In the first month of the COVID-19 outbreak, more than 26 million U.S. workers lost their jobs and filed for unemployment benefits; that equates to about 1 in 6 American employees. To give a parallel, COVID-19 accomplished in 30 days what took a year to reach in terms of job losses during the 2008 recession. And things have only gotten worse from there. If your revenue collection method is payroll deduction—as is voluntary benefits—this is a life-changing event as a producer, broker or carrier.

When there is a "new normal," business models must change. The last example of this was 9/11. Although we eventually re-entered skyscrapers and started flying on planes again, some changes that arose during that time became permanent. Today, we still have clear plastic bags at sporting events, metal detectors everywhere, and employee ID badges—none of which were mandated prior to that event 19 years ago.

This pandemic will have similar long-term effects. Practices such as online education, Zoom meetings and grocery delivery, which were previously on the fringe, will become mainstream. You have probably already integrated several of these activities into your daily life. Secondly, new overarching terms like "social distancing" and "contactless process" have entered our everyday lexicon.

How will these changes permanently impact the future of voluntary benefits? What fringe practices will become mainstream?

To adhere to the new reality, the industry will need to adapt in three areas:

Virtual prospecting systems
Contactless enrollment processes
Non-payroll payment methods

The brokers, organizations and carriers that integrate these concepts into their business models most effectively will win in the new voluntary benefits world.

Let's start at the beginning. Prospecting, and any outside sales activity, will change dramatically. Canvassing that involves face-to-face, door-to-door calling on small business clients will decrease significantly. Businesses are going to be more guarded about who they let into their building—especially uninvited strangers wanting to sell something. I foresee businesses putting up signs on the front door stating, "For health reasons, do not enter if you are unannounced or without invitation."

The future of prospecting will be virtual, using tools like LinkedIn and phone solicitation; anything to keep you out of the office lobby (which will have a Purell station right by the front door). In this instance, the fringe practice becomes the new mainstream, as we observe social distancing.

Recruiting new agents will be negatively impacted as well, if your pitch is: "We want you to walk into businesses unannounced every day and subject yourself to multiple opportunities to interact in close proximity with people you don't know." The job duties of an insurance agent just became more difficult to sell as an economic opportunity. That will impact recruitment of new agents. The agent of the future will need to be much more tech savvy than many of the larger producers today. A new value proposition to potential producers must be developed in order to attract top talent.

Face-to-face will decrease significantly during the enrollment process, as well. The shift to virtual enrollments was already underway, but the pandemic has given it a huge push forward. Even if you have been their trusted agent for decades, clients may ask to check your temperature prior to sitting with employees for open enrollment each morning. And sharing a pen or the agent's laptop for enrollment might become a thing of the past.

So, how do you enroll if they can't touch an enrollment device? Can your electronic enrollment platform be pulled up on their cell phone? Remember, "contactless process" is the new normal; I know, because I eat at Chick-fil-A four days a week.

After prospecting and enrolling a case, the payment process must be established. For most voluntary benefits, it has historically been done through payroll deduction. That will change. The level of payroll disruption brought about by COVID-19 has taught the lesson that this is not a reliable revenue collection method over the long-term. As the enrollment process has been moving away from live enrollments due to technology, the trends were also moving away from payroll deduction. The current crisis will move these changes from fringe to mainstream. In a 2019 study, 23% of respondents chose EFT/credit card as their preferred method of payment for future VB purchases, more than double the response in 2013. What do you think the 2020 survey will show?

Think of the amount of renewals and premiums lost by agents, brokers and carriers because of the pandemic. It's simply staggering, and is largely due to reliance on a single premium collection method: payroll deduction. Purchases set up on recurring bank drafts or credit cards are not having the same issues, even though they are fully closed (think gym memberships). Moving forward, employers are going to be less likely to re-engage in payroll deduction and will prefer employees pay for their benefits the same way they pay for everything else—through bank drafts and credit cards.

As for producers, do you really want to spend five months putting business back on the books using payroll deduction, even as Dr. Fauci warns of a possible recurrence in the fall? The first round caught everyone off guard; if you repeat the same mistakes, shame on you.

All of the above applies to carriers' distribution systems, but the greatest risk to the carriers is the in-force block of business being severely damaged. Remember, the book of business, not new sales, is where profitability resides, because they have already paid the upfront commissions. If 16% of Americans have had their payroll disrupted, what does that mean for payroll-deducted payments? That is scary. Given that the majority of policyholders are hourly workers because the industry skews towards middle- to lower-income sales, the effect could be worse.

To their credit, carriers are doing everything they can, including allowing grace periods. But grace periods are not forgiveness of premium; they just mean you have to pay more later to catch up. Secondly, many carriers are offering an EFT option to conserve the business, since the stimulus checks can be used for EFT payment of premiums, but not payroll deduction.

Eventually, we will move past the pandemic and enter a "Wild West" scenario due to the hit to the industry's in-force book of business. The battle among carriers to court agents and brokers to replace lost business with their product will be intense. Just because an agent offered Carrier A to his client pre-COVID does not mean he can't use Carrier B to put the business back on the books. The smart carriers and producers will recognize this and adapt quickly.

The new environment will incent agents and brokers to switch carriers when putting business back on the books for two reasons: (1) upfront commissions versus same carrier reinstatements, and (2) the policyholder will have to pay months of back premium to keep their existing plan, so more employees will pick back up coverage if they can avoid the missed payments (which they can only do by switching carriers). A recent survey found 56% of VB sales are already takeover sales; expect that number to climb in the short-term post-COVID environment.

The winning carriers will quickly and successfully integrate virtual prospecting, contactless enrollment processes, and non-payroll payment methods into their business model. As these trends shift from the fringe to mainstream to comply with new social distancing and contactless processing standards, these carriers will market those solutions to the various distribution systems to win the business that will be advantaged by a carrier switch. Welcome to the new world of voluntary benefits!

Tripp Amos is the former chairman and CEO of Piedmont Payment Services.

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Rewriting the book on voluntary benefit sales

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