Group, employer-paid coverages have traditionally been managedusing a self-administrative process. This system works well forthese cases, and typically requires the employer to keep therecords on who is covered, for how much, etc. The insurer in thesesituations keeps no individual records.

The employer is the client and all the employees (almost) whoare eligible receive coverage, at least up to the GI limits. As aresult, there is almost no concern about an unscrupulous HR staffperson declaring that an uninsured employee has coverage (moralhazard). In addition, although a claim requires the employer toverify coverage (because only it has the records), a typical grouplife case, even in a large company, will have a relatively smallnumber of claims per year.

The system works, causes no undue hardship, and serves theemployer-client, the broker, and the insurer well.

But imagine we created a new type of employee benefit. Insteadof the employer being the client, imagine that employees were theclients. Imagine that the broker and insurance company wanted tomarket to their clients. Imagine that the product was an accidentplan rather than life insurance, generating a high volume ofclaims.

Imagine that only 30 percent of the employees were covered,making the designation of who was covered a critical step, andintroducing a far more severe moral hazard. Self-administrationwould be a serious problem for each of these changes. The insurerand broker would not know who their clients were, and each claimwould require verification.

Of course, this business is here today and is coming to dominatethe benefits landscape. Call it “voluntary” or “worksite”, thisbusiness is not just the future; it's the present. And today,self-administration of voluntary benefits serves no one well.

This is the situation some traditional group companies are stillfacing today, trying to force the voluntary “round peg” into theself-administration “square hole.” Some carriers haven't evenacknowledged that they are falling behind. Even though manyemployers are relatively new to voluntary, they are starting tounderstand the difference between square and round. Already, morethan half of surveyed employers prefer their carrier to keepindividual records rather than using a square holeself-administration system.

Increasing pressure on carriers to move towards a modernadministrative platform is up to us. By doing the right thing forour clients, we encourage laggard carriers to do the right thingalso. And as those carriers are finally forced to do the rightthing, we will all benefit: our clients, our carriers, andourselves.