Worksite Producers Say Small Groups Are Winners
Selling insurance at the worksite to small groups of 100 or fewer lives may be this years untold success story.
But producers who target this market are now putting out the wordthat small-group worksite selling is definitely a can-do proposition for agents who want to learn the worksite ropes.
Hear Pepper Krach: “Ive sold a lot of voluntary worksite plans in the past five years, and Ive found theyve become increasingly popular among the smaller groups, especially at 35 lives and up.”
An agent with Kistler Tiffany Benefits in Wayne, Pa., Krach notes that the employee-pay-all products written on a true group, guaranteed-issue basis are especially in demand, particularly in the last two years.
(Note: The industry has begun referring to these worksite-sold true group policies as “voluntary” products. This distinguishes them from “worksite” products, which are individual policies that typically offer discounted [not group] pricing and simplified [not guaranteed] issue. Both are sold at the workplace via payroll deduction, but some employers favor one over the other for unique reasons.)
Worksite selling “is not a get-rich-quick kind of thing,” stresses Jeffrey Sikora, managing partner of The Abacus Group, Albany, Ga. There can be up to a four-month lag, from time of first contact with the employer to end of enrollment, he explains.
“Still, once you start getting enrollments, you start to see volume, and then you build on that,” Sikora says.
Hes been in the worksite business for 29 years, first working with individual worksite products and now focusing more on group voluntary plans. In recent years, his annual sales have grown by 20%, both from new accounts and from existing insured workers who buy additional policies.
Sikora says his experience has taught him that “once you get in (to small-group worksite selling), you get sales.”
Thats not automatic, he stresses. “You do have to sell the coverage (i.e., offer coverage that meets needs and explain it well). You do need to work with a carrier that has the enrollment and administrative systems and philosophical orientation to support this market. And you do have to keep in touch with your groups.”
But, in time and assuming the account is well serviced, agents can make a comfortable living, insists Mary Wojnowski. She is president of Kistler Tiffany Voluntary Benefits Company, a King of Prussia, Pa., insurance brokerage and voluntary products administration firm.
“When starting out, you can sell it as an adjunct to other products,” says Gerald Rappold, vice president of Curtis & Associates Inc., Overland Park, Kan. “But remember, its recurring business, and revenue. Its like a snowball. You start small, use it to retain relationships, then add more each year.”
In time, youll notice that “the employees sell each other on it,” Rappold adds. “They really do!” So, when the next annual enrollment period comes, “if you have kept the communication going, even more employees will sign up.”
Active employees usually dont quit the plan, either, Rappold says.
Whats more, he says, after a while, some employees also ask to buy other products from you, on an individual client basis. “For example, after a recent voluntary term insurance meeting, five workers came up to me, asking about buying individual life insurance,” he says.
The willingness to buy is so strong, that producers interviewed for this article say its not uncommon for the very first enrollment to attract 40% of the eligible group, with the range cited spanning from 30% to 70%.
Those levels can and do fall as employees retire or leave the employer, they point out. But new hires and the previously non-enrolled workers often make up for that drop–and then some–if the agent keeps communicating with the group and employer, says John Korby, a benefits consultant with Nesbit Agencies, Eden Prairie, Minn.
In fact, he says, “communication is everything.
“You need to communicate the value of the benefits the employees are getting at the group meetings, and in the face-to-face sessions. And you need to do this both at initial enrollment and afterwards.”
Commissions on the voluntary plans are levelized, while those for the individual products are heavily loaded up front. This means agents, especially those selling group voluntary products, should sell other types of products, too, when first entering the worksite arena, the pros say.
If you dont, at least plan ahead so you can weather some lean times in the first year or so, they suggest.
But sticking with the business does pay off, they insist. For instance, the levelized commission from the group voluntary sales “creates what amounts to a nice annuity for you in the long run,” says Robert D. Heller, president of Alpha Benefits Group, Warrington, Pa.
When his firm started out 15 years ago, he recalls, most group insurance producers did not sell products via payroll deduction. His firm did, finding leads by telemarketing and then going out to talk about this unique concept to smaller employers–an approach it still uses to this day. “It was difficult at times,” he allows, but the business grew and it now has voluntary business in several states.
Other agents can make headway in this market, too, Heller says. “But you need to be resilient and keep your expenses in line.”
Agents can earn anywhere from $500 to $5,000 a month from small-group voluntary business, depending on the size of the case and amount of effort they make, says Wojnowski, the administrator. “Those commissions are in addition to commissions from other products they sell, such as traditional group insurance,” she emphasizes.
She sees the market as presenting producers with “a huge opportunity.”
Why? “Because any benefit the smaller employer doesnt provide can be offered on an employee-pay-all basis, through payroll deduction. And, since most smaller employers dont provide a full benefits package, theres always a hole in the program these products can fill.”
She alludes to group voluntary products like term life for dependents, dental, vision, and short-term disability as examples.
Another trend helping small-group voluntary sales is the aging of the baby boomers, says Krach, the agent. “Many boomers are more aware of their personal need for things like life and disability insurance,” she explains. “They want to get it now, while they still can.”
Yet another spur is all the cost-shifting that has gone on in the past decade, says Sikora of Georgia. He is referring to the trend of employers asking employees to share more of the benefit costs or to assume the costs outright, so the employer can afford to pay the ever-rising group medical insurance costs and respond to other economic threats.
Such cutbacks have made employers more receptive to offering benefits they dont have to fund, Sikora says.
The low unemployment rates of the mid-to-late 1990s helped, too, he says. Smaller employers began to see worksite products could help attract and keep good employees in such a market, he says.
Heller of Pennsylvania says the burst of new voluntary and worksite products, which started in the mid-1990s, augmented all the other trends. “That made products more accessible, and it enabled us to offer more multi-product plans to clients.”
Employee attitudes have played a role in growth of this market, as well.
As Sikora puts it, “workers are looking for additional benefits to fill gaps created by all the cost-shifting. And they want the best rates they can get, and guaranteed issue too.” Since the group voluntary products do all that, at discounted rates, employees are often willing to buy the policies, he says.
Whats more, employees at smaller firms want more options, just like employees at larger employers, says Korby of Minnesota. Even though they must pay for the coverage, theyre often “happy” about it, he contends. “Thats because its their choice. The employer isnt forcing it.”
Rappold of Kansas concurs. A couple of years ago, he says, his firm started doing some surveys that brought the choice issue home. Developed by National Financial Partners, a New York producer group to which his firm belongs, the surveys polled employee attitudes on the benefits plans of client companies.
“Again and again,” he says, “the surveys came back saying employees want to have more choice, and that theyre willing to pay for certain choices (such as voluntary dental).”
He had not expected such a strong endorsement of voluntary options, but he says subsequent sales have supported the survey findings.
“Employees absolutely want to pay for these products,” agrees Heller, explaining that many times, employees cant buy the products on their own, or not at a cost-effective price.
“The sale is labor-intensive,” Wojnowski concedes, pointing out that it involves not only selling the employer and every employee, but also managing or arranging for enrollment and ongoing administration. But agents who dont have the administrative capabilities in-house can always partner with other firms to do this, she says.
Agents face other challenges, too. For instance, they need to be sure their block of business represents a healthy mix of clients, not just one employment sector, says Korby. They also need to watch the product trends and claims activity, and be sure they are dealing with reputable insurers.
“So, get all the education you can,” he tells fellow agents. “Go to seminars, read the periodicals, keep calling and checking. Its a never-ending process, but it seems to work. And remember that your clients are paying you to have the knowledge to help them make good decisions. If you dont, it will go right to the bottom line.”
Korby is so sold on the small-group voluntary market that he says it would take it over large group any day. “Large groups come and go,” he explains. “But with small groups, you deal with the decision-makers. They tend to be flexible people who are looking for ideas. If you do a good job, they stay with you.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 29, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.