Voluntary Benefits
Today’s Economy Creates
Opportunity for Voluntary Benefits
Help Clients Strengthen Their
Employee’s Financial Safety Nets

by Murray Todd

The economy has put us all in a tailspin. Our clients are looking for answers to the spiraling cost of benefits. They want to retain and recruit new talent, which requires a competitive benefit package. They also care about their employees and their employees’ frayed financial safety nets.
What’s a concerned broker to do? We’re afraid to act and we’re afraid not to. We fear doing something because we don’t want to lose the business we have, yet we fear we’re going to lose our clients anyway if we don’t do anything. Take action now. Show your clients how voluntary benefits can help ease their financial strain and allow their employees to fill some of the critical gaps in coverage created by today’s economy.

Our Clients And Their Employees Are Hurting

Employers have taken a big hit from the depressed economy. Unemployment rates in California were the fourth highest in the nation in August, reaching 12.2% (compared to 9.5% nationally). Employers are forced to cut costs wherever possible in order to avoid or minimize layoffs and they’re making tough decisions about their benefit plans. In fact, 82% of human resource executives have made changes to their employees’ coverage in the form of increased premiums, co-pays and deductibles, according to a May 2009 survey of HR executives by Colonial Life.

These benefit changes are reducing their financial security. A recent survey by Unum shows that most employees do not feel their workplace benefits provide a sufficient financial safety net. Only one in three believes their non-medical benefits will provide the resources needed if they became unable to work because of injury, illness, or maternity. Even employees with higher incomes ($100,000 or more) are unsure about their ability to withstand the loss of income, with 41% saying their benefits would not provide adequate protection.

Financial Safety Nets Are Fraying

Employers can no longer afford to -offer the rich benefit packages of years past. Even larger employers, known for their generous benefit plans, have been forced to make cuts. Left to deal with potential gaps in coverage, employees are feeling more vulnerable. And employees sense their financial security gradually eroding with more responsibility for benefit costs and decision-making shifting their way. But the effect of today’s recession extends beyond core medical benefits.

I often tell the story of a client I had nearly 20 years ago. The company’s controller was diagnosed with cancer and spent nearly six months out of work before eventually dying. During this time, the employer continued to pay her full salary and held two fundraisers to help with the family’s medical expenses. The whole company got involved.

It’s much less likely for something like this to happen today. Too many companies are on the edge financially and can’t afford to pay an employee who isn’t working. At the same time, employees are so consumed with paying their mortgages and other bills that they don’t have the resources to hold fundraisers or help out in the same ways they once could.

A safety net is much more important now because we’re not in flush times when people can easily step up to help others in trouble. Fortunately, there is a solution that can help your clients strengthen their employees’ financial safety nets -- voluntary benefits.

Why Voluntary Benefits? Why Now?

Voluntary benefits, offered at the workplace and typically paid for by employees through payroll deduction, offer a viable solution to employers that want to help fill the financial gaps for their employees. They give employers a cost-effective way to expand the benefit package at little or no direct cost. Employees can choose the benefits that best meet their individual and family needs. And they can keep their coverage if they lose or change jobs because the products are owned individually.

Although many brokers are familiar with voluntary products, many haven’t stepped up to the plate and offered them to their clients. In California, voluntary benefits have become much more popular since larger employers began offering them, such as city governments and hospitals.

Use Voluntary Benefits to Close Financial Gaps

By integrating voluntary benefits with core group offerings, employers can help employees protect themselves against increased financial exposure. At the same time, voluntary benefits can alleviate some of the economic pressures employers face. They’re especially helpful in the following situations that employers deal with during poor economic times:
• Introduction of high deductible medical plans to save health premium costs.
• Reduction in benefits for executives or carve-outs for hourly and part-time workers.
• Corporate mandates to cut operational costs.
• Changes in management.
• Large numbers of financial or family changes (marriages, births, etc.) occurring in the workforce.

Will Employees Actually Buy? You Bet They Will!

Many employers find it a huge relief to know there’s an option that actually creates a win-win situation for them and their employees. Fifty-six percent of employers with 10 or more employees are considering introducing a new voluntary benefit in the near future, according to a 2007 LIMRA study. And employees are truly interested in purchasing additional insurance at the workplace, contrary to what many employers believe. The financial instability of today’s economy most likely fuels this interest, but 59% of employees say they would consider purchasing additional insurance to cover themselves financially.

My own experience has been that employees want to know they have the coverage to manage their risks. It doesn’t matter if they make $10 an hour or if they’re higher paid salaried employees. They’re willing to give up a $10 or $15 a paycheck to know that they’re going to be okay financially if something happens to them.

Another plus is that employees who are offered voluntary benefits in the workplace are more satisfied with their benefits than those who aren’t offered the coverage. A January 2009 Unum study reveals that employees’ satisfaction with their employers increased six percentage points when voluntary benefits were offered. And satisfaction with employee benefit packages increased from 34% to 53% when voluntary plans were available.

Choose the Right Benefit Partner

Finding the right voluntary benefit carrier is critical. Evaluate providers based on the following criteria:
1. Business understanding -- Look for a partner with a versatile product portfolio, a proven history, and a foundation of best practices across a number of industries. This kind of partner brings knowledge based on thousands of customer engagements.
2. Product design -- Voluntary products, such as critical illness, cancer, disability and life insurance can help employees get additional protection for their families. A single-source carrier for voluntary products and a limited benefit medical plan helps increase employee understanding of their plans and simplifies enrollment and administration for employers. (If the employer does not offer major medical coverage.)
3. Expertise in benefit communication and enrollment -- A well-designed plan is simple to understand and use, but many carriers rely on self-enrollment for these plans. Self-educated delivery gets very low participation and sometimes leads to dissatisfaction from workers who don’t understand what their plans offer. A top voluntary benefit partner will meet one-to-one with each employee to explain the plans and help employees select the best coverage.
4. Group size -- Many voluntary plans require 50 or more employees, but some cover groups as small as three. Be sure to engage a partner that gives you the flexibility to address positive and negative changes in your clients’ workforce numbers.

Act Now. The Time Is Right.

The economy has made us all more fearful, but don’t let fear immobilize you. Solidify your position with your clients by offering a proven solution. There’s never been a better time for voluntary benefits.
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Murray Todd is territory sales manager for Orange, Riverside, and San Bernandino Counties, California. Colonial Life & Accident Insurance Company provides insurance benefits for employees and their families through their workplace. Colonial Life offers disability, life and supplemental accident and health insurance policies in 49 states and the District of Columbia. Similar policies, if approved, are underwritten in New York by a Colonial Life affiliate, The Paul Revere Life Insurance Company. Colonial Life is based in Columbia, S.C., and is a subsidiary of Unum Group. Learn more about Colonial Life at www.ColonialLife.com.