Voluntary Benefits Add a New Layer for Brokers

For benefit brokers, connecting employee groups to insurance benefit platforms has never been easy and the popularity of employee-paid voluntary benefits has made it more tricky, experts say.

“Voluntary benefits is very high touch,” said Ginger Bates, director of research for Eastbridge Consulting Group, a research firm that tracks the voluntary market.

Compared with traditional employer-paid basic medical and group insurance products, enrolling in a voluntary benefit program isn’t necessarily more difficult, Bates said, but it is different and creates more issues.

For brokers and insurers new to the growing voluntary market, it’s a learning curve for both, she added.

Employers that offer voluntary benefits like to do so because employees pay for a benefit to fill gaps left by gradually retreating major medical insurance coverage.

For their part, employees see value in paying for these supplementary benefits, which they can buy at a group rate.

Voluntary benefits also help employers retain employees, who gravitate to the customization options available with voluntary benefits packages, said Greg Callahan, national director of voluntary benefits for CBIZ, which helps companies manage employees.

Permutations Multiply

Brokers and advisors steeped in the ways of traditional take-it-or-leave-it major medical coverage aren’t necessarily as fleet-footed when it comes to the voluntary benefit market.

Voluntary market permutations multiply rapidly as age bands and plan designs are more complex than in the traditional medical and group market, experts said.

For example, a 25-year-old college graduate declines term life and short-term disability, but signs on for employee-paid dental and vision coverage under the employer’s voluntary benefits program.

In the next cubicle, a 20-year veteran employee, now a manager with three children involved in six sports, opts for employee-paid accident, hospital indemnity and critical illness coverage.

Payroll deductions need to reflect those choices, and the options must be entered promptly, within the first week of employment. An improperly denied claim filed years later is going to make life difficult for the advisor.

By contrast, employees in the market for major medical coverage choose among one or two PPO or HMO plans, or decline them entirely.

For insurers and brokers, smoothly and painlessly integrating an employer with hundreds or thousands of employees into an insurer benefits system, a process known as “onboarding,” remains an economic necessity.

“Our No. 1 expense is acquiring a new customer as a company; the No. 1 expense for a broker is losing a customer,” said Jim McGovern, senior vice president, group employee benefits, for the financial services giant One America.

Term life, dental, short-term disability, accident and hospital indemnity insurance top the voluntary benefits product charts in 2016, according to Eastbridge Consulting.

Traditional Pain Points Linger

Voluntary benefit sales rose 7 percent to $7.63 billion in 2016 compared to 2015, and represent a mere sliver of the overall benefit market.

But the traditional independent benefit broker dominates distribution with a 62 percent share of voluntary products.

Among traditional benefit brokers used to selling major medical and group products, voluntary products are growing fastest, Bates said.

Insurers have made gains around voluntary benefits data aggregation, reporting capabilities and claims support, yet bringing aboard hundreds or thousands of insured lives onto an insurer platform remains a pain point, a 2017 LIMRA survey found.

When asked where they most often encounter issues with insurers, more than two out of five brokers pointed to either the onboarding or billing processes, the survey found.

Onboarding and case set up was cited by 21 percent of respondents as an area where brokers most often encounter challenges, while billing was cited by 20 percent of the respondents.

Only 11 percent of respondents said they were frustrated with claims support, the next highest pain point, the report found.

“I can tell you that with every client I've ever had people like voluntary benefits but don’t like how we enroll them and how we pay the bill,” Callahan said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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