The year in voluntary: Fringe benefits rising to the fore
While supplemental healthcare continues to overshadow all other voluntary benefits, in 2017, carriers began aggressively promoting a new category of low-cost fringe offerings as a way to make further inroads with their core products.
Among brokers, however, the reaction was decidedly mixed, with some viewing these benefits as revenue sources and conversation starters, while others dismissed them as unprofitable distractions.
Looking back on the year, brokers like Eric Silverman, principal and owner of Silverman Benefits Group, says many carriers have begun offering value-add products that they can offer to clients in tandem with more traditional voluntary benefits, such as supplemental health and disability.
“Carriers are trying to differentiate themselves in order earn more business,” Silverman explains. “They are aggressively offering robust fringe benefits to entice brokers and employers.”
These fringe benefits can range from a free app to zero-copay telemedicine visits, concierge services, employee advocacy programs and zero-cost identity theft protection. But in order for a broker to provide these free or minimal cost services to an employer, the carriers require that the broker meet with all of the employer’s employees to educate them on the various offerings.
That can be useful from the broker’s perspective, since it gives them an opportunity to visit their clients and introduce them to other new products. “Our key is that we always need to see people,” notes Silverman. “If we don’t meet with them, then we cannot sell, so it is a win-win for everybody.”
Pet insurance: the underdog
Jonathan Mentor, a benefits account executive for Foa & Son Corporation, says he was surprised to see that employees of all ages have been gravitating towards pet insurance as a voluntary benefit.
“I never really took this benefit too seriously,” Mentor admits, “but when you look into the employee culture – specifically at companies that are pet friendly offices – the interest spans across all employee generations.”
These groups are so small, he adds, that there are no performance and accountability reporting requirements.
The rise of loan benefits
But while pet insurance is a niche benefit aimed at a select group of employees, Mentor says that in 2017 many of his clients began providing a benefit that appeals to a much broader swath of their workforce: Prepay day loans to help employees cover time-sensitive expenses such as rent or car payments.
“Employers are trying to put together policies where employees can borrow internally against their annual salary, and then pay back the loan through automatic payroll deductions,” Mentor reports.
As long as an employee remains with the company, he or she can borrow a set amount against his annual salary and pay no interest. But if the employee leaves the company before paying back the full amount, he or she would then have to repay the outstanding balance plus interest on the full amount of the loan.
From the employer’s perspective, Mentor says, these types of loans serve as an effective exit barrier to discourage their employees from leaving.
Student loan repayments are another such barrier. Employers have begun offering loan repayments as a way to retain talent. The employer offers to pay off a certain amount of the employee’s student loan over a set amount of time, provided the employee remains with the company.
“I see this as a benefit that is really trending with employers in Silicon Valley and the technology sector,” where competition for highly-skilled and specialized talent has become very intense, Mentor notes.
Silverman disagrees. He says that growth in student loan repayment benefits were muted in 2017 and will remain that way in 2018, because brokers are not enthusiastic about the product.
“Brokers have so much on their plate as it is,” he says, and [to sell this benefit] they will need to be experts at it. It will gain traction,” he allows, “but I just don’t think it will grow at the rate that other folks believe it will.”
Mentor says the growth of student loan benefits will depend on whether the IRS begins makes them taxable, and whether voluntary brokers are willing to partner with financial and retirement brokers to promote and sell them.
“There are employee benefit advisers that will [partner with] a retirement firm where they can share profits,” he says. “I don’t think student loan benefits should be the sole province of a retirement or financial adviser, but I do think there is room for partnership between the broker community and adviser community.”
But with many advisers saying they can’t find a way to earn commissions on the product, providers such as Tuition.io and SoFi have begun side-stepping brokers and marketing their student loan benefit offerings directly to employers.