Trend offers opportunities for agents and brokers
Voluntary life insurance sales grew 8% in 2015 and supplemental health insurance sales grew 4%, to boost overall group employee-funded benefit sales for the year, according to LIMRA’s U.S. Worksite Sales survey. It’s the fifth straight year that voluntary sales have increased. Experts expect the trend to continue and say agents and brokers can catch the wave to boost revenue and better serve clients.
Several factors are driving the growth of worksite sales. Major medical cost is one. “Employers’ benefits budgets are getting hammered by medical expense increases,” says Kim Landry, LIMRA senior analyst, workplace benefits research.
“With medical cost increases, employers have had to alter their major medical offerings, so plans they’re offering may not be as comprehensive as they were several years ago,” says Ron Neyer, CLU, ChFC, associate research director, workplace benefits research, at LIMRA. “That drives the need for some of these ancillary benefits.”
Employers are changing more than plan design. “Employers are faced with passing the increased cost of benefits to their employees, due to the escalated medical costs,” says Rich Williams, senior vice president, growth markets, at Colonial Life. “As a result, employers are reducing benefits coverage and offering a soft landing by providing voluntary benefit programs to bridge the gap.”
“As more health care costs are being shifted to workers, they’re in greater need of financial protection,” observes Andy Glaub, senior vice president and director of U.S. sales at Aflac.
Employees are feeling the pinch. “Many are experiencing higher premiums, deductibles, co-pays and coinsurance,” explains Janet Buzil, vice president of marketing and product development at Chubb Workplace Benefits. “For many, costs are increasing while coverage is decreasing. Survey data show that many people don’t have enough money on hand to cover their deductible.”
“The 2016 Aflac WorkForces Report shows that 52% of employees have less than $1,000 saved for unexpected out-of-pocket expenses associated with a medical event,” Glaub explains. “This means employees with little to no savings need options that help protect their finances in ways that major medical insurance simply may not.”
Worksite benefits represent a way for employees to protect their finances. “Supplemental benefits put money back into the consumer’s pocket,” Buzil notes. “It doesn’t matter whether you’re talking about critical illness insurance or accident; those benefits are relevant because they’re an affordable way to address risk.”
According to Williams, “More and more brokers are offering voluntary benefits to their clients and giving employers the tools they need to protect their employees against out-of-pocket expenses.”
Broker/consultant awareness and education are on the rise. “The industry is doing a tremendous job of educating brokers on the need for voluntary benefits and on the strategic placement of these products in the benefits package,” remarks John Stanley, chief marketing officer, Transamerica Employee Benefits.
Adds Buzil, “Brokers are really jumping into this market, which was very much driven by worksite specialists for many years. The Affordable Care Act has created a need for new solutions, and brokers are finding and delivering them.”
Also, carriers are emphasizing voluntary products more than they were a decade ago. “They see it as a growth area,” says Landry. “In the past, many companies did not specialize in supplemental health products. In recent years, companies that weren’t in the market have created products and gotten involved.”
In addition, she says, carriers—both old and new—have started encouraging their reps to spend more time building the business because growth of traditional products has slowed.
Growth also has been driven by worksite product and communication enhancements. “Carriers have been finding better ways to provide coverage that is meaningful and affordable,” explains Simon Milazzo, product manager at UNUM. “These voluntary products deliver value not just by supplementing, but truly complementing, core benefit packages, and employees are becoming more aware of the need to protect themselves against out-of-pocket expenses they may otherwise not be prepared for.”
Stanley says product design changes have contributed to the rise. “Confusion and challenges in the long-term care market have led to the rise of innovative life insurance products that provide either living benefits or long-term care features as riders to the base policy,” he says. “Traditional long-term care policies are very complex, as is the enrollment process. And the cost can be high. Adding a living benefit to a life insurance policy allows for a much broader conversation with employees, and you can expand the demographics of people who buy it.”
According to The Center on Budget and Policy Priorities, private employers added 14.3 million jobs to their payrolls in the 72 months following February 2010, an average of 198,000 jobs a month.
Employee recruitment and satisfaction also factor into the growth. “As the job market has hardened, recruiting and retention have taken on a greater priority,” explains Neyer. “Employers can beef up their benefits package by adding different voluntary offerings.”
Glaub points out that “55% of employees surveyed in the Aflac WorkForces Report said they’d be at least somewhat likely to accept a job with lower pay but better benefits, and nearly half (45%) said employers could keep them in their current job by improving their benefits options.”
“Companies want to offer health insurance, but costs are going up much faster than inflation, so when they’re looking to bring in new products, it’s more palatable if it’s something the company isn’t actually paying for but rather the employees pay all or a substantial part of the premium,” adds Landry.
LIMRA worksite research shows that 71% of employers believe voluntary benefits improve worker morale and satisfaction. “Employees who are happy with their benefits are more productive,” Buzil notes. “Being financially strapped because of personal or family illness or injury can affect production and hit the employer’s bottom line.”
Neyer points out that employees like having voluntary benefit options, whether or not they participate. According to Landry, LIMRA research shows that employees like having options available at the workplace rather than having to do their own research.
According to Len Cavallaro, head of voluntary marketing at Reliance Standard Life Insurance Company, the ACA has supported the concept of consumer choice. “The act makes it clear that consumers/employees must be empowered to make their own choices,” he says. “This has fueled the growth of companies focused on providing technology tools to communicate, enroll and administer these benefits.”
He points out that carriers tried to develop enrollment platforms to replace the paper storm created by employee enrollments, “but they soon learned that meeting employer needs meant they’d need to offer services that went beyond their own products. Technology firms stepped in and have developed technology solutions for this vital function.” This has led to improved transactional efficiency of voluntary and traditional benefit plans—another factor that may be driving growth.
Growth and success
Neyer says it’s reasonable to expect worksite benefit growth to continue. “Some product lines are definitely faring better than others, but the distribution channel remains popular,” he says.
Glaub concurs. “There’s no doubt that products that help workers prepare for and survive financial burdens will continue to grow into 2017 and beyond,” he says. “Dental and vision policies will continue to be popular. However, I see critical illness policies becoming more popular because they help fill medical insurance holes.”
Critical illness and accident are two products Landry says are growing faster. “Major medical changes are driving that, and carriers are training brokers to go out and sell the product as one that will fill a gap,” she notes, pointing out that they’re starting with a slightly smaller base, which means there’s more room to grow.
According to Stanley, “Conversations with HR around products like hospital indemnity insurance are becoming more common, as out-of-pocket costs, deductibles and co-pays continue to rise. We expect continued success in critical illness and accident products, as well.”
“[Fifty-five percent] of employees surveyed in the Aflac WorkForces Report said they’d be at least somewhat likely to accept a job with lower pay but better benefits, and nearly half (45%) said employers could keep them in their current job by improving their benefits options.”—Andy Glaub, Senior Vice President and Director of U.S. Sales, Aflac
Williams says continued small business growth will contribute to future worksite benefits growth. So will increased employee awareness. “As employees better understand how worksite benefits can be tailored to their needs and budget, participation and utilization of the benefits should continue to expand,” he comments.
“As more people recognize the risks and costs associated with high-deductible plans, I believe they’ll look more and more to supplemental benefits,” says Buzil. “Most people I run into on a daily basis outside of work have a very limited knowledge of supplemental benefits, so there’s a lot of room for growth. We haven’t come close to saturating the market.”
Cavallaro points out that available technology, coupled with the rise of “connected” employers and employees, makes it likely that electronic enrollment will be the dominant method of capturing employee decisions. “Carriers will need to work with these automation vendors to get their products to market,” he says.
“More progress needs to be made engaging end consumers and sharing information that will help them understand the products and make clear, confident benefit decisions,” Cavallaro continues. “Implementation of the ACA and the concept of insurance exchanges to distribute health insurance have created a frenzy of activity to build platforms that bring together education, decision support and transactional efficiency across the entire range of employee benefits.”
Neyer says that in some cases brokers are becoming more successful in persuading employers to contribute toward the cost of supplemental products. “Ten or so years ago, for instance, critical illness and accident were almost always 100% employee-paid,” he says. “Some employers will sponsor them or will contribute to them because they realize they’re offering a less comprehensive medical plan than before.”
To succeed in the worksite arena, Buzil says, “Agents and brokers should immerse themselves in supplemental benefits. Learn how they work and what needs they meet. Also, learn about underlying medical plans—deductibles, co-pays, coinsurance and out-of-pocket maximums—and how supplemental benefits can cost effectively help customers protect themselves and their families.”
Share that knowledge with clients. “Inform clients about the latest enhancements to voluntary products,” Milazzo advises. “Remember, these offerings are no longer simply ‘supplemental.’ Instead, each line of voluntary coverage can be customized to address specific financial gaps in core benefit plans.”
He points out that “the products are extremely flexible and can provide the necessary protection at price points that work for almost any budget, especially when they include financial incentives for participating in preventive healthcare, a.k.a. wellness benefits.”
Cavallaro stresses the importance of finding a voluntary benefits carrier that can help agents integrate the right product design with the right enrollment and admin solutions. “Often, some combination of carrier and third-party services is needed to bring the optimal solution to the client,” he notes.
Stanley encourages agents to have a strategic dialogue with carrier partners. “See how they support the consumer, the employee,” he says. “Make sure you can provide a simple and holistic experience for that employee consumer to access information, tools and content, and be able to conduct transactions when they want.
“Smart agents know that remaining competitive requires that they know their customers,” he adds, “and that customer is changing. Employers have all but said they’d like to not be in the benefits business in a great capacity, but they still are because of the competitive advantage and differentiation benefits provide. At the end of the day, though, you want to understand the mindset of the consumer who is paying the bill.”
Focus on educating employees. “With some of these products, employee awareness is low,” Landry says. “Our research says employees spend very little time making enrollment decisions, so it’s important to make sure employees know the products, what they’re good for, and why they need them.”
Glaub agrees. “Benefits can be complex, and there often is a lack of understanding of why voluntary benefits options are needed in the first place,” he says. “Employees need more decision support. Agents play a key role in marketing voluntary products and helping guide employees to apply for certain plans, by showing how beneficial these offerings can be to an employee’s benefits package and financial future.”
“Convey the importance of education to the employer as well, because they’re the ones providing employee access,” Neyer says. And consider targeting smaller firms. “Remember, it’s a lot easier to get direct access at a smaller company, where you only need to see 10 to 40 employees, rather than hundreds,” he points out.
Williams encourages agents to also provide employers the decision-support tools they need to find the product that best meets the employee need. “Agents should mine their existing client base—if they offer voluntary benefits to their clients under 100 lives, it’s a great opportunity to increase revenue and provide a much-needed solution,” he says.
Leverage local presence. “Although there are various ways to communicate, nothing replaces the effectiveness of in-person interaction, which can be supported by call centers and online tutorials,” Glaub says. “Employees need to be educated and oftentimes convinced that it’s in their best interest to apply for voluntary products. Having agents actually sit down and answer questions in real time is ideal.
“Plus,” he concludes, “employees who understand the ins and outs of their policies are more likely to understand how they can be properly protected in the event of an unforeseen medical emergency.”
By Dave Willis, CPIA