You’ve no doubt heard this before: “I’ve got good news and bad news. Which do you want first?” Being mainly a feel-good bunch with little patience for pessimism, most Americans want to get negative news out of the way—and fast. So as we start this article on worksite marketing, you should know that 2006 hasn’t been a stellar year for worksite sales.
Following lackluster performance in 2004 and 2005, worksite sales have taken a dip. LIMRA reported $475 million in new voluntary premiums sold from January through March 2006, a 4 percent decrease over the same period last year. This slide includes drops in life and health insurance premiums of 8 and 2 percent, respectively, as well as double-digit decreases in key voluntary product lines: Term life insurance (-16 percent), long-term disability income (DI) insurance (-14 percent) and accident coverage (-11 percent).
A closer look at the numbers, however, shows that an uptick in the sale of permanent life insurance (5 percent) offset lower term life insurance sales. New premiums also rose in short-term DI insurance (7 percent), dental insurance (2 percent) and limited medical plans (12 percent). And the sale of new accidental death and dismemberment insurance policies soared 47 percent.
Here’s even better news for advisors: In a LIMRA survey of worksite specialists conducted this year, 80 percent of producers said they earned at least $150,000 from worksite sales in 2004. During the same period, nearly half of the producers who reported being less focused on worksite marketing also reported $150,000 or more in worksite-related earnings. And that was in a relatively bad year.
The driver is commission, says Shawn Smith, vice president, western region, for Transamerica worksite marketing: “Voluntary payroll-deduction products pay very well commission-wise. While advisors may earn a commission of 2 to 3 percent on financial-planning sales to high-earning executives, a payroll-deduction business built on the rest of that business’ employees can be very lucrative.”
For example, Transamerica’s lowest commission is 40 percent and spikes as high as 90 percent, Smith says. Though individual premiums are low on worksite sales—sometimes just a few dollars a week—volume is often high enough to propel producers’ annual profits into the six-figure range.
That, combined with the potential for continuing growth, is attracting alert advisors to the worksite-marketing arena. As spiraling health-care costs force businesses to trim employer-paid plans, more decision-makers are seeking low-premium voluntary-benefit packages to boost recruiting and retention.
A cry for help
In May this year, AFLAC commissioned a survey of 501 small-business decision-makers. The study sketched a picture of a market niche that is crying out to be filled. Among the survey’s key findings:
- Nearly two-thirds (63 percent) of decision-makers said they are concerned about their company’s ability to provide a benefits package that will attract and retain employees.
- Nearly half (49 percent) agreed that they cannot attract and retain top-quality employees without offering competitive health benefits.
- Forty-two percent of respondents agreed that the annual cost increases in health benefits have made them decrease their offerings.
- One in three respondents anticipated taking some action on their benefits packages in the coming year.
The extra mile
Such statistics illustrate the point that advisors who are selling voluntary benefits also are offering employers a good deal more: a way to improve productivity and, by extension, their bottom lines.
Enrollment firms can help producers scale the peaks, avoid the pitfalls and reap financial
“It is certainly true that smaller businesses think they can’t compete with larger ones and that they’re losing employees to companies with better benefits,” says Lance Osborne, AFLAC’s vice president for field force development. “We know that a company’s level of quality control and customer service is directly tied to employee morale. The more business owners can do for their employees, the more their employees are going to do for them.”
Selecting the right clients
Still, a needy CEO does not necessarily a good client make. And MassMutual’s Michele Friedlander says that advisors should be choosy. “The ideal company is one in which the employer pays for the majority of health insurance coverage so that you’re not competing for employee dollars” on workers’ most pressing needs, says Friedlander, a registered health underwriter with MassMutual’s DBS Financial Services in Florida. “If an employer has passed on most or all of the health-care costs to employees, you may have a hard time getting those employees to shell out more money.”
To find good clients, the worksite experts Advisor Today spoke with suggested a number of prospecting ideas, including:
- Partner with producers who specialize in group health, commercial property and casualty, or pension products. They provide employers with the main course—you offer noncompeting supplements.
- Set up booths at health fairs and benefits expos.
- Contact national organizations that host seminars. For example, Office Depot offers a seminar for women business owners. Ask the company if you can set up a booth at one of those seminars.
- Network faithfully at area events sponsored by chambers of commerce.
- And don’t overlook your own financial-planning clients. Your existing book of business could prove to be a rich source of employers whose workers could benefit from voluntary plans.
Once you locate business prospects, Friedlander suggests you ask a series of questions:
- Have you offered voluntary benefits in the past and what was the success rate? “If the employer has offered voluntary plans before but employee participation was low, the company might not be a viable worksite candidate,” she says.
- How big is the company? In a 2006 LIMRA survey of worksite producers, high-earning specialists focused on landing clients with 500 or more employees, while nonspecialists focused on smaller firms.
- How spread out geographically are employees? Far-flung workforces can create communication problems for advisors who are selling and servicing voluntary benefits plans.
- How do employee earnings break down? For example, to provide a guaranteed standard-issue offer on voluntary DI insurance, Friedlander says she would need a company with between 60 and 70 workers whose annual incomes exceed $35,000. On the other hand, a profitable long-term care insurance (LTCI) offering would require different demographics—an average employee between the ages of 46 and 60, with an annual income higher than $50,000.
Such statistics are not carved in stone, however. For example, a business with younger employees might make an acceptable worksite client if the company were to extend its LTCI offer to employees’ parents and grandparents.
Critical to finding the right client is the support of a firm’s top executives and HR department.
Speaking of younger employees, they, too, break the mold on what may constitute the right worksite clients. Often, younger employees have jobs that offer little or no health insurance coverage but they cannot afford a full medical plan. Transamerica’s Smith says he’s seen an awakening among younger employees—those going to school and working part-time, for example. “They are starting to understand that a trip to the emergency room will no longer cost $50, but $2,000 or $3,000,” he says. “A lot of younger people who are athletic and active are starting to realize they need coverage.” By August 2006, Transamerica had written more than $20 million in mini-medical plans. “Our reps are having a stellar year because of that product,” he adds.
Such subtleties and surprises make it critical to carefully analyze potential clients before barreling in with a briefcase full of benefits or, conversely, crossing companies prematurely off your list.
Also important to finding the right worksite client is the support of a firm’s top executives and human resources department. “Ideally, you want a solid commitment to your program from HR, along with a letter signed by a higher-up introducing the program to employees,” Friedlander says. The letter should describe the types of benefits offered, the cost range and include an announcement of the group information meeting.
Education is key
So let’s say you’ve done a thorough analysis and found an employer who seems a viable worksite client. What then?
In a word: Educate. But to educate employers, you must first educate yourself, says Joe Jamerson, vice president for sales training with Allstate Workplace Division, the employee-benefits marketing arm of Allstate Financial.
“Most producers have not taken the time to become real students of their game,” says Jamerson, who is based in Jacksonville, Fla. Instead of concentrating mainly on how to sell worksite to employers, Jamerson suggests taking time to learn about benefits from the employer’s point of view.
Take a couple of HR courses, for starters, and join the International Foundation of Employee Benefit Plans (www.ifebp.org). An educational nonprofit founded more than 50 years ago, IFEBP represents 8,500 multiemployer trust funds, corporations, public-employee groups and professional advisory firms. College-level HR courses and membership in IFEBP “will give you a great insight into how HR people think about benefits,” Jamerson says. With your education, you are in a position to “have high-level, qualitative discussions with employers that differentiate you from competitors.”
Serving the client
The educated advisor can offer a solution-oriented approach informed both by HR industry practices and the latest trends. Then he should take it a step further and make sure his approach is not one-size-fits-all, Jamerson advises. “A lot of producers have a preset product line. They want to sell every employee every type of insurance,” he adds.
Instead, you should take a needs-analysis approach that identifies a menu of benefits specific to each employer. For example, if the employer offers only basic group insurance—term life, short-term DI, and a hospital indemnity program, a series of simple questions can help the decision-maker troubleshoot his current offerings: What are the biggest problems with the plan? What are your employees’ most consistent complaints? What did you offer five or 10 years ago? What has changed since then, and what forced those changes?
Such consultation will spotlight holes in the employer’s plan and enable you to highlight specific products to fill those holes. “I think if you take this approach—and the vast majority of advisors do not—you can make your offer so compelling that the employer will see it as his only choice to offer voluntary benefits, and to offer them through you,” Jamerson says.
Treating end-users right
But even employers who buy into the concept of offering voluntary benefits may yet entertain another significant objection: Will my employees be interested? “Many business owners will say, ‘This makes sense to me,’ but they’re not sure they want to invest the time it takes to educate employees to see if they’ll be interested,” says AFLAC’s Lance Osborne.
In worksite marketing, the costs to business owners are the time spent in communicating the program and enrolling employees. Their mentality: If you’re talking to my employees about insurance, they’re not in the back making widgets, and this is negatively affecting productivity. The advisor’s job is to show the employer that time lost initially “will pay off in the future in better recruiting, retention and, most importantly, employee morale,” Osborne says.
Still, employee education is costly, time-consuming—and not always successful, as evidenced by a recent Principal Financial Group study that asked the question, “What needs to be different in the worksite marketplace from the perspective of agents, brokers, employers and employees?”
“What we heard loud and clear from employees was, ‘We don’t get it!’” says Andy Frantz, a Principal regional vice president for voluntary sales. By and large, employees told Principal researchers that they hadn’t understood their employer-paid benefits in the past and still don’t understand them today, even though they’re chipping in even more of their own money. “It was a cry for help, for education,” Frantz says.
But for advisors, employee education is a difficult task, Frantz adds, “because they often have to focus on people with higher income levels to justify the time spent. For the masses, it is hard to create a model that can get the information to [lower-wage] workers effectively.”
That’s one reason some carriers and advisors partner with enrollment firms. The advisor secures the client and teams with an enrollment firm for a group informational meeting. The enrollment firm then meets one-on-one with employees to assess individual needs and sign them up.
Advisors new to worksite marketing can team with enrollment firms to educate employees and expand their own operating capacity by annexing, in effect, a ready-made front and back office.
Selling at the worksite
Producers considering entering the worksite market should understand that selling voluntary-benefits products is different from the traditional, individual sale, says Glenn Ellsworth, an advisor with AIG Employee Benefits in Greenville, S.C. “In worksite, I’m going down to Joe’s Muffler shop, sitting down with Joe’s employees in a group meeting and following up with them one on one.”
Ellsworth can complete that job in a day and a half, he says. “But the sale is still not done … There’s a lot more service in worksite than selling a policy across the kitchen table and then seeing that client once a year for a policy review.”
In fact, post-sale labor intensity often causes rookie worksite marketers to do so badly on their initial cases that they walk away from worksite entirely, giving up what might have developed into a lucrative part of their practices. But for a share of commissions, Ellsworth says, enrollment firms can help producers scale the peaks, avoid the pitfalls and reap financial rewards. “The majority of advisors don’t want to share commissions, but I can assure almost anyone that they will either make the same amount or more, without actually doing the [enrollment and servicing] work,” he says. “If producers go in and mess up, though, they’re not making anything.”
Finding the appropriate carrier
So you’ve found the right client, educated the employees and hooked up with an enrollment firm. Whose products do you sell? Again, be choosy. Ellsworth suggests that advisors entering the worksite market compare carriers carefully. “Some carriers say they’re in the worksite market but what they’ve really done is take an individual product—usually a life product—and try to turn it into a worksite product,” he says.
How can you tell the difference? Look for sudden entry into the worksite market, Ellsworth says. Also find out if the carrier has a dedicated unit specializing in administration. This is crucial and goes back to the labor-intensive aspect of the worksite sale. This is what can happen: A carrier that is used to getting 100 applications a month enters the worksite market, and all of a sudden gets 1,000 applications, maybe 2,000. Those without administrative operations dedicated solely to worksite may offer competitive products, but follow up with bad service on applications, policy changes and claims. When considering a carrier’s ability to deliver on its service claim, the key question to ask is if the company has a truly dedicated back room.
Service and Sales
Both lucrative and labor-intensive, worksite marketing is an area best braved by producers who are truly dedicated to sales and follow-up service. By finding the right carriers and clients, educating employees and choosing efficient servicing options, you, too, can do worksite right.
Lynn Vincent is a regular contributor to Advisor Today.