2012 Voluntary Benefits Special Report
Voluntary benefits on the rise
Reduced costs for employers and employees make these a win-win
By Dave Willis
Smart investors diversify their portfolios. More and more, smart
P&C agents are doing the same thing. They're expanding product offerings to
broaden revenue streams, placing greater emphasis on account rounding to
bolster client retention, and using a range of products and services—some
old, some new—to open doors to new business opportunities.
Today, agents are using voluntary benefits in their move to
diversify. "Voluntary products have definitely seen an increase in sales in
2011," says Robert Nevers, RHU, director, worksite and voluntary marketing for
Standard Life and Accident Insurance Company. "That trend should continue."
Voluntary business experts say the time is right for agents to
get engaged, in light of health care reform initiatives. Tom Giddens, senior
vice president and director of sales for Aflac, says, "More Americans now
recognize the importance of taking charge of their health care decisions and
finding coverage that best fits their medical needs."
He calls the outlook for voluntary benefits in 2012 very
positive, with high demand coming from employees in particular. A Harris
Interactive study, titled, "2011 Aflac WorkForces Report," found that 66% of
employees would be willing to apply for additional insurance products to ensure
coverage where employers don't provide it.
"With continued economic uncertainty, confusion in benefits, and
rising health care costs, many businesses have reduced the amount of coverage
they make available," Giddens explains. "In some cases, they've forgone
offering certain benefit options altogether." He calls this news "alarming,"
since the Aflac study found that 63% of employees say their benefits packages
factor into their decision to change jobs.
John Burke, director, Group Benefit Products Center at Dearborn
National, agrees that voluntary products can offer value for agents and
brokers, as well. "We're placing more emphasis on our voluntary business this
year," he says. "Why? 2014," when remaining health care reform provisions take
effect. Agents who are dependent on health insurance revenues need a plan for
2014 to compensate for potential business loss, he believes, and those without
a book of health business can use voluntary benefits as an entrée during what
may be turbulent times.
"If employers are thinking about sending employees to a public
exchange and getting out of offering traditional benefits, producers can view
that as an opportunity," Burke adds. "Without the burden of a full health care
plan, employers may be more willing to fund, or at least support, ancillary
John Stanley, chief marketing officer for Transamerica Employee
Benefits, has observed increased interest in voluntary plans that fill gaps
left when employers opt for higher-deductible health insurance programs. "We're
definitely seeing a re-emergence in the supplemental health space," he
explains. "In the smaller and middle markets, specifically, there's interest in
products that help employers contain costs.
"Everybody's talking about 2014 and health care reform," Stanley
observes. "Well, mom-and-pop and mid-sized and smaller customers are dealing
with these issues today. They're asking how to cover rising health insurance
costs and provide competitive benefits to retain valued employees." His firm
offers a gap plan that sits underneath a high-deductible plan.
"A gap product lets employers offer major medical with a
significantly higher-deductible and provide the employee supplemental benefits
to cover a lot of out-of-pocket expenses," Stanley explains. "At the same time,
the employer is able to lower its annual premiums and, perhaps, pass some of
the savings on to employees." Often, the employer will align contributions for
supplemental products with the employee contribution for traditional health
Supplemental health products can cover a range of expenses, from
inpatient and outpatient deductibles to emergency transportation and more. They
can also be bundled with other voluntary life, health and accident products.
"Employees really value these products, and we can offer them on a guaranteed-issue
basis and make enrollment and administration simple for employees and
employers," Stanley notes.
Short-term disability is another valued voluntary product.
"Statistics show that one out of three people will become disabled before age
65," explains Nevers, "so disability insurance is important. It protects
people's ability to earn a living in case something happens; they can still
have money coming in to pay the bills."
Kurt Petersen, lead underwriter for Petersen International
Underwriters' Guaranteed Issue Programs, concurs. His company is seeing a trend
toward multi-life guaranteed or simplified underwriting disability coverage.
"Higher limits are being offered," he says. This allows high-income earners to
get adequate amounts of income protection.
Petersen says disability carriers have been profitable for the
past 10 years and now are "spending some of their hard-earned capital exploring
ways to get more people insured by offering lower rates, streamlined
underwriting and electronic enrollments." He cites an example of a large law
firm that recently requested a voluntary program for supplemental disability
insurance to augment their long-term disability plan.
"The supplemental benefits provided on a voluntary basis were up
to $50,000 per month in addition to the underlying $25,000 per month group
plan, for a total of $75,000 per month issue limits," Petersen says.
Participation requirements were modest and premium discounts of 30% were
offered. "About half of the eligible participants were insured for supplemental
income protection, with a collective annual premium just shy of $1 million," he
Nevers says disability insurance sales tend to rise in a down economy,
and that interest is high in a number of industries. "Blue collar workers have
been the bread and butter," he explains, "but we're also seeing success in
other areas, including schools." Reduced funding has led to budget cuts, so
voluntary benefits are coming into play. "Another growing market for disability
and other products is the association world," he says.
Critical illness insurance is also gaining traction in the
voluntary arena. "There's a lot of interest from the producer
community—more than I've seen since any company started marketing the
product," says Burke. "Producers are trying to determine how they can use that
in conjunction with high-deductible medical plans."
Life insurance has been a popular product for years. "There's
group term and permanent life insurance," says Nevers. "Many employees don't
understand that life insurance they get through work doesn't go with them when
they retire. Portability is an increasingly important factor."
Dental insurance has become an increasingly popular voluntary
product. "We're seeing a continuous trend of dental plans going from
employer-paid to voluntary," Burke explains, "We've seen this for the last
couple of years. Today, more than 60% of our dental sales are on the voluntary
Interest among agents in voluntary products has been growing.
"Savvy agents started getting more involved two to three years ago, when they
saw what might be coming down the pike with health care reform," says Nevers.
"They were looking for new ways to generate revenue, so many looked to the
voluntary side, to worksite products."
Stanley adds, "In a soft P&C market, voluntary benefits
represent a tremendous way for agents to leverage existing customers, and to
open up new opportunities with employers they're not dealing with today, to
develop new and recurring revenue streams."
Nevers agrees that voluntary benefits present great cross-selling
opportunities for P&C agents. "They already have businesses as existing
clients, and for little or no extra cost, they can build a script for CSRs to
use when they're talking with these customers."
Producers and principals can get into the mix, too. "Traditional
P&C agents are already dealing with the business owner, the CEO and/or the
CFO," says Stanley. "That's where benefits decisions are being made now,
because benefits represent what is often the second highest expense for most
employers, just after payroll. The P&C producer already has a relationship
and is already discussing risk management strategies. It makes sense to include
benefits in such strategy discussions, because that's a real risk for many
employers; it's an issue they're all struggling with."
According to Giddens, agents can jump-start success by becoming
familiar with voluntary issues and products, and then sharing that expertise.
"Agents and brokers have a great opportunity to educate consumers and
businesses on benefit options available," he explains. The Aflac study found
that nine out of 10 workers choose the same benefit options year after year,
despite confusion with policies and what they are selecting. In fact, 47% of
workers said they have made mistakes or have regrets about choices made during
"These stats reinforce the critical need for agents and brokers
to provide employers and employees guidance and understanding of options
available, and the positive effect these offerings can have on the work
environment," Giddens notes. "By offering competitive insurance policies to
employees, employers can help employees feel secure and protected which in turn
Voluntary products also can help businesses hold on to talent.
"Employee satisfaction levels at the workplace are directly correlated with
medical protection and expenses," Giddens adds. The study showed that 44% of
employees believe the one thing employers could do to keep them in their
current positions would be to improve available benefit packages.
"There has probably never been a better time to be offering
voluntary products to clients," says Nevers. "They fill the gaps and they can
be offered with no contribution from the employer. So it can be a win for
everybody." Employers shore up coverage gaps, they retain workers, and workers
save money and reduce their exposure to catastrophic events. "Plus, it makes
the agent look like the hero, because they provide a creative alternative that
helps save the day," he adds.
For employers who have never offered voluntary plans, the task
may take a little more work. "If they don't know how the plans work, they may
be hesitant," Burke explains. "You have some educating to do." He suggests
starting with one product, and then adding more. "Critical illness may be a
good jumping-off point," he adds. "It's relatively new, and it's proven to be
very attractive to employees where it's been offered.
"It's a great way for employers to test out voluntary plans,"
Burke adds. "Once they see that it's easy to administer and is popular with
their employees, agents have an opportunity to add more and more voluntary
benefits to the mix."
Recent jobs reports validate the "start now" recommendations.
"There seems to be some good news on the horizon for jobs growth," says Burke.
"If employers are hiring, that's better for workplace benefits. An economic
upturn means there will be that many more employees to insure."
Adds Giddens, "Supplemental insurance policies and ancillary
benefits offerings will be a greater differentiator this year than ever before
in the battle to attract and protect a talented workforce."