By Terry Reams and Donald R. Tardif
For many employers, large and small, the benefits question continually gets harder to answer every year. “Which benefits do I offer and how much can I afford to pay for them?”
In the face of continuing large medical increases, most employers have already cost-shifted a significant portion of the premiums to their employees. Combining this with current economic conditions, employers are making significant efforts to better manage the bottom line. This includes making additional benefit cost cuts through more cost-shifting or even program termination.
However, the old adage has it right: “With every gray cloud, there is always a silver lining.”
Simply put: Despite the current benefit chaos, there has never been a better time to present multiple voluntary program options to employers. This is the best method for providing comprehensive benefit offerings at a lower or no-cost approach.
Which voluntary program(s) to present as the available options? Try offering multiple options to all employer groups.
Granted, multiple product marketing can sometimes be tricky. Therefore, to maximize the overall marketing effort, try taking a methodical approach to evaluating potential sales levels within any group. Here is the strategy:
1. Identify specific coverage gaps.
2. Review employee census data to determine different occupational categories and their availability to fund additional products.
3. Determine recent or upcoming benefit level and/or premium changes.
Then balance these findings with the information in the chart on this page. In our firm, we use this to remind ourselves of what we have found to be the pros and cons of specific voluntary programs within a multiple marketing arrangement.
As the chart illustrates, one of the best products to sell at the worksite continues to be universal life insurance programs. This assessment is based on our own results plus current industry environmental factors.
A particular trend influencing UL sales right now is the reduction in levels of employer-paid group term insurance.
A long-time stalwart in the employee benefits portfolio, typical group term life benefit offerings were fairly rich in the past. Many plan designs provided high multiples of salary or significant flat face amounts reaching up to $100,000, if not more. Today, however, it is pretty standard to find employers providing a benefit of only $10,000 to $20,000 for most employee classes.
That leaves many employees with a significant gap in life insurance coverage, especially since they often position their employer-paid benefit as their primary life insurance coverage vehicle.
A related trend is that most group term life programs are no longer available upon termination or retirement.
In such a setting, payroll-deducted permanent UL provides employers and benefits representatives with an opportunity to help employees and their families. Depending on policy design, this UL can help employees in various ways. They can use it to:
Bridge their “real” life insurance gap.
Purchase a permanent life insurance solution at affordable rates.
Receive a preferred underwriting offer.
Stabilize face and premium amounts over the life of the policy.
Purchase additional coverage or separate policies for spouses, dependent children and grandchildren.
Receive a significant acceleration on death benefit when needed, upon diagnosis of terminal illness.
Waive premiums upon disability.
Many types of worksite- marketed UL policies are available today. We prefer to use ULs that allow for the highest death benefit/lowest cash value. In our view, these provide employees with the best overall insurance value as well as ease of enrollment. They also help sell the employer, since these ULs position as a life insurance vehicle, not another investment vehicle that competes with 401(k) dollars.
Marketing permanent UL at the worksite helps both the employer and employee meet real identified benefit needs.
This is especially so since, according to our experience, most employees are underinsured for life insurance or are using temporary term insurance to meet a long-term need. Since worksite-sold UL provides additional financial security on a long-term basis, we feel a sense of pride when we do the enrollment. Often, this is the only time the employees have ever been able to visit with someone about life insurance needs.
Our bet is, you will feel this pride, too.
Terry Reams and Donald R. Tardif, RHU, REBC, are co-owners and principals of Meridian Benefits Companies, a Charlotte, N.C., intermediary distributor and administrator of ancillary employee benefits. Their e-mail addresses are [email protected] and [email protected].
Reproduced from National Underwriter Edition, March 24, 2003. Copyright 2003 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.