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Benefits Products & Services
Pru's survey results support brokers' role
Benefits brokers/consultants a good fit for Prudential’s voluntary market strategy
By Thomas A. McCoy, CLU
Although the ’08-’09 financial market collapse and recession took its toll on the employee benefits business, the economic turmoil may, in the long run, have elevated the value of employee benefits consultants/brokers. “Expertise is essential; turbulent times call for expert advice,” was one of the key findings of a recent independent survey sponsored by The Prudential Insurance Company of America. Among those polled were three of the insurers’ major benefits constituencies—plan sponsors, insured employees and independent brokers/consultants.
And that advice, for Prudential as well as other major players in the benefits market, often comes from outside the insurer: from independent consultants/brokers whose plan sponsor clients depend on them for guidance in selecting and administering their benefits programs.
“Plan sponsors’ need for expert advice and guidance from a broker has never been greater,” says Lori High, president of Prudential’s Group Insurance Business. “The use of brokers and consultants will likely increase over the next five years as plan sponsors seek help managing costs and maintaining the competitiveness of their benefits package.”
For Prudential, and lots of other benefits providers, a key element of cost containment is writing more voluntary (employee-paid) business. In fact, group life business written on a voluntary basis currently is the fastest growing of Prudential’s core benefits products, which include life, long term disability, short term disability and long term care.
John DeLorenzo, Prudential’s senior vice president, sales & account management, says, “One of the findings of our study was that benefits brokers/consultants are sometimes more focused on cost containment than their clients are. So the benefits brokers have helped to drive our voluntary market strategy.” (He points out that many of these brokers are affiliated with property/casualty agencies.)
One size no longer fits all
Once a benefit program is established with an employer, Prudential’s voluntary market support is all about customizing coverage to individual employees. Enrollment materials are tailored to six different life stages of employees, for both males and females, DeLorenzo explains.
“When the employee signs into our Web site, the imagery and information will be customized to that individual. A 23-year-old single male will have completely different needs from a 45-year-old male with a family.”
DeLorenzo adds, “What the broker brings to the process is a broader perspective which includes not only our products but other companies’ products.”
Prudential also is using its voluntary program to bump up the amount of group life coverages it provides. DeLorenzo explains, “Ten or 15 years ago when group life plans were 100% employer paid, the coverage amounts would average two or three times salary.
“What we’re finding today is that companies are cutting back and offering employer-paid coverage of one times salary. And they’re taking their voluntary program, where the employee used to be able to purchase one, two, or three times salary in additional coverage, and moving that up to four, five or even eight times salary,” he says.
Interpreting survey findings
Prudential’s benefits study, titled “Benefits & Beyond,” which has been conducted annually for the past four years, provides a contrast between the attitudes of plan participants pre-recession and into the recession.
In the recession-centered 2009 results, only 29% of plan participants placed high importance on “finding a trusted source to provide financial advice.” That number had been 39% in 2007. Likewise between 2007 and 2009 those who placed a high importance on “needing to save for retirement” fell from 76% to 63%.
Do these declines, as the nation moved through its recession period, represent apathy, discouragement or just a deer-in-the-headlights kind of confusion among benefits consumers? And what will the next survey show, when, perhaps, retirement portfolios will have recovered more lost ground? These are questions for the retirement product side of Prudential’s house.
On the insurance products side, the survey results are more promising. They indicate that plan participants are increasingly concerned about financial security needs that can be met by life insurance, disability and long term care insurance.
For example, “Having to provide for long term care for yourself or a spouse” was rated as highly important by 40% of plan participants in 2007. That number jumped to 53% in 2009. Among plan sponsors included in the study, 39% currently offer long term care insurance and an additional 10% plan to offer it in the next year.
“There is absolutely a need for long term care coverage,” says DeLorenzo, adding that, “Last year was one of our best years ever for sales and growth in long term care,” Still, he acknowledges, the product’s potential remains inhibited by the need for greater education of the consumer since in most cases it is offered on an employee-paid basis.
The recession seems to have been kind to the group life business. DeLorenzo says Prudential’s sales of group life expanded “dramatically” in the open enrollment cycle toward the end of 2009. Survey results indicate that in 2009, 47% of plan participants say they re-evaluated their life insurance needs within the past year (up from 39% in 2008). Also, the percentage who say they have never researched their life insurance need fell from 15% in 2008 to 11% in 2009.
Life insurance and retirement products address different needs. Yet, the survey data suggest that when workers are confronted with general economic uncertainties and declining 401(k) balances, their fear for their retirement accounts may boost their interest in the guarantees of life insurance.
Communication is essential
It’s no surprise that the survey found an increasing percentage of workers believing that their employers are cutting back on their benefits (30% in 2008; 42% in 2009). But in an era of general cost cutting, perhaps the more relevant data is the finding of weaknesses in communicating the features of a benefit program. Only 38% of plan participants and 27% of plan sponsors said such communication is highly effective.
How much does it matter if someone—whether it is the broker, the plan sponsor or the insurance company—is not effectively communicating the features of the benefits package to plan participants?
Prudential’s analysis states, “Our research indicates a clear linkage between the effectiveness of employee communications and the perceived value of benefits. Interestingly, communications can have as much impact on worker satisfaction with benefits as the range of benefits offered or the perceived dollar amount of the employer contributions.”
And the job of communicating information about employee benefits, whether it’s to the plan sponsor or the employees, often lies at the feet of the broker/consultant.
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