FINANCIAL WELLNESS: THE NEXT FRONTIER IN WELLNESS PROGRAMS

Transcription

1 FINANCIAL WELLNESS: THE NEXT FRONTIER IN WELLNESS PROGRAMS Why It Matters to Employers and Employees, and the New Way to Measure It Effectively A white paper developed by Prudential, using supporting research and analysis provided by EY Insurance and Actuarial Advisory Services

2 TABLE OF CONTENTS Executive Summary 1 The Evolution of Wellness Programs 2 Defining Financial Wellness: What It Is and Why It Matters 2 Measuring Financial Wellness: Prutection Score SM 4 Benchmark Scores and What They Tell Us 5 Benchmark Scores by Key Demographic Segments 6 The Impact of Insurance Programs on Financial Wellness 8 Best Practices for Improving Employees Financial Wellness 9 Conclusion 12

3 EXECUTIVE SUMMARY Employers have a vested interest in promoting the financial health of their employees, who can become less productive when burdened by money worries. Nearly a quarter of employees confirm that personal finance issues are a distraction at work, and 39% say they spend three hours or more each week dealing with issues related to personal finance. 1 To alleviate these stresses, increasing numbers of employers are implementing financial wellness programs that educate employees about the financial risks they face and provide tools to manage those risks. To support and enhance these efforts, The Prudential Insurance Company of America (Prudential), with supporting research and analysis provided by EY, 2 has created Prutection Score SM, a patent-pending tool to help employers evaluate the financial wellness needs of their employee populations. Prutection Score SM provides employers with measures of how well protected their employee populations are against key financial risks they face every day: loss of income due to premature death, illness, or injury; out-of-pocket medical and non-medical expenses related to unexpected health events; and outliving assets in retirement. The opportunities to improve individuals financial wellness are vast. Drawing on data from its 2014 Financial Wellness Survey, Prudential has found that most employees are unprepared to fully cover key financial risks they face during their working careers. Prudential also has found that for each risk category, Prutection Scores SM vary dramatically from one demographic group to another. With these data in hand, employers now have the ability to create tailored, needs-based financial wellness programs that efficiently target educational efforts and financial protection solutions to the employees who need them most. This paper introduces a financial wellness measure and new national benchmark scores for the U.S. workforce. It explores the key demographic drivers that can impact financial wellness and suggests best practices for employers seeking to implement or improve financial wellness programs. 1 PricewaterhouseCoopers, Employee Financial Wellness Survey, 2014, page EY Insurance and Actuarial Advisory Services,

4 THE EVOLUTION OF WELLNESS PROGRAMS Over the past decade, employers have learned that improving the health and wellness of their workforce yields benefits for employers and employees alike. Employers enjoy a healthier workforce that is more productive, has fewer absences, and makes fewer demands upon employer-sponsored health insurance. Employees benefit from improved health and well-being and reduced medical expenses. Seventy-seven percent of employers that provide health benefits now offer at least one wellness program, up from 54% in Employees have been receptive; 87% consider it appropriate for employers to encourage them to take steps to be healthy. 4 Now employers are learning that a new kind of wellness program financial wellness can also have a positive impact. Financial wellness programs educate employees about the financial risks they face and provide tools to manage those risks. Over 40% of companies say they already have a financial wellness strategy in place or plan to introduce one. 5 More will likely join them; 81% of companies say they feel at least somewhat responsible for their employees overall financial wellness. 6 Converting that responsibility into action will require that employers leverage the same strategies they used to create successful health and wellness programs: educate employees on the importance of the programs, which provides an impetus for employees to take action, and track and promote employee participation in them. Measuring the current state of employees financial wellness is important, so that employers can track program effectiveness over time. This paper seeks to further that cause by helping employers understand how to measure and improve their employees financial wellness. DEFINING FINANCIAL WELLNESS: WHAT IT IS AND WHY IT MATTERS Many factors contribute to financial wellness, which, for purposes of this discussion, Prudential defines financial wellness as being protected against risks that are difficult to predict and may have significant financial consequences. In essence, financial wellness is important to the For continuity full-time of employees life for employees covered and their by families. medical insurance for their routine medical expenses, Prudential identifies four such risks: For full-time employees covered by medical insurance for their routine medical expenses, Prudential identifies four such risks: Loss of income due to premature death Loss of income due to illness or injury Out-of-pocket medical and non-medical expenses Outliving assets in retirement More immediate financial risks that may occur during working years Prudential defines financial wellness as being protected against risks that are difficult to predict and may have significant financial consequences. 3 The Kaiser Family Foundation, Employer Health Benefits Annual Survey, 2013, page 180; and 2008, page Optum, The importance of promoting healthy lifestyles in the workplace: an Optum research study, Merrill Lynch/Bank of America, Workplace Benefits Report, December 2013, page 9. 6 Merrill Lynch/Bank of America, Workplace Benefits Report, December 2013, page 4. 2

5 Much attention has been given to the financial risk of outliving one s assets in retirement, but many employees underestimate three more immediate risks premature death, illness or injury, and out-of-pocket expenses which could cripple their financial well-being tomorrow, next week, or next month. Employees that are not adequately protected against these risks may need to start paying their day-to-day expenses by incurring credit card debt, using lines of credit, or taking loans from their 401(k) plans. Accordingly, this paper focuses on the first three, more immediate threats listed above that may occur during employees working years. As illustrated in Exhibit 1, several trends are challenging employees financial wellness in each of these areas. They include the shifting of responsibility for medical costs to employees, rising medical costs, low savings rates, and increasing longevity. Exhibit 1: Trends Driving Key Financial Risks During Working Years Risk Current Situation Trends Premature Death: The risk that family members may not be able to maintain their standard of living in the event of an employee s premature death. Illness or Injury: The risk that an employee could no longer work and earn wages due to an illness or injury. Out-of-Pocket Medical and Non-Medical Expenses: The risk of onerous expenses borne by an employee in the event of a critical illness or accident. Thirty-one percent of Americans believe they would feel the financial impact from the loss of the primary wage earner within a month of his or her passing. 7 A 35-year-old leading a healthy lifestyle has a greater than 20% chance of becoming disabled for three months or longer during his or her working career, with a 38% chance that the disability will last more than five years. 10 There were nearly 38 million injury-related emergency room visits in 2012, or one for every eight Americans. 12 One in three women and one in two men in the U.S. will develop cancer during their lifetime. 13 Longer lifespans mean more years to provide for dependents, such as a surviving spouse or partner. The average life expectancy for a 65- year-old female has increased to 88.8 years, up from 85.2 in Many Americans are caring for multiple generations of family members. College tuition has increased at a rate higher than inflation for 30 years. 9 Many employees live paycheck-topaycheck; 66% say it would be very or somewhat difficult to meet their current financial obligations if their next paycheck were delayed for a week. 11 Health expenditures are expected to continue to outpace inflation between 2012 and 2022, increasing at an annual rate of 5.8% 14 versus 2.1% for inflation. 15 Household savings continue to be low, with 52% of U.S. households saying they have less than $10,000 in liquid assets available to use in an emergency % of medical plan participants have out-of-pocket family maximums of $5,500 or more LIMRA and Life Happens, 2014 Insurance Barometer Study, 2014, page The Wall Street Journal, Pension Plans Brace for a One-Two Punch, March 25, 2014, page B1. 9 Claire Hilsinger, Up, Up And Away: College Tuition Is On The Rise, Forbes, July 24, The Council for Disability Awareness, Disability Statistics, July American Payroll Association, Getting Paid in America, Survey CDC, National Hospital Ambulatory Medical Care Survey: 2010 Emergency Department Summary Tables. 13 Benefitspro, Kathryn N. Mayer, Will Critical Illness Insurance Take Off?, June, According to the American Heart Association and American Cancer Society. 14 Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Expenditure Projections , Department of Labor (2011); Congressional Budget Office, An Update to the Budget and Economic Outlook: Fiscal Years 2012 to 2022, page Prudential, Financial Wellness Survey, The Kaiser Family Foundation, Employer Health Benefits 2013 Annual Survey, page

6 Financial wellness matters to employers as well as employees Helping employees achieve financial wellness yields benefits for employees, of course, but it also helps employers by reducing stress and distractions in the workplace, thereby contributing to increased worker productivity and loyalty. Twenty-four percent of employees say personal financial issues are a distraction at work, and 39% say they spend three or more hours each week thinking about or dealing with issues related to their personal finances. 18 Human resources professionals go even further: seven out of 10 indicate that personal financial challenges have an impact in some cases a large impact on their employees performance. 19 Employers are well-positioned to help alleviate employees financial pressures because employers can provide access to protection solutions, typically in the form of insurance, in an efficient, affordable way. Employers also can support employees with educational resources, calculators, and communications programs that drive employees to take advantage of the voluntary benefits available to them. This in turn may have a positive impact on employee satisfaction with benefits: 71% of employees say that even the offer of voluntary benefits increases the value of their company s overall benefits program. 20 Employers enjoy a significant competitive advantage in attracting and retaining employees who believe that benefits programs meet their needs. 21 Seven in 10 human resources professionals indicate that personal financial challenges have an impact on their employees performance. MEASURING FINANCIAL WELLNESS: PRUTECTION SCORE SM For employers, understanding the risks to their employees financial wellness is an important first step toward improving it. The bigger challenge, though, is assessing the financial wellness of their employee base understanding how much money different segments of their employee population need, and what types of insurance coverages they may require, to be adequately protected against the financial risks they face. To that end, Prudential, with supporting research and analysis provided by EY, has developed Prutection Score SM to help employers evaluate the financial wellness needs of their employee populations. For each risk, Prutection Score SM gauges how financially prepared employees are should a risk event occur by looking at the resources available to them personal funds and insurance coverage relative to the resources needed. Resources are estimated using employee demographic information, Prudential Financial Wellness Survey data, and various government and industry sources. In developing Prutection Score SM, Prudential conducted a Financial Wellness Survey 22 of over 5,000 employees who had medical insurance. 23 Prutection Score SM = Funds and Coverage Available* Funds and Coverage Needed * Funds and coverage available is based on an estimate of an employee s financial assets, spousal or partner income, investment income, Social Security benefits, and insurance benefits, drawing from Prudential survey data and external industry and government sources. Funds and coverage needed is an estimate based on a variety of survey data such as an employee s age, marital status, number of children, income, essential monthly expenses (e.g., mortgage, child care), discretionary expenses, and college costs. The figure incorporates realistic assumptions about items such as longevity, inflation, and care-giving costs based on a combination of mortality tables and government and industry data. 18 PricewaterhouseCoopers, Employee Financial Wellness Survey, 2014, page SHRM, Financial Wellness in the Workplace, May Prudential, The ABCs of Voluntary, the fourth in a series of five research briefs derived from Prudential s Eighth Annual Study of Employee Benefits: Today & Beyond, 2014, page Towers Watson, Attracting and Keeping Employees: The Strategic Value of Employee Benefits, May Poll of 5,335 full-time employees with medical insurance conducted using Harris Online Panel in March/April 2014, sponsored by The Prudential Insurance Company of America. 23 For the purposes of this paper, medical insurance implies a comprehensive plan such as a point of service plan, health maintenance organization, preferred provider organization, or high deductible health plan. 4

7 Drawing on data from that survey as well as various government and industry sources, Prudential has developed national benchmark scores for each of the three more immediate risk categories premature death, illness or injury, and out-of-pocket expenses that we identify as germane to financial wellness. The higher the score, the better prepared an employee may be to meet his or her financial obligations. A score of 100 means an employee is likely able to meet financial obligations for a specific risk. BENCHMARK SCORES AND WHAT THEY TELL US The benchmark Prutection Scores SM indicate that full-time U.S. employees covered by medical insurance are unable to fully cover their exposure to three key risks they face during their working careers: u u Premature Death benchmark score: 71. In the event of loss of income due to premature death, the average employee would be able to cover 71% of ongoing financial needs for a spouse s or partner s lifetime and for children until adulthood. u u Illness/Injury benchmark score: 71. In the event of loss of income due to illness or injury, the average employee s household would be able to pay 71% of their monthly expenses using other income sources, such as spousal or partner income and disability insurance 24 benefits. u u Out-of-Pocket Expenses benchmark score: 48. Faced with out-of-pocket medical and non-medical expenses due to a critical illness or accident, the average employee s household is equipped to cover just 48% of those expenses through liquid savings and insurance coverage. While about a third of employees in the Prudential Financial Wellness Survey score high 90 or higher in each risk category, only 4% score above 90 for all three risks, and only 2% have scores of 100 or more for all three, as shown in Exhibit 2. This points to a significant opportunity to Exhibit improve 2: the Distribution financial wellness of benchmark of American workers. Prutection Scores SM Exhibit 2: Distribution of Benchmark Prutection Scores SM Score 90+ Score 100+ Percent of Employees with Scores Above 90 and 100 Premature Death Risk 28% 33% Premature Death, Illness/Injury, and Out-of-Pocket Expenses Risk 2% 4% Illness/Injury Risk 12% 26% Out-of-Pocket Expenses Risk 36% 34% Source: Prudential s Financial Wellness Survey, 2014 Only 2% of employees have a benchmark score of 100 or more across all three risks. 24 Also called disability income insurance. 5

8 BENCHMARK SCORES BY KEY DEMOGRAPHIC SEGMENTS To refine the value of the benchmarks and identify the groups of employees with the greatest opportunity to improve their financial wellness, Prudential looked at the key drivers in each risk category, and then calculated benchmark scores for differing demographic groups. Not surprisingly, the common driver of scores in all cases is the level of insurance coverage currently carried by an employee, as shown in Exhibit 3. Because most employees have limited control over their income and how much they can save, insurance coverage is an important and convenient way to achieve a higher level of financial wellness across all three risks. Exhibit 3: Benchmark Scores and Key Drivers Risk: Premature Death Illness/Injury Out-of-Pocket Expenses Benchmark Score: Key Drivers: Level of insurance coverage Marital status Number of dependent children Age Level of insurance coverage Marital status Employee income Level of insurance coverage Employee income as a driver of liquid savings Source: Prudential s Financial Wellness Survey, 2014 Beyond insurance coverage, there are multiple other drivers, and they vary in significance from one risk to the next. In some cases, a driver is positive for one risk and negative for another. Being single can improve someone s premature death score, for example, because there is no need to provide for a spouse or partner; on the other hand, it can weaken an individual s illness/injury score because there is no spousal or partner income to help cover expenses. u u Premature Death benchmark scores vary significantly by marital status and age, with marriage especially at a younger age tending to lower scores. Someone who is married or in a partnership may wish to provide for a spouse or partner for the rest of his or her lifetime, and the younger that individual is, the more years there will be to provide for that spouse or partner and any children they may have. Another key driver is the number of dependent children. This is particularly pronounced among employees without a spouse or partner, where those without dependent children have an average score of 88, while those with one or more dependent children have an average score of 61. u u Illness/Injury benchmark scores are driven by marital status and employee income. Benchmark scores are significantly higher for married employees due to the additional spousal or partner income available to cover expenses and the potential to receive higher Social Security Disability Income (SSDI) benefits for a spouse and/or dependents. Scores also increase steadily with income. Because employees with higher incomes generally have lower expense-to-income ratios, the disability payments they receive, where available, cover a higher percentage of monthly expenses. Offsetting this somewhat is that employees with lower incomes receive larger SSDI benefits as a percentage of their salary. 6

9 u u Out-of-Pocket Expenses benchmark scores increase steadily with income because employees with higher incomes usually have higher levels of liquid savings that could be accessed to cover out-of-pocket medical and non-medical expenses. Because household income is generally higher for employees who are older, male, married, or in a partnership, these scores also are driven by age, gender, and marital status. Exhibit 4: Benchmark Scores by Selected Key Drivers Premature Death Illness/Injury Out-of-Pocket Expenses Marital Status: Married/Partnership 67% 83% 54% Single 78% 47% 34% Age: < 30 63% 66% 39% % 69% 31% % 73% 31% % 73% 63% % 71% 82% Employee Income: < $50k 72% 69% 31% $50 $150k 69% 73% 59% $150k + 78% 79% 99% Number of Children: Married, 1+ children 66% 81% 56% Married, no children 70% 86% 51% Single, 1+ children 61% 49% 40% Single, no children 88% 45% 30% Source: Prudential s Financial Wellness Survey,

10 THE IMPACT OF INSURANCE PROGRAMS ON FINANCIAL WELLNESS Access to Protection Solutions at Work Has Positive Impact on Benchmark Scores Access to insurance in the workplace has a positive impact on financial wellness. This is most apparent in illness/injury benchmark scores. Employees with access to disability coverage at work have an average illness/injury benchmark score of 82, versus 56 for employees who do not. 16 However, disability coverage across employers has been declining. From 2009 to 2013, the number of employers offering long-term disability insurance declined 3%, and the number of employees with coverage declined 6%. 25 The benchmark scores indicate that employers could significantly boost employees financial wellness by making this coverage more widely available. The same is true for critical illness and accident insurance. Employees working for employers that offer these coverages have an average illness/injury benchmark score of 59, versus 40 for employees whose employers do not offer them. 16 Average illness/injury benchmark score for employees whose employers Offer disability coverage 82 Do not offer disability coverage 56 Type of Medical Insurance Plan Has Little Impact on Benchmark Scores Most employees have low benchmark scores for the risk posed by out-of-pocket medical and non-medical expenses, regardless of the type of medical plan offered by their employer. This is surprising, given that there has been concern that high deductible health plans (HDHPs) increase the potential burden of out-of-pocket expenses on employees due to high deductibles and high out-of-pocket maximums. As shown in Exhibit 5, the average score for employees with HDHPs is 51, comparable to scores for employees with point of service plans (58), health maintenance organizations (51), and preferred provider organizations (48). 25 Council for Disability Awareness, 2014 Long Term Disability Claims Review. 8

11 Exhibit 5: Out-of-Pocket Expenses Benchmark Scores by Medical Plan Type Plan Type Score Point of Service (POS) 58% High Deductible Health Plan (HDHP) 51% Health Maintenance Organization (HMO) 51% Preferred Provider Organization (PPO) 48% Source: Prudential s Financial Wellness Survey, BEST PRACTICES TO HELP IMPROVE EMPLOYEES FINANCIAL WELLNESS Employers have a real opportunity to improve their employees financial wellness through the introduction of programs that educate employees about the financial risks they face and provide the tools they need to manage those risks. Here are some best practices employers may want to consider when creating a financial wellness program: 1. Adopt a needs-based approach to promoting benefits. Many employers try to improve their benefits programs by tracking product penetration levels the degree to which employees select various benefit offerings and attempting to boost the uptake of those offerings that have low penetration levels. Employers may have a greater impact on their employees financial wellness by analyzing product penetration levels relative to employee needs rather than focusing on product penetration levels alone. As part of that effort, employers may want to: u u Leverage employer-based tools to gauge the financial wellness of an employee population. Partner with a provider that can measure the financial wellness of your employee population and understand the drivers behind those measures. Compare your employees financial wellness measures to relevant benchmarks based on industry, region, and/or company size. u u Set financial wellness goals for the employee base. Identify demographic segments within the employee population where financial wellness measures are below established benchmarks and goals. 9

12 u u Measure employees financial wellness on an ongoing basis. Regular monitoring will help gauge the effectiveness of education and communication programs. u u Target employee segments that have large coverage gaps with customized communications. Consider providing employees with targeted case studies and educational videos with profiles relevant to their own situations. Use a variety of communication channels to appeal to a wide range of employee preferences for receiving information. A needs-based approach to promoting employee benefits analyzes product penetration levels relative to employee needs. This may have a more powerful impact on financial wellness than current approaches because it ties employees needs to how well positioned they are to cover those needs. 2. Educate employees on financial wellness, emphasizing both needs and solutions. Define and communicate the importance of attaining a high level of financial wellness. Help employees understand their exposure to key financial risks by providing statistics on the chances and financial implications of premature death, disability, being diagnosed with a critical illness, or being in an accident. Illustrate how specific solutions increased saving, increased insurance coverage, healthier lifestyles, or some combination of the three can help mitigate financial risks. (See Exhibit 6 for more on how education may help overcome employees obstacles to buying insurance.) 3. Leverage existing educational tools and channels. Where possible, provide customizable tools integrated with existing online enrollment systems. Take advantage of customized enrollment support from benefits providers, who can answer employees questions, conduct needs analyses for them, and provide them with personalized coverage recommendations. 4. Take a holistic approach to critical illness, accident, and other insurance by offering a suite of solutions. Premature death, illness or injury, and out-of-pocket medical and non-medical expenses are insurable risks that can be mitigated through life, disability, critical illness, accident, and other insurance. Employers should consider including these solutions in their core benefits lineup. To further boost financial wellness, employers may want to offer health and wellness programs, savings programs such as 401(k) plans, matching contributions to 401(k) plans, and health savings accounts. Providing a robust array of benefits can also give employers a competitive advantage in attracting and retaining workers Towers Watson, Attracting and Keeping Employees: The Strategic Value of Employee Benefits, May

13 Exhibit 6: Education May Drive Employees to Make Better Use of Insurance People typically are not eager to buy products they do not understand or appreciate. Research conducted by the Center for Retirement Research at Boston College and sponsored by Prudential 27 confirms that while many employees do not fully appreciate the benefits provided by life and disability insurance and hence make suboptimal use of it education could help them overcome their resistance to it and improve their financial well-being. Among the survey s key findings: u uwhile employees do not think about life insurance very often, they do think about it during key life events such as getting married, having a child, or purchasing a home. u uindividuals have a narrow view of life insurance. They view it as a means to pay down current and future debts, but often overlook its ability to help cover their dependents day-to-day living expenses. u uemployees are confused about disability insurance. Specifically, they: Underestimate the likelihood of prolonged disability, which they define narrowly as a catastrophic illness or injury resulting from a high-risk occupation or lifestyle. Overestimate the level of coverage provided by their safety net, expecting to be fully covered for disability by workers compensation, short-term disability insurance, or Social Security disability benefits. Struggle to evaluate the cost of disability insurance. Drawing on behavioral finance concepts, the Center for Retirement Research devised and tested various hypothetical interventions that might be used during online enrollment periods to help employees make smarter choices about insurance benefits. Several proved effective, including providing default coverage levels, checklists, personalized estimates, information on monthly income that may be generated from specified coverage levels, and information on the risk of disability Prudential, Consumer Insight Reveals Opportunities to Improve Financial Wellness, CRR partnered with Greenwald & Associates to conduct 24 in-depth telephone interviews with consumers in Prudential, Consumer Insight Reveals Opportunities to Enhance Effectiveness of Enrollment Sites,

14 CONCLUSION Employers have widely accepted health and wellness programs, which benefit employees and employers alike. Like health and wellness programs, needs-driven financial wellness programs promise to benefit employers as well as employees. The opportunity is great. Prudential s measure of financial wellness, Prutection Score SM, indicates that right now, the average full-time U.S. employee with medical insurance coverage would not be able to meet all of the expenses relating to any one of three key risks, identified by Prudential in this paper, that threaten his or her financial well-being. On average, he or she could cover only 71% of financial needs in the event of premature death, 71% of financial needs in the event of loss of income due to illness or injury, and 48% of out-of-pocket medical and non-medical expenses in the event of an accident or critical illness. These findings suggest that employers have a real opportunity to help improve their employees financial health through targeted, needs-based financial wellness programs, which educate employees about the financial risks they face and provide the tools they need to help manage them. Offering a broad array of insurance programs can be an important component of that effort. Life, disability, critical illness, accident, and other insurance programs, paired with medical insurance, can address many of the financial risks employees face every day. To cite just one example, employees whose employers provide disability insurance have an average illness/injury benchmark score of 82, versus just 56 for employees whose employers do not offer that protection. Needs-based financial wellness programs can improve on conventional approaches to promoting employee welfare. Until now, most employers have assessed the effectiveness of their various benefits programs, and decided which to promote, by comparing the percentage of workers using them to pre-established product penetration goals. Using the benchmark scores and/or calculating scores for their own employee populations, employers can target their efforts to the specific employee groups who need them the most. 12

15 About the survey Financial wellness scores are based on a national survey of full-time employees who have medical insurance. Sponsored by The Prudential Insurance Company of America, 5,335 surveys were completed between March 5 April 2, 2014, using Harris Online Panel. Questions covered demographics, income, expenses, savings (emergency and investments), ownership of protection products, and confidence levels. Data has been weighted by representation within industry and in total on these factors: education; age by gender, race, and ethnicity; four census regions; income; company size; and percent self-employed. Weights rely on statistics from the U.S. Bureau of Labor Statistics and U.S. Census Bureau s Current Population Survey, and Dun and Bradstreet. For additional information, visit Eighth Annual Study of Employee Benefits: Today & Beyond Managing Financial Risk in Retirement and Benefits Programs Critical Illness Insurance: On the Road to Financial Wellness Accident Insurance National Retirement Risk Index The Prutection Score SM is a measure of how prepared a group of employees are for the risks of (1) premature death, (2) loss of income due to an illness or injury and (3) out-of-pocket expenses related to an illness or injury. For each of the three risks, the Prutection Score SM is the ratio of Funds Available to Funds Needed, which, are estimated using employee demographic information, Prudential survey data and a variety of credible external industry and government sources. The Prutection Score SM is not intended to advise you or any of your employees what their specific financial needs might be or the exact amount of coverage any one individual might need now or in the future. Individuals should contact a financial professional regarding your personal situation. The resulting scores are to be used for an entire group of employees or large demographics within a group. Results are not to be used at an individual level. Prudential is not responsible for uses made of this information inconsistent with the description provided here. 13

16 This policy provides ACCIDENT insurance only. It does NOT provide basic hospital, basic medical, or major medical insurance as defined by the New York Department of Financial Services. IMPORTANT NOTICE THIS POLICY DOES NOT PROVIDE COVERAGE FOR SICKNESS. This policy provides disability income insurance only. It does NOT provide basic hospital, basic medical, or major medical insurance as defined by the New York Department of Financial Services. North Carolina Residents: THIS IS NOT A MEDICARE SUPPLEMENT PLAN. If you are eligible for Medicare, review the Guide to Health Insurance for People with Medicare, which is available from the company. These Critical Illness and Accident coverages are not comprehensive health insurance coverage (often referred to as Major Medical Coverage ). They do not satisfy the Individual mandate of the Affordable Care Act. They do not meet the requirements of minimum essential coverage as defined by federal law. Group Critical Illness Insurance coverage is a limited benefit policy issued by The Prudential Insurance Company of America, a Prudential Financial company, 751 Broad Street, Newark, NJ Prudential s Critical Illness Insurance is not a substitute for medical coverage that provides benefits for medical treatment, including hospital, surgical and medical expenses, and does not provide reimbursement for such expenses. The Booklet-Certificate contains all details, including any policy exclusions, limitations,, and restrictions, which may apply. If there is a discrepancy between this document and the Booklet-Certificate/Group Contract issued by The Prudential Insurance Company of America, the Group Contract will govern. A more detailed description of the benefits, limitations, and exclusions applicable are contained in the Outline of Coverage provided at time of enrollment. Please contact Prudential for more information. Contract provisions may vary by state. Contract Series Group Accident Insurance coverage is a limited benefit policy issued by The Prudential Insurance Company of America, a Prudential Financial company, 751 Broad Street, Newark, NJ Prudential s Accident Insurance is not a substitute for medical coverage that provides benefits for medical treatment, including hospital, surgical and medical expenses, and does not provide reimbursement for such expenses. The Booklet-Certificate contains all details, including any policy exclusions, limitations,, and restrictions, which may apply. If there is a discrepancy between this document and the Booklet-Certificate/Group Contract issued by The Prudential Insurance Company of America, the Group Contract will govern. A more detailed description of the benefits, limitations, and exclusions applicable are contained in the Outline of Coverage provided at time of enrollment. Please contact Prudential for more information. Contract provisions may vary by state. Contract Series Group Life and Disability coverages are issued by The Prudential Insurance Company of America, a Prudential Financial company, 751 Broad Street, Newark, NJ The Booklet- Certificate contains all details, including any policy exclusions, limitations, and restrictions, which may apply. Contract Series Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide