Labor shortages in the U.S. will become increasingly common in many industries in the next 15 to 20 years, a development that could have a deep impact on employee benefits selling, a new report predicts.
The scarcity of qualified workers will effectively shift employee benefits decision-making from employers to employees, according to the report from Eastbridge Consulting Group Inc., Avon, Conn.
This development could go hand in hand with a general split of U.S. industry into two different classes: small businesses with under 100 workers and mega-companies with over 1,000 workers, says Eastbridge in “The Future for Insurance Companies in the Benefits Arena–A 2020 Supplement.”
By 2020, most employers will provide a specified amount of dollars to each worker to buy the employee’s choice of benefits. In effect, employers will offer all benefits as part of a defined-contribution package, much like today’s retirement plans.
As a result, job candidates will no longer evaluate benefit program contents in deciding which job offer to accept but rather the job itself and the salary plus defined-contribution dollars, the report says.
By 2020, more products will be unbundled and sold as part of three major benefit instruments: retirement savings, nonqualified savings and protection (insurance), the report continues.
Many employees will self-insure a good deal of their protection benefits, setting aside cash to pay high deductibles for, say, disability, and buying insurance as stop-loss coverage against catastrophic illness or injury, Eastbridge says.
For insurers and producers, the big profits in this type of environment would not be from selling benefits but rather from managing the funds that employees set aside for retirement and catastrophic illness.
Those that stick to strict definitions of insurance and insurance companies could wind up selling a few low-margin catastrophic coverages, such as critical illness, disability and long term care, Gil Lowerre, president of Eastbridge, says.
“They’ll need new ways to generate revenues,” he says. “They’ll need to get into fund management.”
Other predictions in the report:
==A new type of financial intermediary, the benefits advisor, will emerge, selling a wide band of products.
==Advisors will be aligned with another new organization, the benefits administrator, which will take on the job of handling a full range of employer-based pension, accumulation and protection products. They will also perform a variety of functions now handled by broker-dealers and third-party administrators, such as enrollment, underwriting and customer service.
A shakeout among medium-sized businesses also could have deep impact on industry