Reasons for Increase in Popularity | VOLUNTARY BENEFITS

A major area of growth for insurance companies in recent years has been through the marketing of voluntary benefits for employees. These products—which can be either group insurance or individual insurance—vary considerably among insurance companies. Even the names used to describe these products are not uniform, with terminology like payroll deduction plans and worksite marketing often being used. For purposes, voluntary benefits will be defined as products provided by the employer that the employee purchases and for which he or she pays 100 percent of the premium.

It is difficult to measure the precise extent of voluntary benefits because statistics are often included with other group or individual products sold by a company. However, surveys indicate that more than half of the employers with 20 to 100 employees make voluntary benefit products available. This figure increases to 90 percent for employers with 1,000 or more employees. It is also estimated that more than half of the employers that provide voluntary benefit plans make at least three products available.

Reasons for Increase in Popularity

Voluntary benefits have increased in popularity in recent years, primarily because of employers' attempts to contain the rising costs of employee benefits. For example, an employer may determine that it cannot afford to institute a new group insurance program and pay any portion of the cost of coverage. Even though employees would naturally like to have the employer share in the cost, the ease of payroll deduction and more liberal underwriting still make a payroll deduction plan attractive to them. In addition, the portability of the coverage is often appealing.

Voluntary benefits have also grown in popularity as a method of providing individual insurance coverage to supplement the benefits provided under a group plan financed by the employer. For example, an employer may pay for a group long-term disability income plan that provides benefits equal to 50 percent of salary. Voluntary benefits then allow employees to purchase additional protection. Or the employer may pay for short-term disability income protection only and make long-term protection available under a voluntary benefit plan.

Changes in demographics make it increasingly difficult for employers to offer an overall benefit plan that meets the needs of all employees. One alternative is to offer a cafeteria plan. Another option is to provide a basic core of benefits that all employees want. Additional benefits, such as long-term care insurance, can be offered on a voluntary basis.

Another reason for the increase in the popularity of voluntary benefits is the increased availability of products. More insurance companies have entered the market to obtain additional revenue at a time when revenue from other sources has been decreasing. As is often the case, this has sometimes resulted in lower costs and more liberal underwriting. However, before entering the voluntary benefits market, agents should be sure they are dealing with a stable company whose market line will stay current with the changing demands of the marketplace.