The “new normal” in voluntary benefits
In the past few weeks, key industries for voluntary benefits such as restaurants, hotels, public schools, and other service sectors have shuttered for an indeterminate period of time. And unfortunately, voluntary benefits are disproportionately skewed towards these hourly workers and sectors.
Given this “new normal,” payroll deductions of voluntary benefits for hourly workers are in jeopardy due to reduced hours and business closures. Think about it: What percent of your business will be disrupted if just one full payroll cycle is missed; much less the eight weeks being recommended by the CDC for any gathering of 50 or more (which would be most restaurants, schools, etc.)? Even a few weeks can create a billing and payment issue for your business clients and policyholders.
Especially during this health care crisis, policyholders need to be able to retain their valuable STD and hospital coverages that cover expenses associated with the coronavirus. Most carriers have already published their COVID-19 responses in terms of coverage, and the good news is many plans will cover coronavirus issues. And because of the current environment, businesses are actually calling VB agents and brokers requesting any plans that cover coronavirus-related issues. And that can be great for sales!
Related: How the coronavirus affects HR, benefits, and retirement professionals
For new sales today, most carriers are promoting phone enrollments to take the place of onsite enrollments, but that doesn’t matter much if the method of payment – payroll deduction – is in a state of unpredictability. Moreover, what about the bulk of in-force premium in your accounts that provide you a stable flow of renewal income? Remember, 60 percent of Americans are paid hourly.
But coverage is not the issue; it is the payment method. The agent and broker communities are already voicing that concern. On one carrier’s veteran agent Facebook page, you are starting to see postings such as, “we are starting to run into a lot of businesses coming to a standstill because of the virus and we are getting asked, if they aren’t making deductions, then how would they pay their bill?” Another agent asked “what to do when payroll accounts are closing for who knows how long?” This is especially true in those key VB industries. One agent stated, “I don’t know how they’ll be paying any invoices? Restaurants, salons, bars and medical offices, all closing today.” And the most discomforting, “I have 9 businesses close doors Friday until further notice.”
Without payroll; there is no payroll deduction.
Many carriers do offer direct bill, but only on a monthly basis, or have in-house restrictions in place on existing case conversions. One carrier limits conversions, such as no cases under 10 policyholders (which is approximately 80 percent of cases) – yet those are the cases most affected in these instances.
Today, some companies offer a model built for the “new normal” that work for cases of all pay frequencies and sizes. Ideally, they not only eliminate the bill to the employer but also insulate you and your clients from the “new normal,” helping you transition your clients to a bank draft or credit card process so your policyholders maintain coverage and you retain your renewals. This process lies entirely outside the payroll process.
When there is a “new normal,” business models must change. The last “new normal” was 9/11. And now we have clear plastic bags at sporting events, metal detectors everywhere, and employee ID badges – none of which were mandated prior to that date. The zero-bill model is perfectly situated to the “new normal” and the future of premium administration. It allows for premium collection and remittance that mimics payroll deduction frequencies, yet collects from each policyholder individually. And mark my words, this situation will push further the already growing gig economy, as employment changes to a contractor status and more people working remotely. Many people being sent home today will never return to their physical work environment.
The trends were already moving in the direction away from payroll deduction, but the current crisis will increase overall adoption. In a 2019 study, 23 percent of respondents chose EFT/credit card as their preferred method of payment for future VB purchases; more than double the response in 2013.
With 30 percent of Americans changing jobs annually, persistency has and always will be a challenge for agents, broker and carriers in a payroll deduction model. And 25 percent of the U.S. workforce now operates in the gig economy – and this is expanding rapidly.
The gig economy and the “new normal” are here to stay so, we must adapt to these times.
Stay safe! Stay resilient! Stay positive!