Mixed Messages Regarding Benefits

By Cyril Tuohy

InsuranceNewsNet

Talk about mixed messages. Pick up the latest LIMRA survey on the dearth of small businesses offering workplace insurance benefits, and it’s like hearing a broken record.

Business owners say they have neither enough money nor enough employees to make selling insurance through the workplace worthwhile. Besides, owners say, their employees often get benefits elsewhere. So why bother offering long-term care coverage or a retirement plan?

At the same time, business owners say they’re ignored, that advisors just pass them by and hunt for business at bigger companies. If advisors bothered to sit down with us, owners say, advisors would know that 40 percent of us considered offering benefits, and that nearly one in two would agree to meet with an advisor once contacted.

It seems as if owners have a love-hate relationship with offering benefits. Either they can’t make up their minds, or if they do, the economy takes a downward turn, and that’s just enough for them to put off — yet again — committing to offering benefits to employees.

For the record, the LIMRA survey found that 65 percent of small businesses don’t offer benefits because they can’t afford it, 40 percent said they have too few employees to make offering benefits worthwhile, and 24 percent said they don’t offer benefits because employees get the coverage elsewhere.

Kim Landry, a research analyst with LIMRA Insurance Research, said it’s important to place the latest survey results in the context of the ebb and flow of the economy. Compared with a similar survey conducted in 2005, when the economy was booming and health care reform had yet to become law, interest in adding benefits have gone down, she said.

Of course, it’s entirely likely that owners will once again exhibit more interest in offering benefits to their employees in the future as part of the rise and fall of demand. Right now, though, owners are “very much in a wait-and-see mode,” Landry said in an interview with InsuranceNewsNet.

“Especially with health care reform, interest rates and government policies, the overall percentage of companies offering benefits have gone down since 2005,” she said.

Where does that leave financial advisors? No further ahead or no further back than they were at this time a year ago, five years ago or even 10 years ago. The small-business market has been and remains deeply underpenetrated, with only 53 percent of small businesses with between two and 99 employees offering any sort of insurance benefit at all, according to the latest LIMRA survey.

Big changes in health coverage under the Affordable Care Act (ACA) may help thaw a market that seems to persist in a deep freeze, Landry also said.

Private exchanges springing up around the country, in addition to the public health care exchanges set to launch next year, will make it easier for small businesses to shop for benefits coverage at fair prices, at least in theory.

Under health reformed mandated by the ACA, businesses with 50 or more full-time employees that don’t offer health coverage will be penalized. That could also motivate more owners to sign on for benefits.

Insurance carriers from MetLife to The Principal to CIGNA to The Hartford to SunLife Financial also have boosted their voluntary benefits offerings in the past several years, and more competition usually means better prices.

The Hartford broadened its distribution network with an announcement in April that it would launch a new benefits enrollment platform in partnership with Selerix Systems, the company said.

Sales of voluntary products — where the employee, not the employer — pays 100 percent of the cost of the benefit increased 6.6 percent in 2012 over 2011, with total new business exceeding $6 billion, the U.S. Worksite/Voluntary Sales Report by Eastbridge Consulting Group found.

Takeup rates in the voluntary market, therefore, are on the rise. That increase in demand simply needs to filter down into the lower tiers of the small-business segment, that vast universe of employers with fewer than 50 employees.

Landry said that for advisers mulling over how to approach this huge untapped base, there’s one piece of advice they must always remember. Owners are much more likely to meet with a financial advisor if they have a prior relationship.

“Sometimes cold-calling is the only option, but we’ve found that highest measures of success occur when the advisor can leverage a relationship they already have with the business owner,” Landry said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at Cyril.Tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.