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The vast majority of employers represent businesses with fewer than 500 employees. These businesses employ more than half of all private sector employees and pay nearly half of the total private payroll. And when it comes to job creation, small businesses far outpace their larger, nationally known competitors.

For insurance carriers, the potential of the small business market is clear. Whats not always clear is how to meet this markets benefit needs.

The large number of small businesses and the employees working for them present a potentially lucrative market, but understanding the needs of small business owners and figuring out how to connect with them can be a challenge. How do the needs of small business owners differ from those of larger employers and from each other? What services and benefits are most important to them? Whats most significant to them when choosing an insurance carrier?

Small business owners arent a homogenous group, which means pre-assembled “canned” plans wont work for all. Instead, experience has revealed three factors critical in meeting the needs of the small business market:

  • Competitive pricing.
  • Ease of doing business.
  • Flexibility in meeting a range of needs.

More than half of small businesses have no group life or disability package, but they could benefit from one. Benefit packages featuring group life and disability coverage can help small businesses compete with larger companies in the struggle for talent. While the bidding war for employees has subsided somewhat due to current economic conditions, benefit packages still provide an incentive for existing and prospective employees.

Unfortunately for small business owners, the sheer cost of such benefits can be an obstacle.

Whats the solution? Offer a range of competitively priced employer-paid coverage and voluntary employee-paid coverage. This approach enables business owners to customize a benefits package according to their unique financial needs. If their budget allows, employers can cover all or part of the cost of coverage. Or they can offer voluntary, employee-paid coverage only.

Voluntary plans provide a win-win solution for both small business owners and their employees. Employers can boost their benefit offering at no cost to them. And employees get the insurance coverage they need, convenient payroll deductions and economical group rates–generally without medical forms or exams.

While competitive pricing plays an important role in the selection of an insurance carrier, its imperative to remember that the lowest price isnt the only key to meeting small business benefit needs. In fact, recent studies have shown most small business owners wont choose a given company just to save money. Insurers must sell the whole customer experience, not just the lowest-priced product.

Small business owners often play multiple roles–CEO, sales representative, human resources manager, customer service contact, marketing associate and more. Their time is valuable, and they dont want to spend too much of it administering their group insurance plan. The bottom line: Less hassle equals more value.

Carriers can ease this burden by offering a choice of service paths (phone, Web, interactive voice response lines, paper forms, etc.) that let employers do business the way they want, when they want. Some examples are:

Employee enrollment. Multiple enrollment options allow small business owners to select the method most appropriate for their employees. In addition to traditional printed enrollment materials, insurance carriers should also consider online or phone-based employee enrollment systems and on-site enrollment meetings run by a trained representative of the insurer.

Plan documents. Keeping track of contracts, administrative manuals, claim forms and booklet-certificates for employees require hours of work and takes up valuable office space. Since most small business owners have access to the Internet, online storage of these documents makes for easy, one-stop recordkeeping.

Billing options. Carriers can help streamline the premium payment process for small business owners by providing both online and paper-based billing options.

Claim submission choices. Regarding claims, carriers should expand their submission options. Consider accepting claim information by mail, fax, phone or Internet, and offer these options around the clock, as appropriate.

Reporting capabilities. Flexible online reports and traditional paper reports help small business owners stay on top of case activity.

Status updates. The medical questionnaire or claim was submitted–now what? Keeping small business owners, their employees, and beneficiaries up to date on evidence of insurability and claim activity is easier when carriers offer online and phone access to status updates.

Single point-of-contact service. Maintaining a list of contacts for various services can be a chore. Centralized, toll-free service centers provide a convenient option for all service needs.

Since small businesses tend to be highly specialized and local in scope, insurers need to be flexible in dealing with a range of industries and locations. Their product portfolio should reflect this diversity and include various group life, accident and disability coverage. For example, life insurance benefits can be enhanced with little hassle or cost by creating a voluntary life plan.

Carriers should also emphasize flexible plan designs to help small business owners assemble a package that fits their budget, company culture and employee needs. Plan options could include multiple coverage amounts (flat amounts, multiples of salary), funding options (employer-paid, employee-paid, or a combination of both), disability definitions (regular occupation, any occupation), dependent coverage (spouse and/or dependent children), and a menu of services and benefits that can be added or removed as necessary.

The small business segment is a challenging market, but focusing on competitive pricing, streamlined administration and flexible plans makes it easy for small businesses to offer benefits–and for carriers to meet their unique needs.

is vice president of small case products for The Prudential Insurance Company of America. His e-mail is bob.patience@prudential.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, September 15, 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.