Voluntary Benefits: Is there a Canadian Story?

Voluntary Benefits: Is there a Canadian Story? LIMRA Group & Worksite Benefits Conference September 2013 All information supplied in this presentation is owned by and is 2013, Eastbridge Consulting Group, Inc. You may quote from this presentation with full attribution. Any other use requires prior approval by Eastbridge Consulting Group, Inc. 2013, Eastbridge Consulting Group, Inc. 1

The Opportunity Eastbridge has been working with RGA Life Reinsurance Company of Canada to gather information and explore this opportunity. Our partners at RGA have said they see opportunity due to several trends in Canada: Cutbacks of state provided benefits Higher out of pocket costs to employees Low levels of certain essential benefits (such as life insurance) Underinsured middle market without an easy way to acquire insurance A more diverse workforce for which a one-size-fits-all benefit package no longer meets the needs 2013, Eastbridge Consulting Group, Inc. 2 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge2

The Opportunity : U.S. employers say they offer voluntary because of employee interest and to enhance their benefits package Importance Factors in Deciding to Offer Voluntary (Scale 1 to 5, with 5 being Extremely Important ) Percent 4 or 5 Employee interest in the product(s) 86% Cost savings to the company 85% Aid in recruiting and retaining employees 80% To address gaps in our current benefit plan 62% To replace benefits we previously paid for or contributed to 51% 2012 data 2013, Eastbridge Consulting Group, Inc. 3 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge3

The Opportunity: U.S. employees buy to satisfy needs and because of the convenience Reasons for Buying Voluntary Products (Percent Extremely or Very Important) 2010 Products purchased filled my needs 93% Convenience of purchasing at work 91% Convenience of having premiums payroll deducted 90% Reasonable cost for the coverage 90% Reputation of carrier for service and claims payments 87% Name of the insurance company is well known 76% Endorsement by employer 62% Influence of co-workers 30% 2013, Eastbridge Consulting Group, Inc. 4 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge4

The Opportunity: U.S. employees like aspects of voluntary offerings 2013, Eastbridge Consulting Group, Inc. 5 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge5

U.S.Voluntary Sales New Business Premium (in millions) 2013, Eastbridge Consulting Group, Inc. 6 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge6

U.S. Ownership rates Employers Offering Voluntary 77% Employees Owning Voluntary 38% U.S. Employee Ownership of at Least One Voluntary Product 2013 10-100 employees 37% 101-500 employees 43% 501-2,000 employees 41% 2,001+ employees 36% Weighted average of all employees in businesses with 10 or more employees 38% 2013, Eastbridge Consulting Group, Inc. 7 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge7

The Canadian Market In 2012, RGA Life Reinsurance Company of Canada and Eastbridge Consulting Group conducted a survey among Canadian carriers about their opinions and activities related to voluntary products. Participants included: ACE-INA La Survivance Assumption Life Manulife Bank of Montreal Insurance Blue Cross Medavie Ontario Blue Cross Life Blue Cross Medavie Quebec British Columbia Life & Casualty RBC Insurance Cooperators SSQ Insurance Desjardins Standard Life Empire Life TD Bank Insurance Equitable Life Teacher s Life Foresters Transamerica/AEGON Canada Great West Life Union Vie Mutuelle Industrielle Alliance Wawanesa La Capitale Western Life 2013, Eastbridge Consulting Group, Inc. 8 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge8

Key Findings from Canadian Carrier Research The Canadian voluntary market is beginning to emerge in terms of product and potential and is at a key point for carriers to become early entrants and leaders. True voluntary products in Canada are still rare with most carriers just offering buy-ups attached to employer-funded plans. Optional life is the most commonly offered voluntary product Several key obstacles to the voluntary market are perceived, including: The broker community s lack of buy-in to the voluntary value proposition Broker s skepticism about the ability of voluntary to create a profitable income stream Fierce protection of their employer relationships. Carriers indicate that employers are beginning to show interest in voluntary product offerings because of their need to cut benefit costs. Larger national or multi-national employers are considered by carriers as the best candidates for voluntary. Canadian employees are not very aware of the availability or value of voluntary benefits. Almost 50% of the carriers interviewed believe that voluntary benefits are an important part of their company s strategic plans now and for 2013. Most carriers agree that the voluntary market will grow at a faster rate than the group market over the next five years. 2013, Eastbridge Consulting Group, Inc. 9 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge9

Strategies for Success Recognize the three key audiences in the voluntary sales chain and design marketing campaigns for each. Engage brokers as partners in bringing voluntary to employers and employees. Educate the brokers on the opportunity for voluntary. Offer a couple of different categories of voluntary products. Make selling voluntary very easy for the broker: Provide sales support. Provide enrollment support. Make materials and rules simple. Underwriting should ideally be guaranteed issue. Ensure that all administration will be simple for the employer so as to not disrupt the broker s relationship with the employer. 2013, Eastbridge Consulting Group, Inc. 10 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge10

To be successful a carrier has to understand VB is a 3-step sales process and each audience s needs must be addressed The Carrier A Three-Part Sales Process Re-Enrollment Convince Broker Employer Prospecting Employer Qualification Employer Sale / Close Employee Enrollment Service/ Administration Broker Sale Employer Sale Employee Sale 1. 2. CEO/ Group 3. President Meetings Benefits Director/ HR Manager Executive Committee Individual Employee Meetings Self- Direct Service Mail Internet Call Center Paper Key Players in Employer Sale Key Players in Employee Sale Independent Agents Independent Agents Benefits Brokers Benefits Brokers Worksite Specialists / Specialized Brokers/ Enrollment Enrollment Firms Firms Worksite Brokers Brokers Worksite Specialists / Enrollment Enrollment Firms Firms Independent Worksite Brokers Enrollers Carrier employee Enrollers 2013, Eastbridge Consulting Group, Inc. 11 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge11

Carriers must work with brokers to be successful 2012 Sales Mix by Distribution Segment 8% 1% These are specialized brokers 16% 21% 56% This is the broker selling other group products Benefit Brokers Career Agents Classics Specialists Occassional More and more the group broker controls access to the case for both traditional and voluntary products. 2013, Eastbridge Consulting Group, Inc. 12 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge12

But while brokers are the first step to success, they have to be educated The Broker/Voluntary Learning Curve 2013, Eastbridge Consulting Group, Inc. 13 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge13

Product underwriting must be simple - ideally guaranteed issue The trend is towards Guaranteed Issue regardless of filing platform; product design helps limit the risk. Fast underwriting with few delays or rejections is key to ease of administration. Product Design Product limits in amount of coverage and duration. Examples: Max of 12 months disability Face amount limited to $150,000 Critical illness limited to $30,000 Higher Risk Industries that Commonly Excluded Amusement Parks Bowling Alleys Commercial Fishing Construction Explosive Manufacturing Night Clubs Seasonal Business Underground Mining Carpet Installers Temp Staffing Liquor Business Used Auto dealers Any employer with greater than 20% turnover Asbestos Companies Asphalt Companies Car Washes Crop Dusters Fast Food Entertainers Window Cleaning Roofing Companies Taxi Companies The lists vary by carrier and some quote any industry but adjust the pricing to cover the risk. Guarantee Issue Now available in most accounts over 50-100 lives; may be limited to initial enrollment Participation of 15-20% or min. of 5-10 employees No health questions or just an HIV/AIDS question Plan may be portable Preferred offering of Brokers Simplified Issue Any case size that meets the carriers rules, some as low as 3 employees A few health questions; knock out underwriting There may be a maximum age 2013, Eastbridge Consulting Group, Inc. 14 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge14

Keep administration simple for the employer Key aspects of administration: Insurer takes the administrative burden and does not ask employer to manage too much: EIO is determined by the enrollment process not by employer Employer doesn t have to keep up with how much each employee buys Ability to bill employer with a simple to use process. Ability to issue policies on a timely basis. Claims are paid quickly and accurately. Customer service tools are available for plan administrators and employees. On-line capabilities suitable to its markets. 2013, Eastbridge Consulting Group, Inc. 15 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge15

Carriers need to help brokers and employers with enrollment A complete enrollment process will cover all of the following components: Set-up and coordination of the enrollment Enrollment methods offered Enrollment platforms used/supported Enrollers Enrollment tools Enrollment clean-up Off-cycle enrollments Enrollment reporting Deduction uploads Re-enrollment strategy 2013, Eastbridge Consulting Group, Inc. 16 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge16

There is a value chain but carriers don t have to own it all Industry Value Chain Marketing & Distribution Product Development Sales & Plan Design New Business Installation Policy Administration Customer Service Critical Success Factors Scale to achieve product, marketing/distribution, operational and technology efficiencies Brand recognition Broker geographic reach and coverage Producer education, training and support Simple and easy to understand communications materials Targeted distribution value propositions Competitive and broad product portfolio Simple product designs Multi-state filings Guaranteed issue underwriting for most cases, simplified issue for others Lead generation and qualification Tailored plan design Policy and case persistency Simple, fast and easy enrollment processes Electronic enrollment Rapid underwriting and policy issuance Automated premium billing and collection Responsive broker and customer service Fast claims administration Voluntary carriers own the crucial value chain processes and partner or outsource the rest. Source: Eastbridge, LIMRA, and AF S&B analysis 2013, Eastbridge Consulting Group, Inc. 17 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge17

Thanks! Bonnie Brazzell bbrazzell@eastbridge.com Eastbridge Consulting Group, Inc. 50 Avon Meadow Lane, Avon CT 06001 860.676.9633 www.eastbridge.com All information supplied in this presentation is owned by and is 2012, Eastbridge Consulting Group, Inc. You may quote from this presentation with full attribution. Any other use requires prior approval by Eastbridge Consulting Group, Inc. 2013, Eastbridge Consulting Group, Inc. 18 only. It may not be disseminated to any third party without the explicit written permission of Eastbridge18