Voluntary employee benefits are developing into a distinct market of their own, shaped by employers' need to be creative in recruiting and retaining workers while holding down costs by asking workers to take more responsibility for their own benefits, note specialists in the field.
"For employers, good customer service and quality control are a function of morale," observes Lance Osborne, vice president, field force development, for AFLAC Inc., Columbus, Ga. "The more a company can do for its employees, the more employees want to do for the company."
Demands of small to midsized employers are moving the industry to adopt new competitive practices, including introducing more bundled products and making heavier use of the Internet for enrollment and administration, experts say.
John Brady, northeast regional disability insurance sales manager, Massachusetts Mutual Life Insurance Company, Springfield, says another recent change has been a more aggressive pursuit of employees who decline a benefit in the 1st open enrollment. Now more insurers are taking a 2nd and 3rd shot at employees who do not initially sign up, particularly for disability products, he says.
A key to this development has been the growing use of pre-existing condition clauses, Brady says. This specifies that if someone signing up for a DI policy had been treated for an ailment within, say, 12 months before enrollment, that individual can't make a claim for that ailment in the policy's 1st year.
This limitation actually encourages employees who declined a policy during initial enrollment to sign up later.
Often, employees who pass on a disability product when it's first offered have to submit an extensive medical history if they later change their mind and decide to sign up, because the product would no be available on a guaranteed-issue basis.
But because a pre-existing condition clause can eliminate or reduce the need for health histories and medical exams, they can make DI more attractive to employees who passed up the policies during the initial enrollment, Brady points out.
"A pre-existing condition clause allows employees with changing needs to have access to underwriting, and that's a major change for the industry," says Brady. "It makes DI a major benefit program rather than a one-time enrollment. Now we can offer it to employees who have already bought but want more, as well as to new hires and to employees who had declined it on the first opportunity."
Product bundling has always been around, but carriers are using it more often to attract employees by offering them a better deal.
In fact, supplemental insurance products are typically sold in integrated packages, according to a recent UnumProvident survey on worksite benefits (see sidebar on page 13). Stand-alone sales occur only about 20% of the time, the survey found.
"We're big on dental and vision and tend to bundle those a lot," says Steve Toby, head of the worksite business unit for Guardian Life Insurance Company of America, New York.
The big attraction to employees is the discount they get when they buy more than one kind of coverage, he notes.
"Bundling also appeals to small to midsized employers who don't want to increase the number of carriers on the same case," Toby says.
Bundling of hospital intensive care and critical illness at a discount is popular among AFLAC customers, says Osborne.
"You'll see brokers and other producers who are offering worksite products go in to an employer and do a good analysis of existing benefits and then bundle some products to cover gaps," he says.
