Benefits Business Group life insurance benefits Agents have an opportunity to take advantage of an exploding need By Len Strazewski It used to be the throw-in, the piece of the group benefits package that improved the overall underwriting profit against volatile group medical costs. But as housing, education and other family expenses rise, group life insurance benefits are taking on a new importance for employers and their employees. According to two new studies conducted by two of the largest group life insurance companies, many employees now realize that they are woefully underinsured with their limited employer-paid life insurance and personal coverage. And while supplemental term life may be available through their employers, they don’t seem to get around to increasing their coverage. The Hartford Financial Services Group’s 2005 Life Insurance Literacy Study, released late last year, reports that two-thirds of 750 consumers surveyed by the company said they considered life insurance “extremely” or “very” important and about 90% of respondents expect that life insurance benefit to allow their families to maintain their standard of living, keep their partners from needing employment, cover major medical expenses, and pay college expenses. However, 44% admitted that their coverage was inadequate. Typical coverage among respondents was only $130,000. Nearly 30% said they don’t understand life insurance and don’t really know what kind of coverage they have. Group life benefits are very important. About half of the respondents said they have life insurance coverage as an employee benefit and, of those, about 40% said their employers pay all the cost of the coverage. Only 15% say they pay the whole cost of their life insurance. Rob Berman, Hartford assistant vice president and director of product development, says the study provides some guidance for agents/brokers that specialize in employee benefits and for their commercial clients. “It’s pretty clear from the survey that individuals suffer from a disconnect in the way they use and understand life insurance. They realize its importance but either don’t understand the products well enough or are not motivated enough to acquire coverage adequate to meet their expectations,” he says. “It’s also clear that the workplace is important to the life issue—a critical source of coverage and an opportunity to acquire supplemental coverage,” he says. Berman recommends that agents and brokers work with their employer clients to help consumers learn more about life coverage and evaluate their needs and encourage self-service opportunities. Employers can also improve access to life insurance with supplemental group term life insurance coverage payable by payroll deduction and emphasize the importance of supplemental coverage in employee benefits communication. Berman says the study indicated that many individuals are simply misinformed about their life insurance benefits and their family needs and therefore need more frequent education from their employer and employee benefit specialists. He noted that the Hartford At Work employee benefits Internet portal allows employees to manage their benefits and learn about options which usually include supple-mental group term life insurance choices. The employer site and the Hartford Group Benefits Web site at http://groupbenefits.thehartford.com/index.html also feature a life insurance calculator to help individuals calculate their needs. The group life insurance portion of the MetLife Employee Benefit Trends study confirms the consumer awareness problems. The New York-based life insurer polled more than 1,200 full-time employees and more than 1,500 employee benefits decision makers in 2005. The MetLife survey revealed that that more than 80% of respondents had experienced a life event—had a baby, bought a home, got married or otherwise changed life circumstances— but only about half think the coverage they had was adequate. More than one-fourth of respondents said they had less than three times annual salary in life insurance coverage. More than two-thirds of employee respondents with children under the age of 18 said they were concerned about their family’s security but less than half—about 43%—said they haven’t taken steps to determine what they really need to maintain that security. About 30% of those with coverage from their employer said they really didn’t know how much coverage they had. Todd Katz, MetLife vice president for institutional business, says that agents and brokers need to be active in their clients’ workplaces to provide more education about the need for life insurance and the availability of new products. Agents and brokers should encourage employers to communicate more about the importance of life coverage in financial planning and also advise employers about new coverage opportunities, including portable life coverage that may be more attractive to employees, and accidental death and dismemberment (AD&D) coverage as an accompanying benefit. “The workplace plays a critical role in communicating the value of life insurance—in many cases, it’s the only place employees turn for guidance,” he says. “A robust benefits program should incorporate educational materials and tools for employees as they reach significant junctures in their lives, and [should] help them realize the importance of planning for the unexpected.” For most employee groups, education and awareness equate with good marketing, he explains, as individuals who understand their needs and their opportunities to acquire coverage are much more likely to make the appropriate decisions. However, producers need to take a multi-channel approach with employees, using group meetings, printed employee benefits communi-cation, and self-service Web sites with coverage calculators to provide as much information and as many opportunities to employees as possible. Paul Blanco, managing director of Barnum Financial Services in Shelton, Connecticut, a division of MetLife Financial Services, supervises 160 producers whose books of business are more than half group-related life insurance. The agency provides coverage to about 75,000 workers. He says the business has evolved dramatically in recent years—and so has the marketing approach. “Life insurance is sold, not bought. Distribution is critical,” he says. “It’s the job of the producer to communicate to employers and their employees and help them understand their needs.” However, the high-pressure approach that has become legend in the life insurance industry has been replaced by a more sophisticated financial planning model that engages both employers and their employees in understanding their financial security and exploring the financial products and services—including life insurance products. “We have to communicate the A to Z of financial planning and how life insurance fits into the financial planning scenarios. This means lots of financial education and asset calculations,” he says. The proliferation of new products also provides some new opportunities. New group life, universal life, and investment products give producers more to talk about and more solutions for sophisticated financial planning strategies. Access is the traditional problem, as many employers are unwilling to allow producers direct access to employees to promote coverage, and many still limit opportunities to participate in employee benefits communications. However, Blanco says that reluctance is changing as employers introduce new benefits and plan designs that cause their employees to rethink their financial planning. Blanco says his firm is helping 10 employers roll out consumer-directed health plans and Health Savings Accounts (HSAs) which were legislated into existence two years ago with Medicare reforms. HSAs allow consumer-directed health plan participants to invest health premiums in a tax-incented account until they are used to pay for medical costs. As employers and their workers rethink the financing of their health care, they also need to rethink their entire financial picture—and employee benefits specialists need to help with that analysis, Blanco says. * The author |
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