When it comes to supplemental insurance coverage, workers don’t know nearly as much as what they think they know.
The gap between what employees know and what they think they know was published as the second set of findings from the fourth annual Guardian Workplace Benefits Study issued by Guardian Life Insurance in New York.
A few sample questions and answers from a quiz reveals employees’ tenuous grasp of supplemental coverage:
Question: In a critical illness policy, can payouts reimburse caregivers for lost income? Answer: False. Percent of respondents who answered incorrectly: 57 percent
Question: In a disability insurance policy, the elimination period is the waiting period before collecting benefits? Answer: True. Percent of respondents who answered incorrectly: 46 percent.
Question: With guaranteed issue insurance, no evidence of good health is required to apply for coverage, true or false? Answer: True. Percent who answered incorrectly: 34 percent.
Question: A hospital indemnity plan pays for certain expenses not covered by your primary medical plan? Answer: True. Percentage who answered incorrectly: 30 percent.
Question: A long-term disability policy replaces 100 percent of income in the event of serious injury or illness? Answer: False. Percentage of respondents of answer incorrectly: 22 percent.
Answers were drawn from an online survey of 1,204 employee benefits decision-makers and 1,439 full-time workers 22 years old or older. It found that 80 percent of working Americans say they understand their benefits very well.
But that level of confidence in understanding workplace benefits isn’t shared by employers. Only 62 percent of employers said workers had a strong grasp of their own employer-provided benefits, the study found.
Filling the Support Gap
The gap between what employees know and what they think they know represents an opportunity for advisors, said Gene Lanzoni, assistant vice president of thought leadership with Guardian Life Insurance Company in New York.
The first goal of a benefits advisor should be to talk to clients about the role of supplemental insurance lines, Lanzoni said. Several trends already work in advisors’ favor.
In 2016, employees were less likely to positively rate their company’s communications efforts in helping them make benefit choices compared with 2014, the Guardian Life survey found.
Employees want more access to benefits through the workplace, but more benefits choices require better communication and decision support, said Dave Mahder, vice president and chief marketing officer of Group and Worksite Markets with Guardian Life.
Advisors are well placed to provide that support, Mahder said.
Employers want more help as well, with six out of 10 employers saying they feel overwhelmed with the complexity of managing benefit programs for employees, the survey found.
Changing federal mandates, implementing technological infrastructures, selecting affordable choices for employees and dealing with new insurers have raised the challenge for benefits managers, Mahder said.
“More employers are turning to external expertise and technology for help in designing and executing their plans,” he said in a statement.
Filling the Commissions Gap
If employees and employers find it difficult to navigate the benefit landscape, advisors don’t have an easy time of it either.
Commissions from ancillary coverage such as life, disability, cancer-critical illness, hospital indemnity won’t make up for revenue received for primary medical coverage. But in an era of shrinking revenue, every bit helps.
Advisors already have a head start as the brokerage channel is responsible for 60 percent of voluntary benefit sales, research published by Eastbridge Consulting Group has found.
Voluntary benefits are benefits made available by the employer, but where the employee typically pays 100 percent of the premium.
Benefits remain a bargain as they are sold on a group basis and prices are lower than similar coverage available in the individual market.
In 2015, voluntary workplace insurance sales reached $7.1 billion, an increase of 3.6 percent over 2014, said Eastbridge, which tracks voluntary benefit sales.
Some supplemental lines grew far more than that.
Sales of critical illness insurance, for example, soared 25 percent in 2015 compared to 2014 as workers looked to supplement primary medical coverage, Eastbridge said.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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