A new white paper, "Filling the Revenue Gap: How Brokers Can Use Voluntary Benefits to Build Business" by Colonial Life & Accident Insurance Company outlines things brokers are doing to steady their income.
"Traditionally, major medical and employer-funded benefits have been the bread and butter of many brokers," says Jay Hutchins, Colonial Life's vice president of broker marketing. "But rapid industry changes are causing more brokers to incorporate voluntary benefits into their business model. It's a matter not only of survival but also meeting their customers' changing needs."
Employers are also using voluntary benefits to their advantage. With cuts to health benefits plans, employers are looking for ways to add value to employees. And one way to do that is by offering more voluntary benefits.
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Robin Widdis, vice president of the Employee Benefits Division of CBIZ, says that voluntary benefits are playing a bigger role than in the past.
With a high unemployment rate and with many employees living paycheck to paycheck, Widdis says voluntary benefits offer security. Even though employees have to pay for them, the security it gives them knowing that should they get an illness or a large dental bill, having added protection such as critical illness or dental insurance will help keep costs down in the long run.
They also help employers manage costs. David Harvey, instructor for the International Foundation of Employee Benefit Plans, says that employers are more limited in what they can and cannot provide and that "voluntary plans are a way employers can deal with cost increases by creatively offering different options, doing so in a cost-effective manner."
In fact, in the IFEBP's 2009 employee voluntary benefits survey, 78.3 percent of responding sponsors believe that offering voluntary benefits results in only slight or moderate increases in administrative costs.
Widdis says that people's perceptions of voluntary benefits have become more positive. Whereas discussing voluntary benefits used to be like consulting with a used car salesman, people have become more familiar with them. Widdis gives Aflac's supplemental insurance campaign with the talking duck as an example. People like the duck and "they can relate to the person [in the commercial] with a cast on their leg."
In the IFEBP survey, 88.5 percent of plan sponsors currently offering voluntary products said their employees' reaction is positive. Slightly more than three-quarters of all employers agree or strongly agree that voluntary benefits are a win-win supplement to an organization's benefit package.
Widdis says that most popular voluntary benefits are dental and life, since those tend to be the ones employers cut first when cutting or changing employee health plans.
Other voluntary benefits such as critical-illness, short-term disability and long term care insurance are also becoming more popular. And since they are offered on a group basis, employees pay less than they would for an individual plan and don't have to worry about eligibility requirements.
Harvey says that baby boomer workers are especially drawn to long term care insurance as they start thinking about the costs related to aging and nursing home care.
Elizabeth Halkos, chief marketing officer of Purchasing Power, a leading voluntary benefits company, says that a key aspect of offering voluntary benefits is that it allows the employer to meet the diverse needs of its workforce.
"Today employees range from baby boomers to Generation X to Generation Y," and being able to reach these different segments' needs is very important, Halkos says.
Voluntary benefits allow the employer to offer a "menu of benefits strategy," which also helps companies attract and retain employees, she says. In addition to compensation and culture, voluntary benefits correlate with higher satisfaction.
Halkos cites a recent study that found that 88 percent of employees want and value choice when it comes to benefits.
"The one-size-fits-all approach doesn't work. By broadening benefit offering, [employers] can keep employees engaged," she said.
Halkos says that voluntary benefits are also valuable because they serve as a "budgeting tool" for employees. If they want to buy a computer through their employer and Purchasing Power, they are able to purchase it through payroll deductions.
Harvey said that while a payroll deduction might not seem like a great incentive, the "out of sight, out of mind" aspect of it is appealing to employees. "It's better than getting a premium bill at home," he said.
Some of the more unusual voluntary benefits are auto, home and pet health insurance. Some employees are even able to add identity theft protection or sign up for discounted club memberships to places such as Costco.
Having a one-on-one or group meeting with employees is a good way to inform employees about voluntary benefits, says Widdis. This way, they are able to ask questions then and there and fully understand how they work.
Harvey says more brokers are moving away from offering hard copy handouts and are getting better at developing web portals presentations.
Voluntary benefits: A greater market for brokers, added security for the employee, little or no cost to the employer. Sounds like a win-win-win.
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