With economic uncertainty continuing deep into 2009, many employers are scaling back health benefits and shifting more costs to employees. But the news isn’t all bleak for insurance producers as voluntary plans become the darlings of the downturn.
Multiple industry sources report double-digit declines for new health policies while the demand for voluntary coverage is growing by 15% or more each year. In fact, in one recent survey, 82% of voluntary insurance carriers, brokers and third-party administrators said sales in 2008 exceeded expectations.
Traditionally, producers specializing in group health have not aggressively pursued voluntary plans because of a misplaced belief that they are too complex and offer minimal return for time invested. However, with proper planning and the right partner, the most common myths around voluntary plans are easily busted, eliminating any excuse employee benefits agents have for not selling voluntary products.
Myth 1: Tightening budgets make for difficult sales.
While it’s true employers are scaling back on benefits in an effort to contain costs, this actually creates an opportunity for selling voluntary benefits. Employers still want to offer comprehensive benefits packages. Voluntary lets them do that. It fills coverage gaps, is affordable and lets employers offer options that employees may not otherwise have access to.
Voluntary plans create cross-selling opportunities that are more about employer-employee morale and less about contract specifics. These plans offset core benefit changes by providing quality options that deliver value to employees at low or no cost to employers.
Offering voluntary options can also strengthen the producer-client relationship, keep competitors at bay and, of course, increase revenues.
Myth 2: Too much work, not enough revenue.
A common belief is that selling voluntary benefits is an extensive, high-touch process that involves finding new clients and meeting with every employee to discuss plan options and manage enrollment. That translates into many hours of work to sell products for commissions that don’t offset the expense of enrollment.
In reality, the greatest opportunities with voluntary sales are with existing clients. As a true cross-sell product, voluntary plans can increase earnings exponentially, as illustrated in the table on this page. (Note: the second-year commission schedule assumes a 95% retention rate.)
Further, by leveraging a full-service partner such as a third-party administrator, enrollment firm or carrier, producers can increase revenues without taking too much time away from core sales. Once initial needs have been identified with the employer, producers can simply share that information with their partner, who will then create a comprehensive proposal consisting of the right mix of voluntary products to meet the client’s needs.
Top-tier partners will also provide enrollment support and work with producers throughout the life of the plan, even identifying opportunities for adjustments at renewal that could increase retention. They also work with producers to present new voluntary plans to meet changing client needs.
Myth 3: Too many products, way too confusing.
Voluntary plans in and of themselves are not tricky. Dental plans cover dental care. Critical care plans cover critical care. Confusion occurs when producers try to know all plan specifics and try to determine whether individual, group or hybrid plans are the best option for a given employer.
Benefits brokers simply cannot be experts on every voluntary plan, nor do they need to be. They need only to be familiar with a plan’s basic moving parts, such as pricing, participation requirements and portability, and have a basic understanding of the types of contracts (individual, group or hybrid).
They should focus instead on educating the employer about plan benefits and how they address needs. Does the employer want to reduce costs? Attract and retain employees? Address demographic changes? Supplement decreased core medical benefits?
All other details can fall to the partner to sort through. Armed with the information on the employer’s needs, the partner organization can generate detailed proposals for a best-of-breed portfolio of voluntary products–with minimal time and effort from the agent.