A recent Eastbridge Consulting report says that more than 70% of employers of 10 or more individuals offer voluntary benefits products. Top reasons employers cite are company cost savings and employee interest in, and need for, these kinds of products. Continued implementation of the Patient Protection and Affordable Care Act (PPACA) is another driving force for some products.
Agents who build a solid voluntary benefits portfolio can help clients and at the same time improve their own business. "There are a number of voluntary benefits some employers don't offer today," explains Leston Welsh, vice president, voluntary benefits, at SunLife Financial US. "Expanding the package they offer employees can help boost retention. For brokers, of course, a strong portfolio generates added revenue."
Consistently popular voluntary products include life insurance and short-term disability. "Our most popular voluntary product is voluntary term life insurance," says Marty Traynor, vice president, voluntary benefits and marketing, at Mutual of Omaha. "Too often, agents and brokers get caught up with the 'hot new thing' and overlook the importance of taking care of basic needs first. That's what voluntary term life does."
He says the product provides an easy way for employees to affordably meet their family's life insurance needs. "Plus, nearly every applicant qualifies," Traynor adds. "The best way agents and brokers can start growing their voluntary business is to help employees build a solid foundation, and that is exactly what voluntary term life does."
Says Welsh: "Voluntary term life insurance is the most purchased voluntary product our company offers. It's a core product in just about every broker's portfolio. However, it often is offered by brokers to sustain their book of business, rather than to grow it."
According to Len Cavallaro, head of voluntary marketing at Reliance Standard Life Insurance Company, "Selling term life insurance in an employer setting often amounts to solving a math problem: 'How much do I need? Really? Okay, how much can I afford?'" Short-term disability is another broadly popular voluntary benefit. "It's the fastest growing group product in our portfolio," says Dan Lebish, executive vice president and chief operating officer of Aflac Group. "The coverage helps protect employees from an unexpected loss of income. That's consistent with our focus on providing benefits that provide employees ways to protect themselves from financial burdens that often accompany unpredictable events."
"As employers try to control expenses, they're sharing the costs of supplementary products with employees," explains Welsh. "Brokers are responding, focusing more on voluntary disability products, which continue to outpace regular or traditional group disability sales.
"Our voluntary disability portfolio lets brokers offer employers flexibility to address their employees' varied needs and budgets," he adds. "Employees can select how much protection they want, how soon they need to begin receiving benefits, and how long they want the benefits to last."
Says Lebish: "Our plan offers two coverage options, multiple benefit and elimination periods, up to 60% or $6,000 in coverage, and optional benefits for continuity of coverage, pre-existing conditions, alcoholism and drug addiction, and mental illnesses." "Short-term disability is an important part of any good voluntary benefits package," says Jeff Caldwell, marketing director at Transamerica Employee Benefits. "Unfortunately, it's often ignored by employees who mistakenly assume their savings will cover short-term costs until their long-term disability and/or long-term care insurance kicks in."
Selling the disability value proposition can be more complex and time consuming than is the case with other products. "If you agree that people 'get' life insurance as a concept, the challenge for agents and brokers is to learn, digest and 'sound-bite' the disability value proposition," Cavallaro explains.
He suggests starting employee discussions like this: "The odds of your being out of work from illness or injury for longer than your vacation time and savings account will carry you are as high as one in four. Why wouldn't you spend a few pennies to make sure your paycheck doesn't stop?" He adds, "Then, if you agree that together life and disability form the foundation of a good protection plan, you can begin to craft effective messaging about specific enhancements using ancillary coverages like accident, critical illness and others."
Accident and critical illness are among the fastest growing voluntary products. "Critical illness insurance provides a lump-sum payment that employees can use to help pay out-of-pocket medical expenses, including deductibles, and it also can help pay non-medical expenses such as child care, credit card bills and travel for medical treatment," explains Caldwell.
"Given the increase in employee out-of-pocket health care costs and the individual mandate of the Affordable Care Act, the growing popularity of critical illness coverage isn't a surprise," says Rob Shestack, senior vice president and voluntary benefits national practice leader at AmWINS Group. "It is a very cost-efficient product, and employees appreciate the benefit." Shestack adds, "As an indemnity product that pays per defined medical occurrence, it's a great financial help to employees with high deductibles, coinsurance and copayments. Also, the indemnity benefits help with any financial need, not just medical expenses. This can greatly assist any employee."
"An accident insurance policy helps employees who experience an accident pay for medical bills and other expenses that often arise after an injury," Caldwell notes. "Benefits advisors often package critical illness and accident together to supplement the employer's health care plan."
"Even though accident and critical illness insure different impairments," Traynor explains, "they both answer a need that has grown for many people, due to the continued trend toward higher deductibles and copays in basic medical insurance."
"As medical premiums continue to rise, and deductibles with them, critical illness and accident insurance act as a virtual ceiling, offsetting a family's financial exposure due to covered illness or injury," says Cavallaro.
"In light of health care reform," says Welsh, "by selling supplemental products like critical illness and accident, brokers can help employers keep costs in line while helping employees get the benefits and protection they need."
Adds Traynor: "Average people simply don't have enough ready cash available to cover the out-of-pocket hit they may experience due to an accident or critical illness event. Agents and brokers can help employers by providing options for employees to insure against a heavy hit on savings via accident and/or critical illness coverage."
"Given the financial risk that many employees confront when faced with a critical illness, brokers should also consider encouraging employers to fund a base level of coverage for these benefits and allow employees to buy up to a higher level on a voluntary basis," Lebish says.
Shestack encourages agents and brokers to view voluntary products through what he calls "the window of wellness. Wellness, like retirement, can be viewed as a three-legged stool with mental, physical and financial legs." He points out that weight loss and smoking cessation efforts help employees address the physical leg.
"Retirement plans, protecting against out-of-pocket medical costs, and identifying life, disability and critical illness financial risks all help brokers address the financial leg," Shestack adds. "Both legs help reduce stress on the third, the mental part of wellness, as does a reduced-stress work environment. When each leg of the stool is strong, tying in voluntary benefits will help retail brokers grow their revenue."
"Two voluntary products gaining significant traction are supplemental medical expense and hospital indemnity insurance," explains Caldwell. "Supplemental medical expense insurance pays a benefit for deductibles, coinsurance and copayments that accompany coverage through the employer's basic major medical or comprehensive medical plan."
Hospital indemnity insurance, he adds, pays a specified amount each day an employee is confined to the hospital, and through a series of optional riders can provide benefits for a range of other medical situations. "Employers can select hospitalization benefits only, or can customize a plan to provide benefits for services such as diagnostic procedures, outpatient surgery, and intensive care," he notes.
Cavallaro describes hospital indemnity as "an old tool being put to relatively new use as a gap-closer for high-deductible plans or low-level government exchange plans. There's a significant challenge for agents and brokers here, but extraordinary potential gain: The producer who can communicate these and other coverages quickly and efficiently as budgetary coping strategies for the employee and his family-why it works versus how-can expand revenue and simultaneously deepen client relationships. How often are we presented that kind of opportunity?"
Another benefit that is gaining marketplace traction involves identity protection. "We act as an alarm system for an employee's personal information," explains Nick Rockwell, director of the benefit solutions group at LifeLock. He points out that, while other insurance products are inherently reactive, his firm's offering helps agents and brokers deliver a proactive service. "We constantly work to alert customers when we detect their information within our network being used in the process of opening new accounts, such as credit cards, cell phone contracts, and mortgage applications," Rockwell notes. "Of course, there is no way to prevent every instance of identity theft, so we offer extensive resolution services to handle any issues."
Rockwell stresses the importance of consumer education and says the workplace is an ideal venue to provide that. "Many people don't realize the need for our services until it is too late," he says. "More than 26 million U.S. adults have been victims of identity theft in the past 12 months. The workplace is a natural place to educate employees about the importance of identity protection, much like companies have led the way with accident insurance, disability insurance, and retirement planning."
"There's never been a better time to invest in voluntary benefits as a practice," says Cavallaro. "Individuals are being forced to learn more and be accountable for benefits purchases." He says the most important thing a broker can do to optimize his chance of success is also the simplest: "Position benefits as, well, benefits."
He points to the meaning of "benefit": "It's a tangible, valuable advantage gained by acting on this opportunity," he explains. "Independent producers need to find relevance and communicate clearly. This will help consumers feel confident they're doing what's right for their families."
Traynor comments on timing. "Spring is a great time for retail agents and brokers to build their voluntary practice," he says. "The fourth quarter, of course, is dominated by planning changes to employer medical plans and fulfilling the annual enrollment. With an influx of new rules stemming from PPACA, once medical enrollment is complete, there's a 'hangover' of making sure compliance planning is in place for next year's medical plan."
He says that, in the spring, benefits buyers have more time to consider options. "Remember," he adds, "voluntary enrollments need not take place at the same time as medical enrollments."
"Offering voluntary insurance benefits give workers a meaningful safety net," Lebish points out. "As employers shift costs to employees who may not be ready to assume them, voluntary products can help fill gaps."
He encourages brokers to adapt and expand their focus. "Become more consultative and offer a wider range of products and services, including voluntary," Lebish says. "Also, encourage clients to fund a base level of income-protecting benefits in lieu of benefits that don't protect employees from financial burdens of an unexpected illness and/or disability."
Welsh stresses the importance of gaining "a deep understanding of employers' health insurance plans, because that's where the need starts. Educate employers on the value of a holistic approach to major medical and voluntary benefits. Rely on your benefits carrier to make recommendations specific to the employer. Finally, help employers educate employees on changes and what they mean for them as they sign up for benefits."
Shestack encourages agents to "engage a firm with robust voluntary benefits expertise that looks at product selection through the lens of employee demographic metrics, overall employer-provided benefits and potential gaps in existing client coverages." He says the firm should offer proven communication, enrollment, project management, account management and administrative abilities. "We regularly help retail brokers dissect their books of business to identify employers that can benefit from voluntary products," he adds. "We help define the broker's revenue opportunities and help design a voluntary practice infrastructure that can grow both vertically and horizontally."
Caldwell points out that some carriers focus on generational differences as a primary driver for employees purchasing benefits. "Our research shows that other factors play a greater role," he says. "Integrating advanced data analytics helps us segment employees based on multi-dimensional demographic and financial data."
He says advisors can use this information to evaluate employee populations and review specific product recommendations for each employer. "This leads to a more comprehensive product strategy for employers, increases employee engagement and drives additional revenue for advisors," he adds.
Rockwell encourages agents not to limit their voluntary benefits options. "Remember, identity theft is much more than a fraudulent charge on a credit card," he says. "It's also new accounts, loans, or services opened up in the victim's name without their knowledge. While credit card companies monitor for fraudulent charges on a specific card, they can't detect new credit cards or lines of credit."
He offers this closing advice to agents and brokers: "As you assess different providers, it's important to focus on administrative capabilities and financial stability, in addition to product features."
Dave Willis, CPIA, is a New Hampshire-based insurance freelance writer and regular Rough Notes magazine contributor.
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