Trevor Garbers has a ringside seat on sales of voluntaryaccident coverage.

“Accident coverage is definitely in the top three voluntary products that employers request,”says Garbers, vice president at Chicago-based insurance company HUBInternational. “We are seeing double-digit growth, year over year,in both our voluntary accident sales and in the industry, and thatdoesn't look as if it's going to stop anytime soon.”

Jeff Culbertson, manager of product and market development atUnum in Chattanooga, Tenn., says his company's numbers agree withthat assessment. Unum launched its current accident product in2004. The company saw $11 million in sales in 2005, $60 million in2012, and $75 million in 2013.

At the Windsor, Conn., based Life Insurance and Market ResearchAssociation, “we track several voluntary benefits on a quarterlybasis,” says assistant research director Ron Neyer. “Between 2005and 2013, the compound annual growth rate was about 11 percent. In2013, by contrast, companies sold $382 million in voluntaryaccident coverage, up 17 percent over 2012.”

Part of that increase, Neyer says, is that more companies havestarted writing voluntary accident insurance.

“In 2004, only about 36 percent of the carriers reportedaccident insurance. That’s up to 67 percent as of 2013,” he says.“Voluntary accident used to be something that just worksite andvoluntary carriers offered. But now companies have seen the writingon the wall and decided that it will be beneficial to introduce aproduct and get into this industry.”

The product in a nutshell

To see why, it’s important to first understand how voluntaryaccident coverage works. Coverage is typically very affordable,between $5 and $8 a week, deducted from an employee’s paycheck.

“The plans typically have guaranteed coverage,” says Randy Finn,vice president of product development at Colonial Life, an issuerbased in Columbia, S.C. “Coverage for a family might cost a littlemore than $5 to $8 a week, but you can get to a level where youhave protection but you’re not paying a huge amount,” he says.

The majority of plans pay a lump sum to covered individuals whosustain an accident. The injury and its treatment determine thepayout. A minority of voluntary accident policies pay a proportionof the actual out-of-pocket costs of treating the injuredindividual.

Beneficiaries can do whatever they like with the money. Forthose with less-robust plans — a group that often includesemployees with health savings accounts—Culbertson says the cash canhelp cushion the financial blow represented by the out-of-pocketcosts of medical treatment.

“This country has a flat savings rate and a median householdincome of $50,000 annually,” he says. “Someone breaks a leg, andthey have $1,000 or more in medical expenses. For a lot of people,that's a hard thing to cope with. They exhaust personal savings,borrow money from family or use credit cards — or they can getfinancial protection through work, in the form of voluntaryaccident coverage.”

Those with better core medical benefits might use the voluntaryaccident policy payout to improve their recoveries. The cash couldpay for the airplane ticket that brings a friend or relative tostay with the recovering accident victim, physical therapy, a rampor other accessibility tool, or even a down payment on a newmotorcycle to replace one lost in a crash.

“People are attracted to the flexibility of a lump sum benefit,”Neyer says. Issuers are, too. “It makes the whole claim issue moreblack and white. It's yes or no, and here's your check.”

More employee-paid premiums

Accident coverage is one of many popular voluntary products,industry insiders say.

“Voluntary products are in the limelight right now,” Finn says.“Brokers are focused on how they can build a stronger package forclients, strengthen those relationships, and offer more options forrevenue streams.”

Voluntary products began a slow rise to popularity back in the1990s, when employers began to realize that rising medical costsmeant they could no longer pay for 100 percent of employees’ healthcare benefits, Culbertson says.

“Now it’s very rare that you find an employer that pays for 100percent of medical insurance premiums,” Culbertson says. “As thattrend continued, we saw coinsurance become more expensive,deductibles increased, and out-of-pocket expenses rose.”

In the wake of health care reform, voluntary products havereally taken off.

“We’ve gone from paying $5 to see the doctor to paying $30, oreven $50. Health care has become much more expensive to the enduser, and the growth of voluntary products has been astronomical,”Culbertson says.

Health care is more expensive, Neyer agrees,and it also covers less than it used to. “Employers have madechanges because there’s only so much they can absorb,” he says.“Employer-provided medical insurance is becoming less comprehensiveover time. Accident coverage fills some of the gaps in medicalcoverage.”

An evolving product

Most employees who have voluntary accident coverage through workpay for the benefit themselves, in what Garbers calls “a changefrom employers being the provider of benefits to being the providerof access to benefits, shifting risk and cost to employees.”

At the same time, however, some companies are beginning to payfor some or all of the benefit.

“They want to position themselves as the employer of choice onthe employer-paid basis. So employers are sometimes covering thecost of accident coverage, putting it into a core benefitoffering,” Garbers says.

LIMRA has been tracking this trend. “Traditionally, it’s on theemployee to buy this, but that’s begun to change over the last fewyears,” Neyer says. LIMRA’s employer study on the matter, which itperforms every four years, found that in 2002, 94 percent ofcompanies that offered an accident plan expected covered employeesto pay 100 percent of the premiums. In 2006, the same number was 83percent. In 2010, 67 percent, or a third of all employers, paidsome or all of the cost of voluntary accident coverage.

Unum’s product evolution has tracked that trend, Culbertsonreports. In 2004, the firm offered an individual benefits schedule.In 2011, it debuted a group-based product that has someemployer-paid options.

In addition to serving as a boost to employee morale, groupofferings are often flexible enough to let employers offer plansthat make the most sense, based on their overall health carestrategies. “Maybe they have a PPO today but know that they'll beon a high-deductible plan in five years. They might build anaccident plan toward that high-deductible plan,” Culbertsonsays.

Or if a firm is concerned about workers overusing emergency-roomvisits, they might change the amount that voluntary accidentcoverage offers to those who get emergency room treatment. “Youcould make the emergency-room and urgent care pay the samebenefit,” Culbertson says, or limit the number of paid emergencyroom visits each year.

The upsides of employer-paid coverage

A chance to coordinate voluntary accident coverage with a coremedical plan is just one reason that employers like accidentpolicies (and are increasingly willing to pay for them). There area lot of other ways employers benefit when employees have accidentcoverage, Garbers says.

For one, accident plans help employees access their core medicalcoverage benefits. “The fastest way to meet a deductible is throughan accident. Once the deductible is met, the health care policy ismuch more accessible and has more traction,” Garbers says. A policythat pays the deductible opens that gate.

Deductible coverage — in addition to disability and workerscompensation — also reduces absenteeism, because it increases thelikelihood that injured workers will get all the care they need toreturn to productivity. “When people don't get treatment they oftenget worse, and then they don’t come to work,” Garbers says.

Early detection also helps employees stay productive, and somevoluntary accident coverage includes cash benefits for workers whoget preventative medical care, Garbers says.

A good voluntary accident plan can even prevent cheating onworkers compensation claims, he adds. “Sometimes employers getworkers comp claims that didn't occur at the workplace,” Garberssays. “When you cover employees on and off the job, they aren't sotempted to falsify a claim, particularly because voluntary accidenttypically pays out more money than workers comp. That saves moneyon workers comp coverage.”

Medical and voluntary providers, workingtogether

Core health benefits and voluntary accident coverage work welltogether for employers; they’re also an increasingly popular tandemoffering for insurers.

Garber says some major medical coverage companies are alsoadding voluntary accident plans, while others promote an accidentcarrier as part of their overall employee education presentation.The carriers benefit when employees use one another'sofferings.

They may also economize on administrative duties by “doing asingle-billing, blended administration approach,” in which acompany pays the larger insurer both premiums. That insurer handlesthe administrative functions, which are relatively simple in theaccident/no accident world of most voluntary accident plans, andwrites the second insurer a check.

“We get a really positive reception from employers around thecombination of core medical and voluntary accident coverage,” Finnsays. “This is a solution for them, for employees, and for brokersas well.”

Also read:

• Why voluntarybenefits still matter
• Voluntary sales up 9 percent last year
• 5 most popular voluntary benefits