Benefits Business
Adding benefits without adding expense
Voluntary benefits programs can help employees without hurting the employer’s bottom line
By Len Strazewski
Employers realize that their employees have needs for financial protection that they don’t provide with their employee benefit programs—but they can’t afford to pay for any more insurance, says Jim Stengle, vice president of employee benefits at Brooks Insurance Agency, Inc., in Toledo, Ohio.
“The cost of medical benefits has risen so high for so long those employers simply can’t afford to expand their employee benefit plans to provide for any other financial needs,” he says. “Yet, they are caught in difficult position. They want to meet all of their employee needs and they want to broaden the overall scope of their benefits so they can be perceived as an employer of choice in their field,” he says.
Brooks Insurance was founded as a property/casualty insurance agency in 1922 and expanded into employee benefits 25 years ago, Stengle says. About 12 of its 90 employees work in benefits and contribute about one-third of the agency revenues.
In addition to group medical, dental and vision benefits and prescription drug plans, the agency also markets group life insurance and disability insurance programs primarily to small to medium-sized employers with fewer than 500 employees.
Stengle says the employer’s need to expand benefits without increasing costs has created an opportunity for agents and brokers who can develop voluntary benefit programs that allow employees to purchase additional coverage with workplace enrollment and payroll deduction. Earlier this year, the agency was a pilot producer for a new, simplified life and disability insurance workplace enrollment program from Unum.
“The biggest problem for agents and brokers is that there isn’t really good follow-through to help employers with the employee education and the enrollment administration that’s required of a successful program,” he says. “Employers don’t want to take on the additional administrative responsibilities themselves or the complications of educating their employees about the products.”
The new “Simply Unum” program is designed to simplify the enrollment process and expedite processing of applications without making demands on the employers or the producers says Mike Simonds, Unum senior vice president of product development and marketing.
Simply Unum provides a base group program of life and short- and long-term disability insurance and a comprehensive list of other products including term and permanent life insurance, accident insurance and critical illness insurance that can be delivered through a single technology platform with education and enrollment support from Unum staff, Simonds says.
For employees, the program provides group premium discounts ranging from 30% to 45% compared to individually underwritten accounts and rapid response options. For producers and employer human resource staff, the program provides Web-based tools to facilitate their portion of administra-tion and allows for online post-enrollment claims management, according to Simonds.
The program was tested in Michigan, Minnesota, Ohio and Wisconsin last year and was rolled out in 42 states in June 2008. The insurer expects the program to be available in the remaining states by the end of the year.
Stengle says he introduced the program to an Ohio hospice association with about 400 health industry employees, about 70% of whom work in the field providing medical support services in homes and nursing facilities.
“The employers had a great need for both the flexibility of the product offerings and support from the insurer in educating employees about the available coverage. Unum met with employees one-to-one and provided continued telephone support during the enrollment process,” he says.
The online paperless processing allowed the agency to receive responses in 24 hours and certification of coverage to employees in 48 hours—a dramatic improvement over individual submissions, he adds.
“We had an exceptional response from brokers and customers in the pilot markets,” Simonds says. “They were especially pleased with the education and communication support. Our one-to-one meetings with employees allow us to discuss the full value of workplace benefits and help employees to understand where there may be gaps in coverage.”
Simonds says the program may be of particular value to agents and brokers who are trying to expand their employee benefits business without building additional staff and infrastructure. “Many property/casualty insurance agents are trying to expand their employee benefits business but don’t have the staff or enrollment resources to manage a workplace program.
“Simply Unum provides them access to the products and the administrative support to bring the products to their clients.”
Among voluntary benefits products, supplemental disability insurance could become the “killer app” of the industry if employees and their families recognize their long-term needs, according to recent industry surveys.
About 80% of working Americans say they mostly would look to either their employer or the government for financial support in the event of a disabling illness or injury. Only 11% would mostly rely on disability insurance purchased on their own, according to a survey released in May by the Life and Health Insurance Foundation for Education in Arlington, Virginia.
“These survey results show that most people have a false sense of secur-ity when it comes to being financially prepared for a long-term disability,” notes Life spokesman Antonio Bolado, in the survey announcement.
“The reality is that most workers don’t have disability coverage through work, and disability benefits offered by the government such as Social Security or workers compensation can be difficult to qualify for and may not provide coverage when needed,” he continues.
“The chances of becoming disabled are much higher than most people realize,” Bolado explains. “Disability insurance, whether you get it through work or on your own, is the best financial safety net a person can have for protection against this significant financial risk.”
The Life and Health Insurance Foundation for Education also sponsored Disability Insurance Awareness Month in May. Participating insurers include Principal Financial Group, MassMutual Financial Group, Guardian Life Insurance Co., Berkshire Life Insurance Co. of America, Illinois Mutual, State Farm Mutual Automobile Insurance Co., Prudential Insurance Co. of America, Union Central Life Insurance Co., The Hartford, Assurity Life Insurance Co., Anthem Life, Anthem Blue Cross, Greater Georgia Life, UniCare Life and Health, American Fidelity Assurance Co., Harleysville Life Insurance, Standard Insurance Co., National Mutual Benefit and Equitable Reserve Association.
New survey research conducted by Opinauri, Inc., for The Hartford Financial Services Group, Inc., indicates that about 70% of respondents said they are meeting their financial obligations with little or nothing left over when bills are paid. An additional 8% said they are not quite meeting their expenses on their present income.
The survey company polled 971 adults ages 18 to 64, predominantly families with children, earning from $50,000 to $100,000.
Nearly all of the respondents (95%) said they would have to change their lifestyle if they lost part of their income for three to six months, yet only half reported that they had short- or long-term disability insurance. However, the survey also indicated that the key barrier to disability insurance was cost, not access. About 80% of respondents said they could obtain coverage through their workplace, but about 44% said they had trouble paying for benefits.
About 20% of respondents blamed administration issues, such as filling out forms and applying for coverage, for their not purchasing disability insurance; and 22% of those without coverage said they lacked enough knowledge about disability insurance to make a purchasing decision. *