By Anita Recchio
Sometimes it’s not what you do that’s risky, but how you do it. Driving a car is not very risky if you obey the traffic rules and wear a seat belt, but if you drive too fast while texting, then that adds a lot of risk. The same is true for enrolling voluntary products. Through a series of three case study examples, you will see how the voluntary enrollment method affects the risk.
Case Study #1: One-on-One
According to a recent Benefits Selling/Eastbridge Voluntary broker survey, one-on-one meetings with an enroller are the most common method of enrolling voluntary products.
Employer: Midwest hospital with 1,600 eligible employees.
Voluntary Products Offered: Individual Accident, Cancer, Disability, Term Life and Universal Life.
Enrollment Periods: Annually each fall in 2011, 2012 and 2013.
Enrollment Strategy: The carrier’s local sales office provided an on-site enrollment coordinator that worked with the hospital’s human resources department to schedule mandatory one-on-one meetings for core and voluntary benefits during each annual open enrollment. A team of enrollers worked in shifts starting as early as 7:00 a.m. to accommodate employee work schedules for the hospital’s 24/7 work crews. Employees were allowed to purchase voluntary benefits at each subsequent annual enrollment, even if they had not purchased any previously. New hires were enrolled monthly during new hire orientation which included a core benefit overview by HR staff and a voluntary benefit overview by the sales representative.
The key risk and participation results are below:
- On average, 400 (25 percent) hospital employees purchased voluntary products each year.
- Participating employees purchased an average of two voluntary products.
- The average monthly premium for the voluntary products per participating employee was just under $80.
- Claims experience is running 10 percent better than expected and persistency is meeting expectations.
Potential pitfalls when analyzing participation results, regardless of the enrollment method:
- Accuracy in the number of eligible employees. Is it updated as the employer size changes?
- Method of voluntary enrollment. Can you easily distinguish how a policy or certificate was enrolled? One-on-one, call center, web or group meeting?
Case Study #2: Call Center
Employer: Audiologists with 400 eligible employees spread across 38 states in numerous offices.
Voluntary Products Offered: Group Accident, Group Term Life and Individual Short Term Disability were offered guaranteed issue. Individual Cancer required simplified issue underwriting with cancer history questions.
Enrollment Period: Two-week period in Feb. 2013.
Enrollment Strategy: Employees were spread across a large geographic region with only a couple of employees at each office. Therefore, face-to-face benefits enrollment was not feasible.
Employees were very motivated to call the call center because the enrollment included mandatory core benefits enrollment for the employer-sponsored medical plan. Call center staffers were licensed to sell insurance in all states to accommodate the geographical spread.
The key voluntary benefit risk and participation results are below.
- 45.5 percent of employees purchased voluntary products during the enrollment period.
- Participating employees purchased an average of 1.7 voluntary products each.
- The average monthly premium per participating employee was just under $60.
- Claims and persistency experience are running as expected.
Some observations from this case study:
Understanding call center capacity is important. On average, a call center staffer can handle about 20 calls per day. A large number of eligible employees may dictate different enrollment dates for groups of employees. This ensures that each employee is provided adequate time and information to make an informed voluntary benefit purchasing decision.
When compared to simplified issue products with yes/no health questions, guaranteed issue products may increase enroller efficiency, but may reduce the average premium per employee sale. This occurs because guaranteed issue coverage levels are less than simplified issue levels resulting in lower premium for the guaranteed issue product. If this occurs, it could put pressure on profitability as fixed per certificate expenses become a larger portion of the premium.
Case Study #3: Online Self Service Enrollment
Employer: Refrigeration Warehousing with 500 eligible employees in six locations across the Southeast.
Voluntary Products Offered: Group Accident, Hospital Indemnity and Critical Illness were offered guaranteed issue. Individual Cancer required simplified issue underwriting with cancer history questions.
Enrollment Period: Fall 2013.
Enrollment Strategy: Employees were emailed a link to the enrollment vendor’s product hosting site. The site was open for voluntary benefits enrollment all throughout the month-long open enrollment period. The product hosting site could only accommodate guaranteed issue product offerings, so enrolling in the Individual Cancer product required agent follow-up. The Individual Cancer product was shown on the product hosting site with a “yes” or “no” interest indication checkbox for the employee. A “yes” response generated a call center agent follow-up to the employee.
The key risk and participation results are below.
- 46.6 percent of employees purchased voluntary products.
- Participating employees purchased an average of 2.1 voluntary products each.
- The average monthly premium per participating employee was $55.
- Lapse rates are 45 percent higher than expected.
Some observations from this case study:
The high lapse rates in a self service enrollment case could be driven by buyer’s remorse and not understanding the value of voluntary benefits. The following questions should be considered when analyzing persistency drivers:
- What was the employee communication strategy prior to the enrollment? A poorly executed communication strategy does not serve well to educate employees in the value of voluntary benefits.
- What is the company’s employee turnover rate? High turnover increases lapse rates for payroll-deducted products.
The enrollment method drives participation which, in turn, impacts the spread of risk and the claims experience. A well-executed employee communication and education strategy positively impacts an employee’s understanding of voluntary benefits which can improve persistency. The underwriting levels supported by the enrollment platform affect the average premium which impacts the expense ratio and profitability. Pricing actuaries should know the enrollment methods being used when formulating pricing assumptions and in understanding experience results.
So fasten your seatbelts and don’t let voluntary enrollment methods take you for a ride.
Anita Recchio, FSA, MAAA, is assistant vice president and pricing actuary at Colonial Life, a market leader in providing financial protection benefits at the workplace. She can be reached at email@example.com.