The voluntary benefits industry has lost market penetration in the past 4 years but has seen strong gains in some products, according to a new report.

Overall, the worksite marketing industry has received an overall grade of C plus for its progress, according to LIMRA International, Windsor, Conn., which issued the report, “Voluntary Benefits Report Card.”

Overall market penetration has fallen, with 47% of firms offering no voluntary benefits in 2006, up from 36% in 2002.

Among businesses aware of voluntary benefits but not currently offering them, just 30% said they would likely or possibly add such benefits in the next 2 years–down from 37% in 2002.

On the plus side, the number of firms offering at least 6 voluntary benefits rose by 45%, LIMRA found, while overall satisfaction of firms with worksite products rose from 64% to 73%.

The most popular voluntary products were cancer insurance (offered by 29% of firms, up from 22%); accident (24%, up from 18%); supplemental medical (20%, up from 18%); and short term disability (20%, up from 16%).

Supplemental life insurance took the biggest hit since 2002, with its share declining to 15%, from 22%.

The most uncommon voluntary benefit included on the LIMRA penetration list was limited-benefit medical, also known as mini-med plans. Only 3% of employers offered these plans in 2006. (In 2002, the product was not included in the survey.)

The top voluntary products being considered in the next 2 years, according to employers surveyed, were dental (still tops at 17%, although down from 21% of employers in 2002); vision (13%, down from 16%); and supplemental medical (12%, up from 5%).

The highest employee participation rates were for prescription drugs (48% average employee participation); dental (40%); and supplemental life (36%).

The lowest participation was in supplemental medical (22%), cancer 19%) and critical illness (15%).

By employer size, the lowest penetration rate was for small employers, with 10 to 99 employees, with half of those small employers saying they offer no voluntary benefits, up from 37% in 2002.

The percentage of employers offering no voluntary benefits has fallen to 21%, from 26%, for employers with 100 to 999 employees, and it has fallen to 7%, from 8%, for employers with 1,000 or more employees.

Ron Neyer, LIMRA worksite research analyst and author of its Voluntary Benefits Report Card report, says the results show that smaller employers appear to be the most promising prospects for voluntary benefits.

“Currently, producers are not going after smaller employers,” observes Neyer. “They’re a bit of challenge to reach profitably. Typically, the owner is also the HR person. The owner has limited resources, less knowledge of benefits and will spend less time on benefits because they have other major considerations to look after.”

Sometimes, however, small firms can be quite profitable, Neyer adds.

“They typically require less customization,” Neyer says. “The trick is to price correctly.”