I’ve spent many years in the voluntary business, and there’s no question in my mind that it’s in the midst of an exciting shift and growth spurt.
In recent years, there’s been a movement to “true group” coverage for limited benefit insurance products such as critical illness and accident. With this shift, employers can provide consistent coverage to all employees, have a simplified billing process and get away from being in the middle of the claims process. This next generation of voluntary allows employers to offer employees the coverage they desire without significant additional work for the employer. At ING U.S., the response has been overwhelmingly positive to our new “Compass” suite of voluntary products.
The group voluntary business is growing at a strong clip, with sales surpassing individual voluntary sales for the first time in 2011 and accounting for 55 percent of business sold, according to the 2012 Eastbridge Consulting Group U.S. Worksite Voluntary Sales Report. The same study found that group voluntary sales increased by a whopping 148 percent from 2000 to 2011, compared to an increase of 31 percent for individual voluntary sales. The study’s group sales figures include products filed on a group platform.
To understand this trend, it’s helpful to have some background on where voluntary has been. Many of the first voluntary products sold in the United States workplace were individual life policies, serving as a valuable complement to the traditional “kitchen table” sales approach. Workplace life insurance coverage took hold, and today, 81 percent of individuals with life insurance have workplace coverage, while half of individuals look to their employer as the only source for coverage, according to a 2012 ING study.
With this success and the opportunity to provide additional benefits to employees, insurers began to branch into accident and health products in subsequent years, keeping the individual model that succeeded with life products. Yet, these policies were more difficult for employers, brokers and insurers to manage. Policies were based on the state of each employee’s residence, and there is much more variation by state with A&H coverage than with life coverage.
Because of this, coverage migrated to a group model (in which employee coverage is typically based on the home state of the employer) to provide greater consistency in the coverage across the employee population. Providing A&H coverage on a group basis, like group life or dental insurance, became commonplace. However, the administrative headache of “list billing” remained, which requires employers to painstakingly reconcile payroll deductions for each employee. List billing has been a thorn in employers’ sides and one of the reasons they cite for not offering voluntary products to their employees.
In recent years, the movement to “true group” coverage provides consistent coverage to all employees and eliminates the need for employers to reconcile lengthy list bills. Employers simply report premium as “lives and volumes” as they typically do for group life and disability coverage. Insurers either reach out to the employer in the case of a claim or accept an eligibility file, frequently utilizing the standard medical format so the employer does not need to be involved with the claims process.
Also driving momentum, voluntary enrollment is increasingly occurring at the same time as traditional medical, group life, dental and disability enrollment rather than off-cycle. This shift is helping to grow voluntary business and reduce its complexity.
While these changes to the voluntary market are likely not the final we will see, the shift to true group is indeed an exciting and provocative one that is creating a stir in the industry.