Voluntary insurance can be used to enhance existing benefits plans by offering added protection and choices to employees without increasing benefits costs to the company."
Gilligan sums it up this way: "Voluntary insurance is by far the hottest segment of the employee benefits marketplace, and it's one of the hottest in the overall insurance business. The market is growing rapidly, and there is plenty of opportunity. We've made a major strategic commitment to voluntary products as a way to round out our group benefits business, and agents and brokers can gain an advantage by taking the same approach."