The big opportunities for brokers in small business

The big opportunities for

brokers in small business

Table of contents

Executive summary ... 1

Small businesses underserved, facing challenges... 2

Billion-dollar opportunity awaits ... 3

Steps to success in small business ... 6

Step 1: Prepare to work with business owners ... 6

Step 2: Have the heart of a teacher ... 6

Step 3: Pick the right benefits partner ... 7

Conclusion ... 9

Executive summary

It’s been said time and time again: Small businesses drive the American economy. But many owners of small businesses lack the knowledge and expertise to deliver high-quality benefits to their employees, which number in the millions. That creates an excellent opportunity for the country’s insurance brokers to market valuable insurance products to small employers.

Voluntary benefits at small businesses already account for more than $1.5 billion in annual sales, and many business owners plan to add more voluntary products to their portfolio.1

Many don’t realize the value a benefits professional can add to their business, their employees and their bottom line.

And small business owners are looking for help. Millions of small business owners haven’t been approached by brokers or producers in the past year. By understanding the challenges and issues facing small business owners, and reaching out to them as consultants and partners, sales professionals can reap huge benefits in the small employer market.

Small businesses underserved,

facing challenges

Small employers (with 99 or fewer employees) employ more than 39 million people, according to the U.S. Census Bureau.2 _{But less than half}

of businesses with fewer than 100 employees offer insurance benefits to their employees. Those that do tend to offer fewer products.3

Many business owners wrongly believe they aren’t big enough to offer benefits. Others don’t understand how voluntary benefits can provide their employees with important financial protection without costing the business valuable resources it needs to survive.

Employers must consider a number of factors when deciding whether to offer benefits and what carrier to choose. More than 40 percent of small businesses are concerned about rising health care costs, the cost of insurance and economic uncertainty, according to a report from LIMRA.4

Rising health care costs mean business owners are having to make tough decisions about whether to send employees to a health insurance exchange, ask employees to cover more of the burden or raise

deductibles (exposing workers to a bigger financial gap). Each of these could impact employee job satisfaction or loyalty in a negative way. Brokers who choose a strong benefits partner can help educate business owners on the power of voluntary benefits and what they can mean to the bottom line. More than 70 percent of employees say understanding their benefits is “very important,” according to Colonial Life research.5 _{Colonial Life research also finds that employees}

who understand their benefits are more likely to report satisfaction with them, and small business workers who are satisfied with their benefits are more likely to report greater job satisfaction and loyalty.

With more small business

owners looking for the

counsel of experienced and

knowledgeable advisors,

opportunities will continue

Billion-dollar opportunities

await in voluntary

More than 40 percent of the country’s businesses with 10 or more employees sponsor no employee-paid voluntary benefits.6 _{But many are looking to add voluntary coverage}

in the coming years. That creates a huge opportunity for the taking.

Voluntary benefits at small companies are already a billion-dollar business. Voluntary sales to accounts with 100 or fewer employees totaled $1.56 billion in annualized sales premium in 2013, with $811 million coming from firms between 26 and 99 employees, according to Eastbridge Consulting Group.7

Key demographics of

small businesses

The number of businesses owned by people belonging to racial or ethic minority groups has grown significantly faster than the

general business population. The number of female-owned small firms increased at double the rate of male-owned

firms from 1997 to 2007. They tend to be smaller and have lower revenue, on average. And they are more likely

to be organized as sole proprietorships.

Voluntary sales to accounts with

100 or fewer employees totaled

$1.56 billion in annualized sales premium

in 2013, with $811 million coming

from firms between 26 and 99

employees, according to

Eastbridge Consulting Group.

78

%

Small World: Trends in the U.S. Small Business Market, LIMRA, 2013.

24

%

14

%

Small employers plan to add

voluntary benefits

Among small employers, the most popular voluntary benefits are dental, accident and cancer coverage. Vision, short-term disability, critical illness, accidental death and dismemberment, long-term disability and life insurance are close behind.8

And opportunities abound as businesses with fewer than 100 employees say they are looking to add voluntary benefits in the workplace in the coming years. Some 20 percent of small employers (50 to 100 employees) said they were likely to offer a new voluntary benefit, and 21 percent said they would likely move a current benefit to voluntary. For very small employers (10 to 49 employees), the numbers were 11 and 15 percent, respectively, according to Eastbridge Consulting Group.9

Employers surveyed say they offer voluntary benefits to employees to achieve cost savings to the company (as compared to having to pay for these benefits), to respond to employee interest in the products, to improve worker morale and to help recruit and retain employees.10

Voluntary benefit

availability

Businesses with 10-99 employees

23

%

24

%

19

%

n _{Accidental death &}

dismemberment n _{Critical illness} n _Short-term disability n Vision

17

%

18

%

Keeping Up With the Times, Voluntary Benefits Remain a Fixture in an Ever-Changing Landscape, LIMRA, 2015.

Small employers looking for help

Small employers know they need help, and brokers are poised to bridge that gap and find success in helping smaller firms.

The vast majority (94 percent) of business owners with fewer than 100 employees say the need for advisors stays the same or is increasing, according to LIMRA. But only half of these firms currently use advisors for business or personal needs.11

With more small business owners looking for the counsel of experienced and knowledgeable advisors, opportunities will continue to grow for brokers.

“Helping both employers and employees understand the options available within and outside the exchanges will be a new way for advisors to grow their business,” says Mary Boyce, associate analyst, LIMRA Insurance Research. Two-thirds of small businesses without benefits have not been approached by a broker or advisor in the past year.12 _{That leaves millions of small businesses without}

someone they can connect with.

Despite the variety of valuable benefits employers receive by working with advisors, 40 percent of small employers report being “neutral” when it comes to their advisors. Those who have stopped working with advisors say it’s because they were either too expensive, did not provide necessary counseling, did not provide sufficient help to employees or did not provide in-depth input on benefits administration.13

Employers who work with advisors

report receiving a variety of

advice, services and help from

a professional counselor.

Reviewing plans to ensure competitive rates and current services

Helping control costs of employee benefits Staying informed of governmental regulations Assisting with carrier selection

Reviewing renewal rate adjustment to ensure competitiveness

Step 1: Prepare to work with business owners

At many small businesses, benefits decisions aren’t made by human resource professionals or benefits administrators. In these instances, the business owner is often the one sales professionals must work with. In fact, among small businesses, the owner or president exerts “a lot of influence” in 71 percent of the benefits decisions, according to LIMRA. Human resources staff members are fourth on the list, falling also behind the head of finance and brokers/agents/advisors.14

To be successful, brokers should tailor their approach to consider a lack of benefits expertise and the limited amount of time the business owner will be willing or able to spend discussing benefits.

Step 2: Have the heart of a teacher

No matter who the main decision-maker is at a small business, brokers may find their biggest job will be to educate. Among the reasons small businesses don’t offer benefits are the misconception that offering benefits is costly, the idea they don’t have enough employees or the opinion that employees prefer higher take-home pay over benefits.15

Those misperceptions can be exacerbated by the fact that many business decision-makers are unaware of voluntary benefits and how they can be used. They don’t realize that valuable benefits can be offered to employees at no direct cost to the employer.

Small business owners do realize they need help, however. More than 50 percent of business decision-makers say they look to agents, brokers and consultants for both information (52 percent) and advice (59 percent) about benefits. Following agents and brokers as a resource are carriers, peer companies and professional associations.16

Steps to success in small business

Brokers can better understand potential clients in the small business

arena, connect in a meaningful way with them and provide them with

optimal benefits options by following these steps:

Step 3: Pick the right benefits partner

Choosing the right benefits partner is key for brokers to take advantage of the great opportunities for voluntary products in the small-case market. While the products and services must be right for the employers and the employees, brokers must also consider competitive compensation schedules, quality voluntary benefits unaffected by health care reform, and turnkey benefits counseling and enrollment services.

Advisors should also keep in mind how easy it is for them to enter the voluntary benefits market. No training or certification is required if partnering with a voluntary benefits partner who can handle much of the work for them.

Here are some of the capabilities brokers should look

for in a quality voluntary benefits partner:

Flexible enrollment capabilities

n Maximum flexibility with enrollment systems (1-to-1, group meetings, call center, co-browse and self-enroll)

n Core and/or voluntary products

n Support for all case sizes (3+ lives)

n Single and multi-site/multi-state

n Local benefit counselors who are part of a national network

n Dedicated in-house communication team for large-case management

n Data collection and daily enrollment reporting

n Long-term commitment – first-year enrollments, new hires and annual re-enrollments

n Additional enrollment options, including auto enroll, census enroll and express enroll; private exchanges through strategic partnerships; and plug-in or product hosting arrangements through benefits administration system partnerships

of business

decision-makers

say they look to

agents, brokers and

consultants for

both information

and advice about

Maximum revenue

By partnering with a strong, high-quality benefits provider, brokers can find additional revenue with competitive commissions, bonus programs, management tools to help maximize opportunities and no investments required in outside or in-house enrollment or employee communications capabilities.

1-to-1 benefits counseling

A strong benefits partner can help counsel small business employees by meeting with every employee, educating them on the overall benefits package and improving their understanding and appreciation of benefits. This benefits counseling model has been shown it can drive total voluntary enrollment participation and yields up to 46 percent more revenue.17

Strong counselors improve the financial success of brokers by driving participation through consumer-focused pre-enrollment solutions and by listening and proposing needs-based product solutions. Picking a partner that develops products and services that are simple, modern and personal can help employers manage a high-morale, cost-conscious workplace; help employees value their jobs and their benefits; and help brokers manage a successful portfolio of accounts that are financially and personally rewarding.

Brokers who choose

a strong benefits

partner can help

educate business

owners on the

power of voluntary

benefits and what

they can mean to

Conclusion

As rising health care costs continue to put pressure on business owners to reduce the amount of benefits provided to employees, the need for voluntary benefits for employees continues to rise. This need only grows when discussing small businesses, where owners are working to control costs in every way possible.

Voluntary benefits can be a valuable way for employers to show employees their concern and to give employees the option of benefits they find important. There is already a large market for voluntary benefits and it’s growing. And business owners know they need help. This opens the door for brokers who are looking for additional revenue in the changing health care environment. By contacting owners of small businesses and having the heart of a consultant and teacher, brokers can make valuable in-roads into smaller markets. While the effort can seem exhausting, it doesn’t have to be – with a good partner.

Finding a strong benefits partner who will provide flexible enrollment capabilities, maximum revenues and 1-to-1 benefits counseling can alleviate much of the burden of selling to small businesses. At the same time, focusing some attention on smaller businesses can provide brokers with a diversified portfolio of clients and a steady income stream.

By contacting owners

of small businesses and

having the heart of a

consultant and teacher,

brokers can make

valuable in-roads into

smaller markets.

References

1 Voluntary and the Small Case Market, Eastbridge Consulting Group, November 2014.

2 Statistics of U.S. Businesses: Employment and Payroll Summary: 2012, U.S. Census Bureau, February 2015.

3 Small World: Trends in the U.S. Small Business Market, LIMRA, 2013. 4 Keeping Up With the Times, Voluntary Benefits Remain a Fixture in

an Ever-changing Landscape, LIMRA, 2015.

5 Colonial Life survey of 2,111 adults, conducted by Harris Interactive, February 2013.

6 Eastbridge, op. cit.

7 Voluntary and the Small Case Market, Eastbridge Consulting Group, November 2014.

8 LIMRA, Keeping Up, op. cit. 9 Eastbridge, op. cit.

10 LIMRA, Keeping Up, op. cit.

11 A Little Advice: How Small Businesses Use Advisors, LIMRA, 2013. 12 Ibid.

13 Ibid.

14 No Small Matter: How Small Businesses Make Decisions About Employee Benefits, LIMRA, 2013.

15 Ibid. 16 Ibid.

17 Colonial Life marketing brochure, “Your success is our priority.” Assume: 100-life account, 50 percent participation, $707 annual premium per person, 75 percent collected premium rate and Colonial Life product mix of 30 percent disability, 30 percent group hospital confinement indemnity and 40 percent universal life insurance. This is an estimate only. Results may vary based on actual performance levels and other factors.

About Colonial Life

Colonial Life & Accident Insurance Company is a market leader in providing financial protection benefits through the workplace, including disability, life, accident, cancer, critical illness and supplemental health insurance. Our benefits education, innovative enrollment technology and personal service support more than 80,000 businesses and organizations, representing nearly 3 million working Americans and their families. We help our customers design benefit programs to address their business needs. In one-to-one counseling sessions with employees, we offer simple, straightforward advice about the benefits they have and those they may need to fit their individual lifestyles and budgets.

Colonial Life’s 13,000 career agents work in one of the fastest-growing segments of the insurance industry. The company has received national recognition for excellent training programs, and annually receives top recognition in a national awards program as brokers’ partner of choice in the workplace benefits market.

Colonial Life is a business unit of Unum, a world leader in employee benefits, which has been recognized as one of Forbes’ 150 Most Reputable Companies, the Best Place to Work in Insurance, Best Employers for Healthy Lifestyles and Newsweek’s Green Company listing. Colonial Life has been named one of the Best Places to Work in South Carolina. Its national headquarters building in Columbia, S.C., has earned the Environmental Protection Agency’s ENERGY STAR® certification.