The latest entrants into the voluntary benefits marketplace are group medical insurance companies and group health brokers. Both have long resisted entering this market space. But that is changing.
In a recent Eastbridge Frontline Report, Medical Companies and Voluntary Products, we surveyed 40-plus medical carriers and found that over 30 already offer some voluntary products. Another 5 either have access to these products through a subsidiary or are in merger talks with companies that offer voluntary benefits.
It seems that these companies are seeing the attraction of the voluntary frontier. They are starting to offer some voluntary products. At least part of the reason is that medical insurance companies have realized that their producers are selling voluntary products, even though they almost always underestimate how many are doing so.
Many of these companies, however, offer a limited worksite product portfolio. Some offer just dental or vision plans. Others offer these plans along with group term life and disability insurance. Chart 1 shows the frequency of various product types.
Compare the offering of many medical players to that of a “full service” voluntary carrier and you’ll quickly see some missing products. Somewhat surprisingly, voluntary medical products, such as a limited-benefit medical plan and coverages such as critical illness or hospital indemnity are some of the least offered products. (When a carrier offers a limited benefit plan, it is often through a subsidiary company.)
Those responsible for voluntary sales in medical companies say one thing they face (that is not faced by other voluntary players) is the different risk profiles associated with medical companies and life insurance companies. Specifically, medical companies are more focused on short-term risks, whereas life companies are more comfortable with long-term risk. This makes some medical companies more reluctant than life insurance carriers to embrace traditional voluntary products. But this reluctance to fully embrace the products being sold in the market can prevent them from taking advantage of their wide distribution networks and getting their share of the voluntary market.
In many ways, the medical broker is already ahead of the medical carriers.
In a study soon to be published, 94% of the medical brokers surveyed by Eastbridge sell at least some voluntary business. Most tend to sell voluntary only when a case comes to them (incidental) or as a cross-sell to existing clients (occasional). But this is where most voluntary producers started. And as Chart 2 shows, a number of them are already actively selling voluntary.
[Note: "Active" means the broker offers payroll deduction worksite programs in all their cases, while "Pro-active" means the broker tries to sell payroll-deduction worksite programs and often uses voluntary products to initiate the client relationship.]
Though the amount of voluntary business the medical broker sells is still small, these brokers already have strong thoughts about voluntary. In the study, 61% prefer group platform products, 25% said it doesn’t matter and only 13% prefer individual platform plans (sometimes called traditional worksite plans). (See Chart 3.)
In terms of the most frequently sold types of products, medical brokers lean towards selling voluntary versions of traditional ancillary benefits. The top 3 most frequently sold voluntary products were:
o Short-term disability