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The Trend Toward One
There was always the chance that either due to product availability or performance, issues with service (or lack thereof), or simply because a particular agent went out of business, small business owners might want to use several providers for coverage. They would use one agent for employer-paid benefits and might use two or more for disability, accident, supplemental life, vision and dental, and other voluntary products.
That worked well for brokers, too, who were more or less specialized in specific product areas. With the broad product portfolios now available through some carriers, however, and their delivery through "one-stop-shop" platforms that encompass everything from enrollment to claims management, smart brokers are diversifying themselves and reaping the rewards, particularly in the work-site market.
Challenges to Business
Small business owners face tremendous obstacles when it comes to offering their employees a variety of cost-effective benefit options. To attract and keep valued employees, a robust benefits package with quality coverage is imperative. Group health insurance costs have risen steadily for several years, however, so employers are forced either to reduce benefits or pass these rising costs on to their employees in the form of high deductibles, coinsurance, or co-payments. With voluntary products, employers are finding they can at least partly compensate for the increases in health insurance costs by giving their employees what they want -- including empowerment through choice -- at no cost or administrative hassle to themselves.
According to LIMRA International, over the past decade the trend toward voluntary products -- group insurance programs paid entirely by employee contributions -- has spread throughout nearly all employer sizes and industries. These programs have risen primarily out of the combination of employers' need to offer a wide variety of benefits to increasingly diverse employee populations and their need to shift more of their employee benefit costs to the employees because of continually rising medical costs.1
But which insurance programs should be voluntary and which ones employer-paid? What's the right mix? That's where you come in. The following is a good hypothetical example of how an adept agent not only solved an employer's current benefits problem, but also helped the firm's bottom line through a wider offering of voluntary products and secured future business with the company as well. (And let's not forget all the other small business owners to whom this employer will refer the agent.)
Case in Point2
Tim Miller owns a small manufacturing firm and employs a staff of 20, including one office manager (a.k.a. human resources manager, accountant, benefits coordinator, etc.). As with any small business owner, Tim knows that his people are his business and for all the right reasons he wants to do right by them with the benefit programs he offers.
Over the past five years, Tim has seen his premiums for major medical steadily increase until this year when he learned that because of utilization and medical inflation his costs will rise more than 25%. With already shrinking margins in his industry, this increased cost is too much for Tim to absorb. He doesn't want to cut benefits, but he's worried that passing these higher costs on to his employees will make for an unhappy workforce, some of whom may start to look elsewhere for employment.
Fortunately, Tim has Robert Gill for an agent.
Manufacturing a Solution...and a Sale
Robert performs a needs-based assessment of Tim's traditional core benefits. After analyzing the benefits package, Robert develops a strategy that will provide Tim's employees with choice and flexibility in an attractive benefits offering, all of which won't cost Tim a dime, through voluntary benefits.
The core benefits Tim already provides are staples: major medical, dental/vision, and group life insurance. In fact, these are considered by many employees to be entitlements rather than options. It's already been established that Tim cannot afford not to pass on the increased premium costs to his employees; because these are foundational products, however, employees are less likely to gripe about having to pay a little more for them. But an increase without any added feature to compensate for it still will not sit well.
To diffuse any employee unrest about increasing employee-paid premiums and raising deductibles, Robert advises Tim to, in effect, give back what was taken away by providing a suite of voluntary products, including supplemental life, accident insurance, and critical illness.
With Robert's help through a benefits enrollment specialist, Tim is able to educate his employees on the features and benefits of these new options. For instance, critical illness insurance could be an appropriate supplement to both current health coverage and group disability insurance. Should an employee who owns a critical illness policy develop any one of a number of illnesses or conditions covered by the policy, he or she can receive a lump-sum payment upon first diagnosis to use in any way he or she wishes. This could include paying for experimental treatments, or visiting a specialist on the other side of the country not covered by the health insurance plan. It also could help to cover the increased deductible in the major medical plan, or provide a transitional benefit to replace income until the 60-day elimination period is over and disability payments -- still employer-paid -- begin.
By offering these options, Tim has given his employees choices, thus empowering them to make their own decisions about their benefits and how they're used. Depending on participation rates, he's also provided them with this variety of products at a lower cost and established an easy, painless method of payment through payroll deduction, again at no additional cost or increased administrative hassles for Tim. And fortunately for Robert, these voluntary products are all portable, so if any employees who buy them end up leaving Tim's company, Robert will stay with them to keep those policies current.
Robert has maintained Tim's costs for health care coverage, kept administrative issues to a minimum through the use of a "one-stop-shop" carrier, and provided his employees with additional coverage options at no additional cost to him. Robert probably will be Tim's benefit resource for a good long while. Good for Robert. He's extending his practice into a whole new market to increase his sales. And by offering a broad product portfolio, he's keeping the competition at bay and all of Tim's eggs in one basket -- his! Bradley O. Harris is vice president of accident and health at AIG American General and has more than 12 years of experience in the insurance industry. He is a Fellow in the Society of Actuaries and a member of the American Academy of Actuaries. Jay Drucker is director of accident and health product development for AIG American General and has 30 years of experience in the insurance industry. He is a LIMRA Leadership Insurance Fellow and the past president of the National Association of Health Underwriters (NAHU) Disability Insurance Training Council and the NAHU Education Foundation.
Footnotes
1. Joseph Premus, "Rising to the Challenge," LIMRA MarketFacts, Summer 2005, Aug. 16, 2005.
2. This case is presented for illustrative purposes only.
