Traditionally it has been my experience that the marketing of voluntary insurance products is for the purpose of enhancing an employer’s benefits package.
Somewhere along the way several issues have crept into the sales process.
For example, when does the marketing of a voluntary insurance product cease being a valuable benefit and become just a way of marketing insurance?
I would submit this occurs when the benefit is not available to all full-time employees. If all employees are not eligible, then it becomes just a marketing method, and coverage of the workforce is scattershot.
Furthermore, over the years, the industry has brought out so many voluntary insurance products that employers don’t know how to evaluate them all. More to the point, the employers have difficulty determining what the employees truly need in order to complement their employer-paid benefits.
This surplus of product ultimately hurts the workers.
For example, supplemental health insurance products have been offered under Internal Revenue Code Section 125 cafeteria plans for many years. As National Underwriter readers know, these plans allow various voluntary products to be offered on a pre-tax basis. But now, due to the worsening finances of employers who have been hurt by the national recession, many employers have closed their doors, thus terminating millions of workers from those plans.
Each time a shutdown occurs, what happens to the supplemental Section 125 coverage of the now unemployed workers? Basically, that coverage is gone. Now, the workers are facing no job and no benefits. That is, they have no group benefits and no Section 125 plan benefits.
The terminated employees would be in a much better position today if the industry had continued to focus on selling what the workers really need–true guaranteed issue permanent life insurance and disability income plans, sold on a voluntary, portable basis. (Remember that, under federal law, such plans cannot be sold as part of Section 125 plans.)
With such coverage, even if the job ends and the company benefits are terminated, the workers would still have some coverage to protect their families and to use as a building block for their new life.
Case in point: one voluntary client of mine did have such coverage. She was terminated and subsequently died. But because of the accumulated value in her voluntary permanent life insurance policy, her coverage remained in effect under the automatic premium loan provision. Therefore, the policy was in effect at the time of her death, and the death benefit has since been paid.
True, the above is but one story, “just an anecdote,” as the saying goes. But when cases like that happen many times, as has been the case over the years, it begins to make the point–that voluntary permanent life coverage is essential.
When the voluntary industry goes off on tangents, selling all types of insurance products under Section 125 plans–such as hospital indemnity, cancer policies and accident policies–the workers really don’t benefit. They have coverage but it is not lasting.
Perhaps this recession is a good time for the voluntary insurance industry to return to basics–needs-based product development and marketing. It must establish practices that ensure workers can buy products at the worksite that are affordable, guaranteed issue, and portable.
This is all the more important because employers have entered an era when they will be reducing their employer-paid benefits even more than they did in the last recession. (Who would have predicted, for instance, that employers would actually slash the 401(k) match altogether? That is what is happening right now.)
In such an environment, employees will need access to secure permanent voluntary coverage more than ever.
Donald S. Hardy is founder and owner of QuantumBenefits.com, an Atlanta insurance agency. His email address is [email protected].