Achieving customer satisfaction and generating increased revenue are two primary objectives in any industry. Traditionally, brokers struggle to determine the true profitability of a given case. They also struggle with finding the best solution for their voluntary benefit prospects.
By effectively analyzing the economic value of each case in advance, both a broker and their selected enrollment company can make better business decisions about voluntary product opportunities. In short, proper case analysis should guide the planning for customer satisfaction and increased broker revenue from worksite sales.
Proper case profitability analysis requires a detailed information gathering process. It starts with understanding the basic characteristics of each case:
*What type of employer are you working with? What are their major lines of business?
*Where are employees located?
*What types of employees are being covered? (Blue collar, engineers, teachers, etc.)
*What is the pay scale?
Surveying each employers paid benefits reveals coverage gaps, helping you to find a perfect fit for a variety of products and services. Proper surveying yields critical information for developing a consultative worksite product needs analysis.
The survey asks several major benefit category questions, covering benefits such as:
Savings and Thrift Plans
Section 125, TSAs, etc.
What Employees Want
Present Voluntary Plans
What Employers Want to Offer
The online survey prioritizes offerings from a proposed Supplemental Voluntary Benefit Plan. The survey results can also be prioritized using either the 1998 LIMRA Study Data or broker-generated data concerning basic financial planning needs in areas like life insurance, disability insurance coverage, retirement plans or long term care coverage.
The LIMRA study asked employees what their most desired voluntary benefit products would be. The top three responses included health (61%), dental (57%) and life insurance (51%). Other preferred products included: prescription drugs (50%); vision care (49%); auto (49%); long-term disability (43%); homeowners (42%); short-term disability (38%); accidental death and dismemberment (33%); cancer/critical illness (24%); and long-term care (21%).
Through prioritization and the survey, you can generate a personalized worksite analysis report for employers.
Once the group thoroughly reviews the report, brokers may propose the most appropriate products and work with an employer to design an enrollment plan. A personalized consultative report is a great tool to illustrate voluntary product needs. It also shows the benefits of a long-term enrollment plan to the employer (rather than a “one time” campaign that will have no continuity). Finally, it completes a Consolidated Product Package for the group.
After completing the information survey and establishing a preliminary product/enrollment plan, brokers may create a case model and complete the case analysis to determine a cases value. This can also help evaluate the relative merits of different enrollment/communication plans.
Lets take a look at the case analysis process assumptions used in an illustration model for a Universal Life Product (see Figure 1).
In developing a case analysis, several key assumptions are considered to project employer participation. That participation begins with access for enrollment. Key questions to ask include:
*How many employees will be eligible?
*What are the access conditions?
*How many of the eligible employees will be seen?
*What are their occupations?
*What type of product will be enrolled?
*Which will be used: existing employer-provided plans or voluntary benefit plans?
Brokers will also need to consider what value-added services will be enrolled or communicated at the same time, including such programs as 401(k), Section 125, core benefits, 529 plans, safety programs and training programs. These tools can be essential for gaining employer cooperation and employee interest.
Proper case value analysis includes assessing the cost of these services as part of the overall package. Without a value-added service, the employer may simply choose not to install a program, even if their workers need it.
Employer cooperation helps determine the level of employee participation. Next, consider dependent spouses, a potentially significant source of additional business in the worksite market. (See figure 2.)
We have found that spouse participation is relatively constant by the type of case we are examining. We have also found that spouse enrollment without required employee participation can be a big plus. Spouse coverage that is greater than employee coverage is also well received.
The case analysis process assumes that consistent re-enrollment is vital. Find out if all employeesor only new hireswill have access to the plan you are presenting in several years. Use proper planning techniques to manage all employee access whenever possible.
Consider a case with 30,000 employees that is now in its 11th enrollment. After its first year, the case generated $4.8 million in sales plus an 89% 13th month persistency. The re-enrollment for 2002 resulted in over $2 million in new business while the average result over 11 re-enrollments is $1.4 million. There have been several enhancements along the way:
Added long-term care.
Upgraded the long-term care benefit to include home health care.
Added a cancer insurance product.
Upgraded the cancer product to cover other critical illnesses.
Persistency is another key element in determining case profitability, depending upon the type of business. For instance, in high turnover businesses like nursing homes, food service businesses and hotels, one can assume a higher lapse rate. Conversely, highly stable industries and government units have lower lapse rates. Hospitals are generally better than average, but its important to consider the percentage of employees in home health and nursing home jobs.
In addition, methods used during the enrollment will affect the Not Taken (NTO) rate (overselling results in NTOs and lapses).
After completing an information survey, an illustration model is created to determine premium and commission revenue projections for both the enrollment company and the broker. (See figure 3.) Premium flow is projected for the first year and renewal years, including the affect of lapses and special sale features, such as Add A Dollar increases.
The final step in projection is to compare the projected revenue with expected expenses.
Maximizing case value is critically important. Brokers need to know each case and the anticipated results. Never take a short-term view of the value (use a planned strategy, not a single-year track).
How can you determine the best results? A case should develop into a consistent source of income, not just a “one-year wonder.” Proper case analysis and determining profitability allows you to project the current year and future margins. It also allows you to help the employer make good business decisions.
For the best outcomes, get case result reports showing how much of the business you sell is placed. Also make sure to:
Get case persistency reports at least every six months to track the monthly rate.
Get detailed data on every case participant from the carrier to spreadsheet case performance.
Proper execution and attention to detail guarantees an accurate determination of how profitable each case will be and how valuable it will be to your employer clients.
, CLU, FLMI, is a senior vice president, case management, with Trustmark National Worksite Benefits. He can be reached via e-mail at email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 23, 2002. Copyright 2002 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.