Top Trends in Voluntary Benefits

&

Simple Selling Tips

Mark Parabicoli Erin Barfels AVP & Managing Director Chief Human Resources Officer

Auto & Home Voluntary Benefits ARAG Legal & Financial Solutions

Agenda

3

Proprietary - Trade Secret (Competitively Sensitive Information) Subject to Confidentiality Agreements DO NOT COPY OR DISTRIBUTE

• Overview of Current Marketplace • Value of Voluntary Products • 2013 Employer & Employee Survey

• Top HR concerns & How Voluntary Supports These

• What employees desire versus Employer Perceptions

• Most Popular & Emerging Voluntary Products • Generational Differences • Communication & Payroll Effects

• Impact on Revenue - A Case Study • Choosing a ‘Turnkey’ Partner • Simple Steps to Selling Voluntary

A Changing Marketplace

Crisis?

• Diminishing healthcare commissions - Possibility that commission levels cut 2/ 3rds or more

• Minimum medical loss ratios leaving slimmer margins for broker commissions

• Public vs. Private Exchanges

• Evolution of Broker business model - Strategic Advisor

4

…or Opportunity?

• Healthcare costs have increased by 40% in

the past six years forcing employers to

seek voluntary offerings*

• Employees want more benefits options –

59% of workers say a company’s benefits

package is influential to attract and retain

talented employees*

• 58% of employers say voluntary benefits

are a significant benefits strategy, up

from 32% in 2010***

* 2012 AonHewitt Benefits Study

** 2011 Aflac Benefits Survey

*** 11th Annual Metlife Benefit Sutdy

Why Voluntary ?

Voluntary Benefits

Relevancy in a changing Market

Diversify Revenue Streams

Strategic Benefits

Consultant

Client Needs

Client Retention

Differentiation

“Voluntary is no longer a quaint sideline; it has become one of

the largest and fastest grow ing segments of the benefit s business.”

- Gil Low erre, Eastbridge Consult ing

January 2011 Ed. – Benefit s Selling Magaz ine

6

Extra, Extra…

2013 Survey Parameters

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Methodology

Design/ Method : Online survey

Sample

Sample Size: 602 interviews

Qualifications: US resident

adults age 25 or older who are

employed full time in an

organization with 10 or more

employees in the US. Employer must

offer some type of voluntary benefits,

but respondents were not required to

be enrolled in any of them. All

industries.

Field Dates: February 2013

Methodology

Design/ Method : Online survey

Sample

Sample Size: 313 interviews

Qualifications:

The majority of HR employers

managed employers ranging in size

from 250-5,000 employees. All

industries.

On average, the HR employers have

about 20 years experience in

managing benefits.

Field Dates: January 2013

Employer – B to B Employee – B to C

2013 Survey Executive Summary

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• Introducing a suite of Voluntary Benefit program aligns with employers top objectives of

controlling costs and attracting/ retaining quality employees

•There is evidence of increased employee loyalty and satisfaction

82% of employees with voluntary report being satisfied vs. 52% w/ out voluntary*

99% of employers feel a strong sense of loyalty towards employees, while only 62%

of employees feel the same about their employer

• However, most employers currently have limited voluntary benefit offerings because they are

not in sync with what their employees want

•There is a clear gap in perception between employers and employees on the importance of

the Voluntary Benefits offering

• Employers offer a variety of d ifferent voluntary benefits, with life insurance and short/ long -

term disability being the most common

• Employers continue to increase the number of Voluntary Benefits, and indicate they

plan to offer more in the fu ture

• Effective Communications & Payroll Deduction

* Unum Buyers Study 2011

HR Importance of Job Tasks

9

Voluntary benefit s program w as considered significant ly less important than the top priorit ies of controlling cost s and at t ract ing/retaining employees

Rated importance of priorities by HR managers (out of 10-point scale)

4.2

8.6

8.6

9.0

9.4

9.6

9.7

0 2 4 6 8 10 12

Voluntary employee benefits program

Employee Training & Development

Developing Leaders

Employee Engagement

Core Benefit Programs

Attract/Retain Employees

Controlling Costs

Employee vs. Employer Priority Rankings

There are significant gaps betw een employer percept ion and employee priorit ies, most notably employees find ret irement benefit s and choice of voluntary benefit s to be of more importance vs. employers’ percept ions.

Factors influencing employee loyalty

0

10

20

30

40

50

60

70

80

90

100

Salary Health Benefits Retirement

benefits

Choice of

Voluntary

Benefits

Advancement

Opportunities

Company culture% o

f su

rve

ye

d (

wh

o i

nd

ica

ted

fac

tor

wa

s i

mp

ort

an

t in

infl

ue

nc

ing

em

plo

ye

e l

oy

alt

y)

Valued by employees Employer's perceived value by employee

A Gap in Perception Exists

49% of employees ind icated that a choice of voluntary

benefits was an important factor influencing their

loyalty

Only 20% of employers perceived a choice of voluntary

benefits influenced loyalty

And only 27% p lan to increase their voluntary benefit

offerings in the next two years

An opportunity exist s to bet ter align benefit s st rategies

w ith employees’ benefit s priorit ies

Current Voluntary Benefit Offerings

There is an opportunity for most employers to enrich their voluntary benefit s program to sat isfy their employees needs, w ith most companies moving tow ards offering betw een four and nine.

Number of voluntary benefits currently offered

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

0 1-3 4-6 7-9 10 or more

2009 2011 2013

Current and planned Voluntary Benefit Offerings There is a wide variety in the voluntary benefits that employers are currently offering; however, consideration levels to add voluntary products continues to remain low.

% employers who currently offer

Disability (short and long term) 77%

Dental 71%

Vision 69%

Life Insurance 61%

Critical Illness 47%

Long Term Care 36%

Legal Plans 25%

Hospital Indemnity 19%

Supplemental Medical 19%

Auto and Home Insurance 15%

Pet Insurance 9%

% employers who consider

adding

Long-term care 34%

Legal Plans 21%

Supplemental Medical 20%

Critical Illness 19%

Pet Insurance 17%

Auto and Home Insurance 16%

Life Insurance 12%

Hospital Indemnity 11%

Vision 10%

Disability (short and long term) 5%

Dental 2%

Gen X and Gen Y employees value many voluntary benefit types more highly than do Young or Older Boomers.

Generational Differences

Generational Groups

“Gen Y” – ages 25 to 31

“Gen X” – ages 32 to 47

“Young Boomers” – ages 48 to 56

“Older Boomers” – ages 57 to 66

“Older” – age 67 or older

Extremely valuable Very valuable Somewhat valuable

Voluntary Benefits Communications

Communication Method

(n=260)

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About 90% of employers communicate Voluntary Benefits at the onset of employment or during open enrollment meetings, but there needs to be awareness that some voluntary products can be offered throughout the year…

Proprietary - Trade Secret (Competitively Sensitive Information)

42%

41%

11%

6%

Less than 2 times

per year

About 2 times per

year

About 4 times per

year

More than 4 times

per year

Communication Frequency

(n=260)

91%

90%

57%

41%

21%

4%

At the onset of employment through a

new hire benefits package

At open enrollment thru a benefits

package

Having an onsite information session

regarding Voluntary Benefits

Sending an email about Voluntary

Benefits

Sending a notice in the mail about

Voluntary Benefits

Other

On average, employers are communicating Voluntary Benefits about 1 to 2 times per year.

Impact of Payroll Deduction

Key Consumer Benefit s:

- No down payment

- No installment fees

- Easy budgeting

Technology Overv iew

- Complete flexibility to

Employer’s payroll calendar

- Encrypted file transmissions

- Seamless ability to switch

employee to direct bill at home

in the event of disability, LOA,

termination, etc.

- Source: Internal Liberty Mutual data, February 2012

Broker Case Study – Voluntary Example

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Broker

Relationship Effective

# Clients

Total Eligibles

Total Policies

Participation %

2012 Compensation

A

2012

1

2,100

118

5.6%

$3,815

B

2000

11

39,300

4,625

11.8%

$447,630

Voluntary (Auto & Home) is not a ‘Get Rich Quick’ model; however, if you start

building now you can reap the rewards in just a few years…

“Folks, adding auto and home is simply a no brainer” Quote provided by a national broker as quoted during an educational session at a 2009 National Broker Conference

Choosing the Right Vendor is key…

A ‘Turnkey’ Vendor will handle/ provide:

• All marketing and associated costs

• Entire enrollment process

• Multi-channel d istribution including Call Centers, Intranet and

Local Sales Offices

• Post-enrollment employee service

• Dedicated Account Management duties

• Policy maintenance and claims transactions

• Provides detailed reporting on program results

Selling Tips

5 Simple Steps

1. Identify existing & prospected client base that could benefit from

Voluntary Products that satisfy their employees needs

2. Identify & Obtain any appropriate license(s)

3. Learn and Introduce appropriate program(s) at next stewardship

meeting using an Executive Summary sell sheet

4. Engage Voluntary carrier(s) to assist with the close

5. Develop and implement communication plan

Result…

Watch your client retent ion and revenue rise 19

Thank you

Mark Parabicoli Erin Barfels AVP & Managing Director Chief Human Resources

Officer

Auto & Home Voluntary Benefits ARAG Legal & Financial

Solutions

Mark.parabicoli@libertymutual.com erin.barfels@araggroup.com

617-654-4508 515-237-0275