Market-watchers have long bemoaned the low levels of ownership of financial protection protects in the U.S. The hand-wringing has been especially vigorous in respect to life insurance.
As LIMRA has reported in past surveys, fewer than half of U.S. households own individual life policies. About a third have no life insurance coverage and many others remain underinsured. The numbers are similarly bleak in regards to disability income, long-term care and critical illness insurance.
How to close the coverage gap? Much of the answer lies at workers’ places of employment, where they can secure group benefits (and, increasingly, voluntary products). The widest range and most competitive products are, interestingly, offered at companies that are outsourcing benefits functions.
For evidence of the impact that employers have on policy ownership, look no further than a new study from Guardian Life. “The Guardian Workplace Benefits Study” examines benefits issues from the perspectives of both employees and benefits decision-makers or employers.
The findings are an eye-opener.
Greater percentages of U.S. workers own protection products and a retirement saving plan through their employer than outside the workplace:
Retirement savings (71 percent through workplace vs. 9 percent outside workplace)
Life insurance (51 percent vs. 25 percent)
Disability income (55 percent vs. 8 percent)
Accident insurance (30 percent vs. 24 percent); and
Critical illness/cancer insurance (17 percent vs. 5 percent)
The availability of the protection products, often heavily discounted through employer subsidies, helps to explain the greater adoption levels at the worksite. Other factors include employee education, decision-support tools and access to independent financial advice.
The focus on these benefits strategies, as you might expect, is more pronounced at larger companies.
The survey finds that more than six in 10 employers with 1,000-plus employees rank “increasing employee benefits education and/or financial advice” as important. This compares with 40 percent of companies with fewer than 1,000 employees.
Marked differences between the two groups are also observed when companies are probed about:
Expanding the use of benefits web technology (61 percent for firms with 1000-plus employees vs. 38 percent at businesses with 1,000 or fewer employees);
Tailoring communications and enrollment for the various employee segments (59 percent vs. 33 percent, respectively); and
Increasing the use of third-party benefits administrators (47 percent vs. 30 percent).
The first two items, you would think, would help to facilitate worker participation in employee benefit plans. The last might seem to have as chief aims boosting efficiency and lowering the cost of plan administration.
In fact, third-party-administration has had a measurable impact — both in terms of the benefits availability and product adoption — at companies that outsource employee benefits functions to partnering brokers and carriers. That’s a key finding of the report.
More than of the companies polled by Guardian Life (52 percent) now outsource at least half of their benefits administration (as well as plan enrollment and absence management activities.). Smaller percentages of companies are “total outsourcers” (16 percent) or “non-outsourcers” (15 percent), the former handling all benefits functions externally and the latter internally.
In respect to benefits offered, the total outsourcers have the edge. And that difference is seen across the gamut of protection products. Examples:
Medical (96 percent/total outsourcers vs. 90 percent non-outsourcers)
Life insurance (69 percent vs. 51 percent)
Long-term disability income insurance (61 percent vs. 43 percent); and
Critical illness insurance (36 percent vs. 15 percent).
Benefits brokers and consultants, whom more than seven in 10 companies use to support their group insurance programs, are often the catalysts driving a company’s decision to outsource. The result is not only a wider range of benefits and greater financial security for workers, but also improved employee productivity and more competitive compensation packages.
And that’s great. Clearly, if we’re to make a big dent in the protection gap, more such outsourcing with the help of benefits brokers — agents and advisors like you — needs to happen. The sooner, the better.