In a recent roundtable discussion on worksite voluntary benefits sponsored by Guardian, I mentioned that several key breakdown points in the WVB sales process severely suppress the industry’s growth.

Despite its roughly $6 billion in new annual premium, steady year-over-year growth and all the industry buzz, the voluntary benefits market greatly underperforms its potential. Part of the blame lies with employers, where two of these WVB breakdown points are often fatal. The primary obstacle to explosive growth, however, remains the continued resistance to worksite voluntary from employee benefit producers — who keep a huge portion of the commercial market walled off to WVB.

While most brokers offer group voluntary such as dental, vision and group life buy-up, the vast majority of these producers will not cross-sell the more profitable worksite benefits — e.g., critical illness, cancer, accident, permanent life, hospital indemnity and short-term disability — despite frequent and insistent agency cross-selling initiatives.

For benefit firm leaders who desire more voluntary benefit production and revenue, WVB presents a challenging three-phase sales process made more difficult by the complex and intrusive procedures required to enroll employees and collect premium.

Since its creation, the worksite voluntary market has faced a frustrating Catch 22. Known variously as “worksite voluntary benefits,” “worksite marketing” and “payroll deduction insurance,” the voluntary benefits market continues to be defined largely by its operational methods. Yet, these very characteristics that define the WVB market and enhance its value — sales to employees by enrollers at the worksite and payroll deduction of premium — also drive the key breakdown points in the WVB sales process. Anyone with experience with worksite voluntary will recognize these breakdown points in the WVB sales process:

For benefit brokers
• Fear that enrollment and/or billing problems will cost them the BOR on the medical
• Having to give up two-thirds or more of the WVB commission to get the case enrolled

For employers
• Enrollers in the workplace and/or providing adequate enroller access to employees
• Extra work and billing problems from payroll deduction of the voluntary premium

For employees
• Inadequate access to an informed and knowledgeable benefit counselor
• Poor and/or inconsistent presentation of the value proposition of the WVB and how voluntary benefits work with and complement the core benefits
• Pressure sales tactics and/or overselling by enrollers

These reduce to three key breakdown points in the WVB sales process:
1) Enrollers in the workplace
2) Unfavorable commission splits to enroll the case
3) Payroll deduction of premium

For the leadership of a benefits firm that wants to succeed with voluntary benefits, success requires a preliminary sale to the producer, who has to both buy into the concept of WVB and be comfortable with voluntary’s complex sale and enrollment process.
Although the employee is the real decision maker on voluntary benefits, a sale to the employer is necessary to get permission to present the WVB to the employee. Thus, voluntary benefits represent a three-phase sale for the benefits firm: broker sale to employer sale to employee sale.

A single breakdown point in any one phase kills the entire sale, and the key breakdown points start with the producer.

The benefit broker bottleneck
While employers certainly kill their share of WVB sales and plenty of employees have said no to WVB at the worksite, widespread rejection of WVB by benefits producers remains the real bottleneck to explosive growth of WVB sales. For most benefits firms, a successful WVB cross-selling initiative to get brokers to sell voluntary is like a unicorn — often discussed but never seen.

Convincing the producer to cross-sell WVB poses multiple challenges for the agency. The first and most difficult obstacle is to overcome the benefit broker’s understandable fear of losing the BOR letter and lucrative medical commissions as the result of a bad WVB enrollment or billing problems.

Despite the substantial value of WVB revenue to the broker, the reality is that medical commissions historically have dwarfed those from voluntary benefits. Although medical compensation continues to shrink, the task remains convincing the broker that introducing WVB into an account won’t kill the medical goose that lays the golden eggs.

Brokers also object to having to give away 60% to 75% or more of the WVB commission in a split with an enrollment firm. The commission split required to get the voluntary benefits sold and enrolled substantially reduces the broker’s financial reward for cross-selling WVB. Many brokers simply refuse to give up two-thirds or more of the commission and, as a result, won’t cross-sell voluntary benefits.

Deterred by these potential problems, the vast majority of brokers continue to resist WVB. Until producers embrace voluntary benefits and cross-sell their accounts, the bulk of employers — and especially large accounts — will remain out of play for WVB.
Thus, the challenge is to construct a WVB sales system that eliminates the breakdown points for the producer, removing the broker bottleneck. And here’s where it gets exciting: Eliminating the broker breakdown points gets rid of the breakdown points for the employer, as well.

The unique characteristics of the worksite/payroll-deduction voluntary benefits insurance market were derived from the experience of working that market. One-on-one employee meetings with enrollers at the workplace became the norm because that was — until now — the only consistently effective means of presenting (and selling) the products. Payroll deduction of premiums became the norm because that was — until now — the only viable solution for collecting premium.

In other words, the two defining characteristics of the worksite voluntary market were born of necessity during the formative years of worksite marketing. For more than 50 years, worksite marketing has been done this way because these were the only methods that worked.

For many brokers and employers, the intrusive nature of the WVB process has produced the breakdown point that killed the sale. Both the enrollment of WVB and the collection of premium have been necessarily intrusive processes in two ways:
1) The need for enrollers to enter the workplace and meet one-on-one with employees during work hours and
2) The requirement that the employer add a payroll slot and each month reconcile the bill and make payment (hopefully timely and accurate) to the carrier before the broker could get paid.

Not only is this process intrusive for the employer, it is highly complex, with a large number of moving parts. The inherently complex nature of the WVB process has led to many of the problems (both enrollment and billing) that continue to spook both employers and brokers.
Risky business

Beyond the usual vagaries of the sales process, the WVB implementation process is rife with risk and uncertainty that can threaten not only the broker’s BOR but also the agency’s cash flow.

These include: employers who deny or suddenly withdraw the necessary enroller access to employees; enrollers who oversell, pressure sell or otherwise act inappropriately; carrier billing errors; employers who delay or short premium payments.

Of course, over the years enterprising carriers, brokers and enrollment firms have worked to discover easier, less intrusive and less risky alternatives to one-on-one worksite enrollments and payroll deduction, but with little success. No other enrollment methodology (group meetings, direct mail, payroll stuffers, enrollment guides, online self-service enrollment, etc.) has produced participation and premium that approaches one-on-one enrollment meetings at the workplace. Every other method of collecting premium (i.e., direct bill, ACH bank draft) has proven inadequate and inferior to payroll deduction.

Because these obstacles to the growth of WVB sales have been structural — inherent in the very nature of the industry’s standard operating procedures — no real solutions were possible. Until now.

After more than 50 years of the status quo, revolutionary new technologies now can give a benefit agency full control of the WVB process to eliminate all three key breakdown points. With these new solutions, a brokerage finally can fully and effectively expand its WVB efforts into the commercial market with more and larger cases, higher profits and reliable cash flow.

A benefit firm can apply cutting-edge technologies to both the communication of voluntary benefits and the collection of premium to eliminate both enrollers in the workplace and payroll deduction of premiums, making the WVB process a far less complex and intrusive process. And this technology can as much as double the broker’s net commission revenue.

Taken together, these components can be a massive game changer, revolutionizing the enrolling and premium collection of voluntary benefits and eliminating the key breakdown points that kill WVB sales — beginning with payroll deduction for premium collection.
Next month’s column will reveal how innovative technology is automating premium collection, getting the employer out of the premium collection business and allowing you to eliminate the key breakdown point of payroll deduction — a deal-breaker in too many WVB sales.

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