By Thomas A. McCoy, CLU

Voluntary benefits business continues to grow, fueled in large part by tightened employer budgets. It's a competitive market, but one with room for a diverse field of carriers, featuring a variety of products and niche strategies.

"What makes the voluntary market so exciting is the speed at which it changes," says Steve Hannah, regional vice president of group insurance sales for Mutual of Omaha. "Growth in our voluntary business has more than doubled over the past five years."

Short-term disability has grown the fastest," he says-up 500% over those five years.
Although this kind of growth obviously proves the appeal that voluntary products can have with employees, it doesn't mean that the broker's role in selling voluntary products will be a piece of cake. Many benefits plan participants remain shell shocked by the assaults on the two pillars of their traditional benefits program: their employer-paid health plan-hit by increased costs for participants, and their defined contribution retirement plan-battered by wildly unpredictable market forces.

"When you're talking about payroll deduction-money coming out of employees' paychecks, it's got to be right." Robbie Nevers Director of Worksite and Voluntary Markets Standard Life And Accident

As they digest these unsettling changes, employees may feel overwhelmed when they are presented with the choices that come with products they will be paying for. HR directors, for their part, may need to be coaxed out from the bunker mentality that they've developed as a result of employer belt tightening. The need for effective communication between the broker and HR executives, and between the broker and plan participants has never been greater.

A recent Aflac study of the small employer market found that employers and employees have very different views about how the features of their benefits program are being communicated. The study found that among small business employees almost half (46%) said that their HR departments communicate too little about employee benefits. Only 30% of employees said that their benefits communication from the HR department was effective. Employers didn't see it that way. More than half of them (52%) rated their benefits communication to employees as "very or highly effective."

The study, conducted by Harris Interactive, a leading market research firm, included data from more than 2,100 business decision makers and 4,000 workers at companies across the United States.

What are some of the strategies insurers in the voluntary market are using to educate workforces about their products and help participants make informed choices? And what voluntary products are proving most useful?

At Mutual of Omaha, "our professional field representatives can walk a partner broker through helping identify the need with the employer all the way to delivering the first bill after a successful enrollment has been executed," Hannah says. Enrollment, featuring a "complete turnkey solution," is a particular strength for the company, he adds. "We have a full-time staff of salaried enrollers who focus primarily on educating the consumer so they can make an informed decision about their employee benefit package."

Hannah says that over the past 15 to 18 years a number of technological innovations-including "spreadsheets, online enrollment platforms, call centers and electronic signatures"-have made the enrollment process more efficient and helped make products accessible to smaller groups.

He continues: "When voluntary benefits first became popular, it was mostly limited to larger groups of, say, 100 lives and up. Today this is not so much the case. We can go as small as 10 enrolled."

But while technology greatly enhances voluntary market strategies, it is not what connects buyers to products. To succeed in the voluntary market, insurers and brokers must achieve good participation by communicating the value of their products. "Good (enrollment) participation results in a better performing plan, and good performing plans seldom see any changes in rates," says Hannah.

Rate increases can have a deleterious effect on a plan, Hannah points out. "Many sales people make the mistake of selling a cheap rate, only to find themselves having to deliver an increase some two years later. Regardless of whether the necessary increase is a percentage point or a healthy 20%, it necessitates a change to every single participant's deduction schedule. A small 5% increase, which might be only a few cents per employee per week, could be a huge administrative burden to the HR staff.

"The wise choice is to pick a carrier who knows how to price the risk and create the plan design that will be best suited for stability."

Hannah says group meetings with employees have proved effective in the enrollment process. "It is very common to enroll a group of 100 employees within an hour or two with group meetings. We find employees prefer group settings as they can make decisions alongside their friends and colleagues rather than feeling any unnecessary pressure while sitting one on one with an enroller."

As for the type of employer that seems to fit best with Mutual of Omaha's voluntary products, Hannah says, "We see the best fit with groups that have limited base-employer plans. This typically includes gray- to blue-collar industries. For example, an employer that has provided a base life benefit of $50,000 would benefit from a voluntary term life plan that enabled valued employees to purchase additional amounts."

"Many sales people make the mistake of selling a cheap rate, only to find themselves having to deliver an increase some two years later." Steve Hannah Regional Vice President, Group Insurance Sales Mutual of Omaha

Changes in the benefits climate also present opportunities for smaller insurers that cater to smaller worksite groups. Some of them capitalize on their size by maintaining close communication with employees and employers. One such insurer is Standard Life And Accident Insurance Company, which entered the group voluntary market about a year ago. Its strategy is to build on its depth of experience in the individual market-Medicare supplements, life, health and annuity products-where client interaction is critical.

"There's less competition for voluntary business with groups smaller than 100," says Robbie Nevers, director of worksite and voluntary markets for Standard Life And Accident. As other carriers have increased their group size minimums, Standard has found its niche in those with 2 to 50 employees, "although we will write larger groups," says Nevers.

"Many of the worksite carriers offer about the same products and compensation arrangements, so what really distinguishes one company from another is service," says Nevers. He feels that the number one area to monitor for potential service problems is billing.

"We are proactive-calling the client before a bill ever goes out to make sure that everything is in place-rather than reacting to a problem after it occurs. When you're talking about payroll deduction-money coming out of employees' paychecks, it's got to be right. It's important not only to the employee and employer, but also to the agent or broker. The agent has recommended the use of a carrier for voluntary products, so the service standards will reflect on the agent."

Standard Life And Accident's leading voluntary product is Critical Illness. Its voluntary line up also includes life insurance, hospital indemnity, accident and cancer policies. "Another product where we see a tremendous need-and the brokers see it as well-is limited medical," says Nevers. "It serves the lower- to middle-income employee who can't afford traditional major medical."

He points out that health care reform is generating significant interest in limited medical. "Starting in 2014, a lot of employers will be penalized if they don't offer group health insurance, so a lot of them are going to go to a fixed indemnity type limited medical program. We offer that both on a group and an individual basis."

As the voluntary market continues to gain momentum, it's likely that those carriers and brokers that take advantage of it will be prepared to reap further dividends as the voluntary market evolves with new products and services. One of those "new" products for the voluntary market is likely to be an old one-permanent life insurance. It's a time-tested product, but one that can always use a new avenue for distribution. American United Life, for one, is working toward the introduction next year of a permanent life product within its voluntary benefit line up.

Health care reform and employer budget tightening makes this a time of uncertainty for agents and brokers in the benefits market. The good news is that the voluntary market presents a welcome array
of opportunities. n