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My first job in the insurance business was in an actuarial department for a debit insurance company, which sold products that we now consider voluntary benefits. One of my responsibilities was to calculate the value of policies when coverage lapsed, as well as how long the value would last before the coverage expired.
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It didn't take long for me to learn that our target market was working people who wanted basic family protection. The coverage was affordable, easy to purchase and premium payments were conveniently picked up from the insured's home. I felt good serving that market.
But it was difficult for me to understand why so many people bought coverage, paid for it a while and then just left it behind—perhaps losing the only financial protection they had. So I've been on a personal crusade ever since to promote conservation of business through continuation of voluntary benefits through portability and conversion.
According to Eastbridge Consulting, in 2014 the voluntary market represented sales of $6.89 billion, up 3.7 percent over 2013. And if our sales to date are any indication, 2015 will continue the trend.
What's behind voluntary growth?
First of all, most medical plans have changed to reflect the requirements of the Patient Protection and Affordable Care Act, creating gaps in coverage. Voluntary products like critical illness and accident insurance have been designed to cover those gaps.
Employers also are being challenged now more than ever to reduce medical benefit costs, while still providing their employees with a broad portfolio of benefits. The need for a broad benefit portfolio is fueled by increasing employee diversity where the traditional "one size fits all" benefit package is no longer relevant to most employees.
Think of the differences in needs between age and gender groups, family composition, financial status and cultural heritage. Voluntary products can offer the diversity of benefits consumers want and need.
In fact, according to Towers Watson, more than 80 percent of companies have adopted voluntary benefits to support employees' personal needs. LIMRA also reported in September 2014 that 7 in 10 employers offer voluntary benefits to improve morale for their existing employees and to attract and retain new talent.
Retention means revenue
From the broker's viewpoint, voluntary benefits provide additional ways to serve customers, advise them on best practices and generate revenue.
Take brokers Jill and Joe, for example. Each of them have 100 groups with 100 employees. Jill keeps 90 percent of her groups and 88 percent of employees every year. Joe keeps 85 percent of his groups and 80 percent of employees every year.
While the difference in keeping customers is small, the extra value for Jill is big. After only three years, her revenue is ahead by 20.5 percent ($199,000); in 5 years that jumps to 32.2 percent ($390,000) and in 10 years, 51.4 percent ($713,000). Wouldn't you prefer to be Jill than Joe?
Consider these four ways to keep voluntary customers:
1. Communication
Consistent communication is the cornerstone of lasting relationship with customers. Offer new ideas and be an advocate for the customer as a trusted member of their benefits management team.
Ask yourself—are you a consultant or an auctioneer? Consultants sell value and auctioneers sell price. Auctioneers also sell what's best for them, while consultants sell what's best for their customers.
2. Education
Education is the base for successful voluntary plans—whether it is an employer knowing why, how and what is the best portfolio for their employees, or employees understanding the importance of keeping the coverage they choose to purchase.
The problem in educational enrollment of employees is that we tend to focus on facts and statistics without beginning with why coverage is needed. If employees understand why their voluntary coverage is important, they are much more likely to become durable customers. We also must provide multiple approaches to education—in group or individual enrollment meetings, via web-based needs calculators, illustrative videos, personal stories—to give consumers the tools they need to make wise coverage decisions.
3. Advice
Education tells the why, how and what of the product portfolio, but advice helps ensure the products purchased are suitable for the needs of the employee. Be sure to remind employees that their coverage will preserve their insurability; they have the right to continue (port) coverage if they leave their employer; and how easy and convenient it is to port or convert the coverage.
Providing solid advice will allow you to sell your value propositionto help combat lower price by competitors. Employers might think lower price is the best solution in the short-term but it can come with longer term issues, like poor service.
4. Make it easy
Signing up for voluntary coverage is very easy. Most of the voluntary enrollment process is available with online options because people want that convenience. Of course, payroll deduction premium payments assure the employee will never miss a bill or have any billing paperwork.
Bottom line: Treat customer conversations as a service, rather than just a sale.
Many times, those conversations will include an easy opportunity to upgrade coverage to meet a need the customer might not even realize they have. Customer satisfaction and retention go hand in hand. And ultimately, retained customers are likely to become repeat customers.
Marty Traynor is Vice President of Voluntary Benefits at Mutual of Omaha. He can be reached at [email protected].
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