Employers Looking To Worksite Producers To Make Their Lives Easier
By Trevor Thomas
Voluntary worksite products provide the chance to boost sales as employers increasingly seek ways to simplify benefits programs, and the products fill the bill exactly, experts say.
“In general, insurers are a lot more focused on voluntary products than in the past,” says Susan Sames, a consultant for Tillinghast, a business of Towers Perrin, New York. “Thats where they want growth. Benefit managers’ time and money are being taken up with managing medical benefits. They arent looking for new employer-paid products. But they are interested in offering more choices to employees.”
For their part, producers say they are positioning voluntary benefits as a way to reduce stress on employers human resources department.
“Whats happening is an emphasis on making it easier for the employer,” says Alan Barthelman, president of AB & Associates, Cape Elizabeth, Maine.
Laptop enrollments, single-source billing for all benefits and payroll deductions are all part of taking the workload off the employee benefits department, he notes.
“The reason is saving money, and companies doing that are cutting staff, so human resource is already stretched so thin,” Barthelman says. “Worksite marketers and carriers need to make it very easy. Technology and the use of the Internet for enrolling, getting rid of paper handling are a big part of that.”
At the same time, employers are seeking ways to offer employees a wider choice of benefits as they cut back on medical plans, advisors point out. This is driving sales among employers of all sizes, says Rick Storms, a benefits consultant with Marsh Inc.’s employee benefits services in Minneapolis.
Although the recent economic downturn spurred voluntary benefit sales, employers’ interest continues to be strong in the recovering economy, Storms notes, because employers “are still being shrewd with their benefits dollars.”
Employers are looking for producers to be their consultant on benefits and help them to understand the players and options in the market, he adds.
“They are looking at a variety of products, administrative approaches and enrollment approaches, and producers need to have a real good understanding of those things,” says Storms. “The advisor has to manage it, so the employer doesn’t second-guess their decisions.”
Michael H. Sheridan, chairman of Fringe Benefits Management Co., Tallahassee, Fla., thinks the recent economic downturn may have helped voluntary benefit sales in more ways than one.
Many employees lost confidence in their 401(k) plans as values plummeted, so now they are turning to insurance products, he says. Products such as executive life, disability and medical supplements have benefited as a result, Sheridan believes.
“There are improved results in enrollments for worksite and voluntary products at the same time as enrollments in retirement plans funded with equities decrease,” he says.
“Another phenomenon we saw during the last economic downturn is that many employers shifted from benefit-rich medical plans to more employee contributions for benefits,” he observes. “Now that the economy is turned around, I don’t think that employers will reverse themselves. So the opportunities for more worksite-marketed programs will increase.”
One product that will continue to see increased sales is the consumer-driven health care plan, such as health care reimbursement and flexible spending accounts, Sheridan says.
“This is going to shift control partially from the employer to the employee for decision-making in terms of employee benefits,” he points out. “I feel that’s going to drive worksite products. I think everything points to an increased participation in voluntary and worksite marketed products, driven by economic changes and changes in the nature of health care benefits offered by employers.”
Insurance carriers are lending a hand to the producer in many cases by blurring the lines between individual and group life and health policies, Sheridan says.
“The progressive companies will issue individual policies on a group basis, so insureds will have portability if they leave,” he predicts.
A related development is the modified guaranteed issue product, he adds. With such policies, the carrier accepts or declines based on the employee’s answers to a limited number of medical questions.
“On the surface, it will look and feel like a group product, but the employee will get an individual policy,” Sheridan explains.
One product that Sheridan does not expect to grow rapidly in the worksite is long term care insurance. Sheridan thinks the reason is that most workers feel they are too young for it.
“Active employees under 55 aren’t buying it,” he says. “They’re waiting until after they retire.”
Instead, Sheridan believes, carriers will develop a variation on the long term care theme: a life insurance policy that is linked to medical benefits.
“I think there’s a need for an insurance product that could supply death benefits to actively working employees and then converts to long term care at retirement, when their children are grown and they don’t need so much life insurance,” Sheridan says.
At retirement, the cash value of such a policy would have built up to the point where it could be used to fund some LTC benefits, he explains.
He believes, however, that most insurance companies have little interest in the worksite market.
“There are only a handful that have multiple products that they could sell in worksite,” he says. “Their biggest problem is back-office capacity.”
The process of enrolling up to 1,000 people a week, common in worksite marketing, is just too much for most insurers, Sheridan says.
“Their back-office capacity is far more important than the commissions they pay,” he says. “The important thing is that they not embarrass us in front of our clients. But most who say they are in the worksite business cannot handle a large capacity. The biggest problem for the broker is finding an assortment of companies that are stable financially and are committed.”
Reproduced from National Underwriter Edition, June 25, 2004. Copyright 2004 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.