We all know that voluntary is quickly becoming the key driver in benefits sales. We've discussed the desire of employers to reduce and control benefit costs, the trend toward greater employee choice, the larger product variety, the impact of Obamacare and a range of other issues driving increased voluntary sales. And unlike traditional employer-paid benefits, half of all voluntary sales are new coverages rather than takeovers.
Sales grew in the great recession years of 2008 and 2009. Given that, is something else contributing to this track record?
First, skeptics have pointed out that more than 70 percent of employers now offer at least one voluntary benefit and the saturation point must be near. But looking at employer data, an interesting phenomenon appears.
Many employers (30 percent) have resisted offering voluntary plans and many of these are at the very small end of the size spectrum. For years, executives cited perceived complexity and the fear of administrative burdens as barriers, but the number offering has continued to increase.
On the other hand, those offering only one voluntary product rarely stay at that level for long. Maybe because they have overcome their fear based on their initial experience, employers who offer a voluntary product tend to quickly add a second, then a third (and so on) voluntary product.
Twenty percent of employers say that they plan to add at least one new voluntary product over the next two years. And 21 percent report that they are considering moving at least one employer-paid product they currently offer to a voluntary equivalent.
Unlike employer-paid coverages, voluntary accounts represent a continued source of sales opportunities. Today, roughly 38 percent of Americans own at least one voluntary product and they, like employers, are more apt to add additional voluntary products as they become available. Still, another 39 percent of employees have not yet purchased, even though they work for an employer who offers voluntary. Obviously, re-enrollment is a key factor in voluntary sales.
In both cases, the limitation seems to be distribution. Employers are ready and are adding more voluntary products. Employees are accessible and are favorably disposed to buy.
But it's worth noting that the sales potential of neither of these trends is dependent on opening new accounts. In times of economic stress, brokers can access both the increasing likelihood of employers to enhance benefits with a voluntary product and the large numbers of employees who have not yet bought or are considering buying an additional voluntary product.
By the numbers: Market penetration estimate
114 million: Total U.S. employees
88 million: Worksite offered
43 million: Current voluntary customers
45 million: Potential customers in voluntary accounts
26 million: Potential customers in accounts without voluntary
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