A 3-dimensional approach for benefits advisors
This three-dimensional approach benefits all parties involved and can be extremely effective when positioning benefits to the end user.
There are typically multiple underlying issues standing in the way of a successful benefits program, and they can be addressed using a three-dimensional selling approach paired with a solid communications plan for effectively engaging and educating employees.
Using this approach, we focus on the three areas that impact the success of a benefits program, strategize effective ways to improve those areas, and identify how this can change your bottom line. This three-dimensional approach benefits all parties involved and can be extremely effective when positioning benefits to the end user.
A three-dimensional selling approach focuses on the following initiatives:
- Driving a higher level of participation
- Increasing the policy value of each participant
- Broadening the coverage per participant
The motivation behind driving these three areas varies, depending on the audience, but they are all important to the overall strategy. When an employer begins the journey of adopting benefits products for their employees, it is positioned by a broker or consultant. The benefits broker shops carriers, places the employer on an enrollment technology platform, and then potentially solicits the help of an enrollment firm to communicate and enroll the organization’s employees.
The importance of a higher participation rate
To begin with, many insurance products are underwritten with a certain number of participants necessary, because insurance carriers want to avoid adverse selection and align revenue goals for each client. They also want to determine the profitability of the new client while determining any subsidies that are needed for technology or enrollment costs.
Meanwhile, there are benefits to the broker partner who helps select and enroll those products, especially in the case of voluntary products. A good question for a broker to ask when offering voluntary lines: “Is this in line with profitability versus opportunity?”
These factors either play into a short- or long-term financial strategy. Ultimately, a higher participation rate often helps with an overall increase in revenue. There are situations where this may not always be the case, but in most instances, the economics work best for every partner involved when more employees purchase the offered insurance products.
From the employer’s perspective, when an HR department seeks to find a quality portfolio for their employees, they spend countless hours researching and planning. When employees participate, the HR department sees their hard work pay off through the employees’ satisfaction and ultimately improved retention rates. The negative impact of poor participation could mean employee unhappiness and unwanted departures of key staff lured away by better benefits. In a report from Aflac, 57 percent of employees surveyed said that having a comprehensive benefits package will play an important role in a decision about whether to leave a current employer. And it is no secret that the cost of sourcing, interviewing, onboarding, and training replacement employees can cost tens of thousands of dollars, not to mention opportunity costs for loss of progress.
Another way employers (and employees) benefit from higher participation rates is through tax savings. The decisions employees make in selecting benefits could lead to higher corporate tax savings by having more insurance premiums redirected prior to tax. This is especially the case in regards to adding coverage lines like voluntary benefits. As an example, an employer saves money by matching FICA tax (7.65%) on every dollar that is redirected pre-tax, and the employee saves on average 25%, which increases their net take home pay.
But in order to get increased employee participation, the employees must first be aware of, and understand, the benefits that are being offered by their employer. There is typically very little awareness of the services offered, because they are ineffectively communicated during a brief enrollment period each year. Communicating the available benefit products effectively year-round, and not just during open enrollment, is key. According to an IFEBF survey, 80 percent of participants don’t read emails about benefits and only 50 percent understand them. Therefore, educating employees on available resources and giving them the tools to do self-guided education improves the adoption rates and effectiveness of the offerings.
A solid benefits communications plan should include a straight-forward decision-support tool and engaging digital employee communications that help employees to understand their benefits options.
The importance of increasing the policy value of each participant
From retaining satisfied employees and increasing tax savings to a greater profit for all partners involved, the advantages of employees adding family members to their plan is beneficial to everyone.
When employees have the opportunity to add spouses and children to their insurance coverage, it can be favorable to their entire family’s well-being, reducing the cost and stress of finding money to deal with a major life event that could impact their income.
Carriers understand this added protection is incredibly valuable for certain employees — especially those who prefer to plan for unforeseeable events, or have health concerns. When employees choose to pay into and add these additional coverage options, they pay higher premiums and the carrier partners benefit from higher margins. As an example, the average sale per person for life insurance might be $500 per year; however, if that employee adds an additional rider for long-term care to their policy, the cost may increase to $800 per year. Also, moving employees from standard health or life insurance to a customized plan with riders specific to their needs increases policy retention.
In order to increase the policy value for each participant, employees need to be educated about the coverage that is available. Engaging, informational resources are key in communicating this to the employees and their families. Short educational content in the form of videos is extremely useful in this instance, and offering digital methods of distribution is critical. Consider creating a digital employee resource center that can be accessed from any device and reviewed by employees and their spouses at home.
The importance of broader coverage per participant
For the same reasons that driving a higher level of participation and increasing the policy value of each participant are important, so is strategizing to broaden the coverage (or benefits products sold) per person.
Typically, policyholders that have more than one line of coverage with a carrier tend to stay with that carrier even after they leave the employer. In short, carriers refer to this as making the client “more sticky.”
However, new and existing benefits packages are made up of independent parts and are often insufficiently communicated. This makes getting value out of the benefits a real challenge for both employees and employers. Employees need year-round communication to increase their awareness and understanding of the products so they can effectively choose the best options for their needs before the need actually arises. Dependent spouses can be particularly important in the benefit review process and communicating and educating them via easy-to-use decision-support tools, portals, and informational videos can have a lasting and positive effect on the decision making process.
Benefits decision-support tools are particularly effective in securing broader coverage with employees. If implemented correctly, these tools help employees to quickly choose the most appropriate plan for their needs, giving them the confidence they need to select additional products of coverage.
Conclusion
Regardless of the motivation, the three areas discussed above drive greater revenue for the broker and other partners and help drive tax savings to the employer while increasing overall satisfaction with employees and their benefits.
The most important aspect of delivering a three-dimensional approach is effective communication. Benefits partners and HR teams alike need engaging employee benefits communications solutions to exceed expectations for all parties involved.
Robert Ferrone serves as VP of Sales for Flimp Communications and is the leader of the client account-management team. With more than 25 years of experience in the insurance business, Robert led sales organizations at Aflac, Colonial Life, Jellyvision, and benefits administration/enrollment firms.