Banks Urged To Sell Bundled Employee Benefits
Businesses with fewer than 100 employees can generate millions of dollars in revenue for a bank willing to pursue the market for bundled employee benefits, says William J. Leary, senior vice president, American General Financial Group in Houston.
Speaking at the recent Financial Institutions Insurance Association’s fall conference here, Leary noted LIMRA research showing that group medical plans among small employers rose from 52% to 71% between 1994 and 2000.
A good deal of the growth was spurred by the debate over a national health care plan early in the Clinton administration, he maintained.
“It awakened the need for health care coverage among small employers,” Leary said.
An advantage to banks in selling group benefits is that it strengthens their ties to small businesses. This can enhance revenue for a variety of other insurance lines offered by the bank, said Leary.
Again citing LIMRA data, he noted that group disability sales increased 8% from the first quarter of 2000 to the same period in 2001, while group life during that time grew even more impressively, about 42% for both term and permanent life.
Small businesses, needing a way to recruit and retain employees, want to offer benefits, even though many can afford to offer only employee-paid or voluntary benefits, Leary said.
American General has 34,000 small business employers for various group plans, mostly life and long- and short-term disability, he added. Of these, 31,000 have fewer than 50 workers. It sells the plans through a variety of channels, including banks.
With American General’s recent acquisition by AIG, the combined company is now number 12 in the employee benefits marketplace, he said.
Kevin B. Gannon, president of Niagara Benefits Group, urged banks to see themselves as a way to help fill the benefits advisor gap for small businesses.
Fewer than half of small businesses have an advisor who assists with benefits purchases, said Gannon, whose Williamsville, N.Y. company works with American General, banks and other partners to administer employee benefits.
Offering bundled benefits helps a bank take advantage of the needs of this market, he said. Typically, such programs consist of an HMO plus dental, disability, group and individual life and administrative services.
“This is a natural product for banks. You have the customer base,” he said.
Banks are a good channel for producing group benefits programs because small business owners want to work with advisors they already know, he observed.
“My company will write 12,000 new contracts this year, 10,000 of which will be for businesses with under 50 workers,” he said.
Another advantage of going after small employers is their endurance as customers, he said. About 90% of them stay with his firm year after year. Most of those who leave have done so only because theyve gone out of business or been acquired.
Financial institutions can often work with insurance carriers to cobrand the products for small businesses, he noted.
Banks can often make inroads by showing small businesses how they can offer a full range of benefits at no cost to them, through voluntary benefits that fit the needs of people at various stages in their lives, Gannon said.
Not all employers will be ready to take on a bundled package of benefits, he noted. But once an initial product is introduced at a work site, an entr?e is gained to offering more and more benefits, he added.
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 15, 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.