MARKETING
Choices, flexibility in voluntary product line
create opportunities for P-C agencies
By Phil Zinkewicz
Donna Mountain is second vice president in charge of alternative distribution for Fortis Benefits.
As recently as a decade ago, employee benefits packages were a "carrot" that employers used to attract talented workers and keep them happy. In fact, for some job seekers, employee benefits packages or "perks" as they were sometimes called, were even more important than salary levels. It was not uncommon for most businesses--small, medium and large--to offer their employees family medical coverages, life insurance policies, disability and dental insurance coverages--all paid for by the employer. Even pension programs were matched with some level of employer contributions.
However, in today's economic environment, the tide is shifting. Despite the promises of managed health care, the costs of medical coverage have gone through the roof. Although non-medical employee benefits such as term life, disability, and dental have remained relatively stable in their pricing, many employers--especially at the small and medium-sized level--want to offer their employees these types of benefits programs. But they're finding themselves hard put to pay for them.
Two options are available. One is to discontinue providing these employee benefits. The downside of this approach is that it fosters employee dissatisfaction and could result in small and medium-sized employers losing their pool of talent. The second option is to make these types of benefits available at the employee's option, with the employee paying either part or all of the freight, but at a lower price than in the individual marketplace.
The latter concept has been embraced by Fortis Benefits Insurance Company in Kansas City, Missouri. Fortis offers a line of voluntary employee benefits products that the company's leaders say can be tailored to employers' and employees' needs. In addition, it is an avenue for agents and brokers to either enter into or build up their existing employee benefits business.
Fortis Benefits is part of Fortis, Inc., a financial services company that has built leadership positions in a number of specialty insurance market segments. Fortis, Inc., is part of Fortis, a financial services provider active in the fields of insurance, banking and investment. Fortis ranks 31 based on its assets and 73 based on revenues on the Fortune "Global 500," and 42 based on revenues on the Forbes "International 500" list.
A 25-year veteran of the individual and group insurance business, Donna Mountain is second vice president in charge of alternative distribution for Fortis Benefits. Before moving to her new role, she spent eight years developing Fortis Benefits' portfolio of voluntary products, underwriting and administrative guidelines and systems, and the implementation of marketing enrollment tools to support worksite sales.
"What we don't do is force-fit companies into prepackaged plans," says Mountain. "We take time to learn about a client's company, employees and financial situation in order to tailor a solution that benefits employers and provides employees with benefits they really need."
"We're looking for producers who will allow us to be partners with them in reviewing their clients' employee benefits needs."
--Donna Mountain
All of the products Fortis Benefits offers are marketed through agents and brokers, and Mountain says that voluntary employee benefits provide an opportunity for those producers. One of the products Fortis Benefits offers is voluntary term life insurance. "Many employers already provide an employee life insurance benefit," says Mountain. "But it may not be enough for some employees--particularly for those with a mortgage or children in college. While employers may want to offer more coverage, they're finding it difficult because, at the same time, they're facing rising benefit costs. With our 100% employee-paid voluntary term life plan, employees have access to coverage at lower-cost group rates. Employers can increase benefits without significantly increasing benefit costs."
Mountain says that employers have a choice of flexible options to tailor coverage. There is the $10,000 unit plan in which coverage is available in $10,000 units. An employee can buy as many units as needed, from a minimum of $20,000 up to a maximum of $500,000, not to exceed five times annual earnings. Then, there is the "times earning plan" where coverage is offered for one, two, three, four or five times annual salary rounded to the next higher $1,000 and to a maximum of $500,000. Matching accidental death and dismemberment coverage is available for employees only at their election. Employees also can purchase coverage for their spouses in amounts up to 50% of the employee's coverage amount. Both products offer dependent child coverage as well.
Under its voluntary benefits program, the company also offers a suite of voluntary dental options. Prepaid dental options available in many states are called the Legend SeriesSM, while voluntary indemnity dental products are called the Freedom SeriesSM, according to Mountain.
"Under the Legend Series, employees know what their out-of-pocket costs will be because when they visit a Plan dentist, costs are based on a fixed copayment schedule," she explains. "The dentists are selected from a specified network of Plan providers, which offers savings for both the employer and the employee. Compared to traditional dental insurance plans, premiums are generally lower and more stable under a prepaid dental approach."
In the Freedom Series, the employee can choose any dentist; but if the dentist is part of Fortis Benefits' preferred provider network, the employee will enjoy lower overall out-of-pocket expenses.
Mountain says that, because of these options for voluntary dental, more employers are able to offer dental coverage to their employees. In turn, more employees can afford dental coverage for themselves and their families.
On the disability side, Fortis Benefits is now offering a new three-tier product called Disability Income SolutionsTM. Alice Rathburn, vice president of life and disability marketing at Fortis Benefits, says the new disability product line can be customized to offer a full range of income protection options at a single workplace. Benefits can range from basic coverage that pays entry-level workers if they become disabled, to comprehensive packages that protect an employee's income, retirement savings and medical insurance.
"Our research with consumers clearly proves people want flexible options," says Rathburn. "The industry trend has been to control costs by offering lower-cost alternatives that strip out benefits some employees truly value. The new three-tier product lets employers attract and retain the most talented people in their fields by meeting income security needs of different classes of employees through one package."
The top tier of the disability product is called Ultimate Secure Income SolutionsTM. It provides customized protection with features comparable to an individual disability insurance product, says Rathburn. The middle tier, Secure Income SolutionsTM, offers employers flexibility in selecting definitions of disability and plan provisions that will fit their needs, she says. Finally, there is Essential Income SolutionsTM, the product's basic tier. It offers income protection to entry-level workers and those who have never had access to disability insurance coverage.
"One key feature setting this product apart from others," says Rathburn, "is the option to select the best definition of 'disability' to meet the needs of different employee groups. We offer three definitions, while most disability income plans are limited to just one. A new Regular Job test can be added to any of the definitions of disability offered by Fortis Benefits."
Rathburn points out that, before developing this new product, Fortis Benefits asked consumers to imagine what they would want from their insurance provider if they became disabled and could not work. "The new disability product is therefore designed to fill an expressed need for financial security by offering employers the maximum flexibility to mix and match coverages and options to fit their particular needs," says Rathburn. "For example, besides their basic coverage, employers can select Fortis Benefits' new Critical Illness Benefit. This option allows claimants who suffer specific illnesses ranging from cancer to quadriplegia to receive a lump sum-payment in addition to a monthly disability benefit."
Mountain says that, traditionally, Fortis Benefits markets its products through employee benefits brokers. In addition to their traditional distribution, the company is looking to assist property/casualty insurance agents and brokers who have not built up a book of business in the employee or voluntary benefits arena, but who now would like to. For those agents and brokers who are new to the market, Mountain says that the company will provide assistance and guidance.
"We're looking for producers who will allow us to be partners with them in reviewing their clients' employee benefits needs," she says. "We want brokers who will allow us to create options for their clients and give them more flexibility. Some agents and brokers who have commercial clients would like to become involved in employee benefits, especially during times when P-C premiums are shrinking, but they're afraid that if they don't do a good job it will jeopardize an existing relationship. We are able to provide the expertise they will need."
Mountain says that P-C agents and brokers who want to get into employee benefits have several options. "First, they can try to build within their own shop," she says. "They can hire people with expertise in employee benefits and who represent two or three solid carriers. The advantage of this approach is that they have a great deal of control, but the disadvantage is that it is a slow process. Another way is to buy an existing employee benefits broker. This also offers the advantage of control and the ability to get into the market faster, but sometimes there can be difficulties in aligning the goals of the two organizations.
"A third way is through a strategic alliance with another broker, but this approach, while faster, is also riskier," explains Mountain. "The two members of the alliance might have a difficult time working together. But when brokers work through carriers, such as ourselves, that act as advisors, they can enter the market quickly and with little expense."
Mountain estimates that the voluntary employee benefits market now represents about 15% of the total non-medical employee benefit marketplace, but she predicts that it will grow rapidly. "It's definitely an opportunity for P-C agents and brokers," she says.
Robert N. Munao, president of the Woodbury, New York-based agency, Kaye Benefits Consulting, has been involved in the employee benefits arena and represents Fortis Benefits as well as other carriers. He agrees that voluntary benefit plans are on the move. "Employers are trying to cut back on benefits costs," he says. "Benefits costs are rising to the point where some employers just can't afford to pay for them on their own. So, they're looking for carriers who write what I call ancillary lines, such as dental and disability, on an employee voluntary basis. And it is a way for P-C agents and brokers to increase marketshare." *
For more information:
Fortis Benefits Insurance Co.
Web site: www.fortisbenefits.com