January is often recognized as an annual milestone when we reflect on our lives and implement diet, exercise and savings programs to improve ourselves. We disavow bad habits such as smoking and nail biting, load up on self-help books and embrace clich?s that declare, “Today is the first day of the rest of your life.” But in the employee benefits world, the transformation period isn’t the month at the beginning of the year, but rather the season at the end of the year.
Open enrollment season–a time when millions of employees in America have the opportunity to select, update and upgrade a host of benefits–is underway. But if you read the personal finance section of daily newspapers, you would assume that medical insurance was the only option available to employees.
Health Insurance in the Life/DI Equation
Health coverage is extraordinarily important and it is no surprise that it dominates media reports. But it is important for producers, marketing executives, and others in our industry to get the word out to employees about other benefits as well. Two benefits that require special attention are life and disability insurance.
Benefits that are used regularly, such as health and dental, are often top of mind and easy for employees to grasp. Group life and disability are insurance products that employees want to have, but hope that they will never use.
Because of the nature of life and DI, employees may be tempted to overlook or spend inadequate time assessing their need for these protection products, especially in today’s environment where escalating healthcare costs are putting a squeeze on limited benefit dollars. Nearly half of employees admit that future medical premium increases will have major effects on their decisions to purchase other workplace coverage, regardless of their need, according to Navigating the Workplace Benefits Landscape, a 2006 LIMRA report. And future healthcare costs, and consequently medical premiums, will indeed rise. The U.S. government projects total health spending will constitute 20% of gross domestic product by 2015–double what it was in just 2004.
Producers who sell in the retail individual markets often say that life and disability insurance are sold, not bought. This message can be similarly applied to marketing group products. Employees need guidance to fully understand and take advantage of their life and disability benefits.
Employers are shifting more benefits costs to employees, and consequently employees have to make more decisions, primarily through the selection of voluntary benefits. But this doesn’t have to be bad news. If employers use tried and true enrollment success practices, they will see that employees are willing to embrace more responsibility in exchange for greater choice. If employees have a better understanding of the value of benefits such as group life and disability insurance, they will have a greater appreciation for their overall workplace benefits package despite the cost pressure from rising healthcare premiums. Think of voluntary programs as a good counterbalance to the increased cost of benefits.
Below are a few things that employers or HR managers can do to help employees maximize open enrollment season. These best practices will help fight underinsurance, increase life and disability income sales, and bolster overall employee benefit participation.
o Make enrollment meetings mandatory. Sometimes a little nudge goes a long way. Benefits selections are analogous to the all too unpopular office fire drill. Many employees would not participate if the drills were not mandatory. Not because the fire drill isn’t important, but because they are busy, productive and don’t want to stop their work. If there wasn’t a fire in the building at the very moment or if there wasn’t a recent emergency, some would see the drill as a disruption. But in the event of an actual fire, everyone would be happy that they paused and took the time to understand and prepare. Bottom line: mandatory meetings underscore the importance and value of employee benefits and increase participation levels.
o Endorse the voluntary employee benefits through written correspondence. Announce the benefits being offered and encourage employees to take advantage of the opportunity to enroll, and state where and when to enroll. Employer endorsement of voluntary life and disability products helps to ease some of the fears that serve as barriers to purchase.
o Allow adequate time during normal business hours for enrollment presentations. Employee benefits are important to attract and retain talent. The education and selection process should not be relegated to after-work or lunch hours. Small to midsize companies can especially benefit from formal gatherings during normal business hours. This sends a message that the employer cares, and it also improves participation rates, which can lead to volume discounts.
o Assist in the communication of the planned employee enrollment meeting by allowing use of current company communication systems (e.g., e-mail, company mail distribution systems and bulletin boards) for pre-enrollment announcements. Employer-sponsored communications highlight the importance of the benefits selection process. Education and communication are the watchwords of a successful enrollment.
o Have a company representative (Human Resources Director or site manager) present at all enrollment meetings.
Workplace as a springboard for coverage
Of the many reasons LIMRA International research cites to explain why the issue of life insurance is often avoided, most survey respondents say they simply can’t afford coverage.
A recent Guardian survey, “Insurance & Behavior: Spotlight on DI,” revealed that consumers overestimate the costs of protecting their income. More than 30% of consumers said they are prepared to pay more than 10% of their monthly salary for disability income protection. But income protection for most individuals actually costs less than 2% of their monthly salary.
Many families are first introduced to life and disability insurance in the workplace. Insurance carriers can do a better job communicating how affordable these policies are, especially in the workplace, and even for those who are living paycheck to paycheck.
Access to these important benefits in the workplace and the ability to upgrade coverage through a voluntary benefits program is the perfect example of a win-win situation. Employers are able to hold the line on costs while providing a robust benefits package to their employees. Employees, in turn, have access and the ability to customize the products and services that they need to protect their families and loved ones.
The industry issued a collective call to action during September’s Life Insurance Awareness Month. But for many employees, now is the critical time to act. If people take full advantage of their workplace benefits and remember that life and disability insurance are important components of their financial well-being, then open enrollment season will set the stage for a more prosperous and secure New Year.