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
o Long-term disability
Term life and vision insurance were also popular. Somewhat surprisingly, however, these traditional ancillary plans were followed by cancer and accident. Both of these products are traditional “worksite” products.
In terms of carriers, many non-medical insurers are concerned that once medical carriers get into the market, the medical brokers will favor those carriers for voluntary products. At least today, that does not seem to be true. According to the survey, 55% of the medical brokers surveyed said it did not matter. Somewhat surprisingly, among those who had a preference, more want to do voluntary business with a company other than their medical carrier. Only 17% said they prefer their medical carrier. Chart 4 shows the full results for this question.
One reason medical brokers may not prefer their medical carriers for voluntary is that they need or want more support from carriers on these products, and medical carriers often aren’t providing this. These medical brokers are not as experienced as other voluntary producers and, because of this, the knowledge about voluntary of the carrier’s sales rep, the enrollment materials and carrier enrollment support are all much more important to medical brokers when selecting a voluntary carrier.
This type of broker is also more likely to use carrier enrollers than many other brokers. Many of the traditional voluntary carriers have developed these capabilities, but medical carriers often don’t have the support. In fact, medical carriers often do not have special voluntary sales reps, and the traditional sales reps are often reluctant to promote voluntary aggressively.
Medical companies attempting to achieve significant voluntary results said that it takes a tremendous amount of work to train sales reps and to get them to take voluntary seriously. Promotion and training must take place continuously over a very long time to get traction.
We can also see the need for more support in the answers to the question about why medical brokers do not sell more voluntary. According to 32% of the brokers, this is due to lack of time, while 27% said their accounts just aren’t interested.
When asked what they or their agency need to be successful in selling voluntary, the most often mentioned item was, again, more time. But there were also many other needs, as indicated on Chart 5.
So, the medical carrier and medical broker have indeed entered the voluntary marketplace, allowing voluntary benefits to break through the final frontier in the market. Time will tell how well these two do. We suspect that medical brokers will begin increasing their voluntary sales as they lose medical clients and revenues and start developing new ways of helping their clients address their benefits issues.
For the medical carrier to take advantage of the market, a good strategy is imperative. Strategy must be focused around distribution and meeting the needs of the medical brokers. That probably means looking at new service for the brokers, new products, and new ways of servicing the clients. It’s not easy in a new world, but as voluntary benefits continue to grow and achieve better- than-average results, the rewards will be there for those that get it right.
Gil Lowerre is president and Bonnie Brazzell is vice president of Eastbridge Consulting Group Inc., Avon, Conn. Both can be reached at