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The voluntary benefits marketplace has evolved significantly over the years, and the rate of change promises to increase as employers continue to try to attract and retain employees at a reasonable cost. New product and service offerings, along with a growing distribution system of brokers and consultants, will ensure a dynamic and expanding universe of value-added options.
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Various insurance and investment products made available to employees as a “voluntary” option through an employer-sponsored benefit plan date back to the 1950s when they were originally called payroll-deduction or salary savings plans – monikers that reflected the mostly employee-pay-all nature of this coverage.
Sales were largely confined to individually owned plans through insurance brokers and agents. In the early 1990s, several leading group-market carriers became involved in worksite marketing, which is another term often used to describe voluntary benefits.
Traditional carriers offer a host of insurance products that include life and health products, disability, dental, critical illness, long-term care insurance and property-casualty lines such as home and auto insurance. There also are boutique providers specializing in discounts on a seemingly unlimited number of non-insurance products without any medical underwriting. They include vision care, pet care, legal plans, travel services, employee purchase plans, shopping and mortgage programs, assistance with computer purchases and other areas, as well as third-party administrators that focus on enrollment, billing and technology.
Leading industry consultants include LIMRA International and Eastbridge Consulting Group Inc., both of which provide extensive research. Trade associations include the Benefits Marketing Association, Mass Marketing Insurance Institute, known as MI2, and the Voluntary Employee Benefits Board. Eastbridge Consulting estimates the total number of industry players at more than 100.
Ron Neyer, senior analyst, distribution research for LIMRA International in Windsor, Conn., notes two trends that are driving interest in voluntary benefits: employers offering more choice in the face of cutbacks in company paid core health care, dental and retirement coverage, and the rise of a health care consumerism approach where employers increasingly have sought to replace corporate paternalism with a partnership approach.
He says low- and middle-income earners stand to benefit the most from voluntary coverage considering that they’re under-served by traditional distribution outlets. Noting the need for small and midsize employers to round out their benefit offerings amid the search for top talent, he was surprised to learn that about 70% of the respondents to a 2005 insurance carrier survey LIMRA conducted involved firms with fewer than 20 employees – a market segment that could be ripe for future sales.
Steve Weisbart, an economist with for the Insurance Information Institute in New York, observes that the number of voluntary plans and breadth of coverage has expanded in recent years. “This is a fairly easy way for employers to provide a richer employment-attachment experience for their workers, and at the same time, a fairly efficient distribution mechanism for insurance companies that are offering these different types of coverage,” he says.
Voluntary benefits are similar to consumer-driven health plans (CDHPs) in that both approaches require employees to shoulder greater financial responsibility for their benefits. But unlike CDHPs, Weisbart explains that many voluntary benefit plans pay out first-dollar coverage when an insured event occurs, and may not be subject to an annual deductible. He says the key to success in these two emerging areas will be to provide understandable and comprehensive information on quality products and services that offer the best value.
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