Depending on who you talk to, the small business market is either a totally untapped opportunity for selling voluntary or it’s a market that is not worth the effort. Which of these two divergent opinions is true isn’t clear cut, but may become more so after reviewing the market and looking at some of the misunderstandings.
First, we have to agree on a definition for the “small business market.” There’s no industry definition—we’ve heard as small as “under 50 lives” and as large as “up to 300 lives.” For the purpose of this discussion, let’s define the small business market as accounts with between 10 and 100 employees.
The primary misunderstanding in this market that clearly needs dispelling is one we hear occasionally at industry trade shows: No one is serving the small group market and, thus, few small employers today offer any voluntary benefits. That’s simply not true. According to recent Eastbridge research, three-quarters of small employers offer at least one voluntary benefit.
Granted, the penetration levels aren’t as high as they are in the mid-market, where up to 88 percent offer at least one voluntary benefit. It’s true that the percentage offering voluntary is less than three-quarters at the lower end of the small market (especially the under 50 lives), but a significant portion still do offer voluntary. All of this is good news if you’re looking for virgin cases since there are more of these in the small market than in the larger market.
But the good news doesn’t stop there. Small accounts also tend to offer a lower number of voluntary products today than do larger accounts, averaging just three as compared to five for larger employers. This means there’s opportunity to add new types of voluntary products in all small cases. Often the smaller employer offers less robust benefits packages on the employer-funded side, so there is more opportunity to supplement the package with voluntary. All that’s required is making sure the administrative processes for the employer is smooth. That means picking good carrier partners, including ones that make administration easy for the employer.
On the other side of the argument is that small cases take too much time for too little payback. That may be the case sometimes but, generally, smaller cases take less time to close and there’s a more streamlined decision-making process. With the right partners, enrollment is easy and so is administration.
So, is the small group market an untapped opportunity for voluntary? It really depends on your perspective. There are many small employers across the country, and the need for voluntary products is strong. If you’re in that market already and think that your small employer clients don’t offer voluntary products, you may want to check again as there is probably another broker or voluntary agent offering them. Be careful not to leave money on the table for someone else to take.
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