A few months ago I was asked, what is the greatest area of potential for growing revenue in the voluntary market? It did not take much thought to come up with the idea that our customer, the employee, is the one who pays for voluntary products. So the greatest potential revenue growth in voluntary benefits is going to revolve around creating value for the employee in the products and services we deliver. How can we maximize value for the employee?
Let's start with a brief history lesson on how voluntary benefits evolved over the past 35 years or so. Then we will discuss what it means to stop thinking about voluntary benefits as a series of products and to start considering it as a market. We'll take a look at the distribution of benefits products from a somewhat different perspective, viewing employers as an enabling channel. Finally, we will end up with how employees purchase voluntary benefits and how approaching voluntary benefits as a market opens doors to seeing employees as customers and not simply as enrollment units.
First, our history lesson: more than 35 years ago, voluntary benefits were virtually nonexistent. Employers provided benefits to eligible employees. These benefits usually included medical insurance, some basic life insurance, a pension plan of some sort, and often included a disability or sick pay plan.
The life insurance employers provided was not enough for a family's needs, so for most people, a modest amount of additional group term life insurance was available as an employee option through their employer plan. Additional permanent life insurance was purchased at the kitchen table. This approach dried up for many reasons (such as the time pressure of two income families not having available time at home, the cost of maintaining a debit agent system, etc.).
So 30 to 35 years ago the office desk replaced the kitchen table. Benefits not provided by the employer began to be offered at work through "salary savings" purchases. These purchases centered around permanent life insurance, disability income protection for employees whose employer did not provide a plan, and supplemental medical products like cancer, critical illness, or accident protection. They were individual product designs with simplified underwriting and premiums paid via payroll deductions. The enrollment presentations were usually personal, one-on-one sessions.
Over the next 20 years or so, benefits at work expanded into more formal, complete lists of insured products. Employers sought diverse ways to expand benefits and benefit-related services without expanded costs, especially as they began to see their medical benefit expense require an ever-greater share of the benefit dollar. Product offerings became more diverse, with a distinction between "worksite" individual products (which grew out of the permanent life-debit business model of the past), and "voluntary" group products (which grew out of the expansion of optional group benefits by group carriers). In recent years, the two "sides" have gradually merged into a single line of business (a process called "groupification" by our friends at Eastbridge). The product diversity offered in today's voluntary plans reflects the diversity of today's workforce. We have ethnic and cultural diversity, generational diversity, diversity in family structure, and normal workplace diversity (associates who are blue collar, technical, managerial, etc.). The employee as customer has more choices than ever in the voluntary benefit arena, and this matches up with their diverse needs.
As products have changed, the methods of connecting employees with these benefits have evolved as well, though more slowly. Gradually, distribution of voluntary products has progressed toward mass marketing methods, including many computer and Web-based variations of enrollment process. We will consider this in more detail and will discuss the "employee customer" implications of this evolution in next month's column.
