Five Myths about
Group Voluntary
Products
by Steven Johnson
Assistant Vice President, Product Development
Colonial Life & Accident Insurance Company
[email protected]
Voluntary products are a big business—a $5.4 billion
business, to be exact.1 And while more and more
brokers have come to know voluntary benefits, group
products tend to get the lion’s share of attention.
That’s because group products are easy to understand,
easy to implement and more familiar to brokers. But
that doesn’t mean they’re always the best option.
If you’re new to voluntary, don’t fall victim to some
of the myths that exist about group products. Get
to know the benefits of both group and individual
voluntary benefits so you can make the best decision
for your clients.
How many have you fallen for?
Myth 1: Group products are always best for large accounts.
Though group products are typically sold in accounts with 100 or more employees, individual products can
also work well in large accounts. In situations where employers want to offer their employees more flexibility
and choice, individual products fit the bill. Sometimes, it’s even best to offer both types of products within an
account. (You can’t offer group and individual versions of the same product in an account, however.)
Myth 2: Group products provide a higher income stream than individual products.
There’s certainly money to be made with group products, but the “stickiness” of individual products
makes for a long-lasting revenue stream. Though first-year commissions can be higher on group products,
don’t overlook the benefits of renewal income from individual products. Individual products tend to provide
better persistency. And because they stay on the books longer, individual products can yield greater longterm revenue than group products. Individual products are also portable, which means a continuing revenue
stream for you even if employees leave or change jobs. Group products don’t always offer portability.
April 2013
Health Insurance Underwriter
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Get to Know Individual and Group Products
Advantages
Disadvantages
Individual
Voluntary
Products
Employee-owned
Employer-owned
Portable
Guaranteed renewable in most states
No participation requirements
No account-level rate increases
Typically stricter underwriting
Typically higher priced than group products
Limited rate flexibility
Group Voluntary
Products
Employer-owned
More flexible underwriting than
individual products
More flexible rates than individual
products
Group-level rate increases
Ported or converted at higher rates
Minimum participation requirements
common
Myth 3: Group products are more flexible than individual products.
Not so fast. Individual products offer employees more choice in plan design, which helps them select the product that
best suits their needs. This option can be especially appealing to a company that has a wide range of benefit needs due to
a diverse workforce. And sometimes participation requirements can be challenging with group products, especially when
multiple products are being offered in an account. In these instances, individual products can provide a solution since
they typically have lower or no participation requirements.
Myth 4: The only way to get guaranteed issue is with group products.
Nope. You’ll find guaranteed-issue underwriting in both group and individual products. Many individual products
offer a variety of underwriting levels that can include standard guaranteed issue and post-enrollment guaranteed issue.
So don’t immediately assume you’ll only find guaranteed issue with a group product.
Myth 5: Group products are best for accounts with multiple locations.
Not necessarily true. When an account has multiple locations in the same state, individual products can work
beautifully, offering employees more features and more rate stability. Don’t assume because an account is large or has
more than one location that group products are always best. It’s possible that multiple locations represent a very diverse
workforce with a wide range of benefit needs. In those instances, individual products make perfect sense.
When looking for a voluntary benefits partner, select one with a complete portfolio of products, both group and
individual. That way, you can weigh the pros and cons for your clients. In addition, you’ll be more competitive by
offering a wider range of solutions and better able to meet your clients’ diverse needs. Some other important points to
consider when selecting a voluntary partner:
• Expertise in benefits communication and enrollment. A top voluntary benefits provider can meet one-to-one with
employees to make sure they understand their benefits plan and the choices made available to them. This type of
personal benefits counseling can increase employee participation during an enrollment. A study by Eastbridge
Consulting Group found the average voluntary benefits participation rate for face-to-face enrollments is 46% higher
than the participation rate for self-enrollment.2 That translates to 46% higher commissions.
• Commitment to customer service. Choose a carrier that excels in customer service. Ask about a company’s claimspaying track record, billing services and support for policyholders. And if the company participates in any customersatisfaction surveys, ask if they’re conducted by an objective third party and check out the results.
Don’t get caught up in myths of the trade. Both group and individual voluntary products have a place in your
portfolio. Don’t let the myths that exist keep you from missing out on increased revenue and client satisfaction. HIU
1 Eastbridge Consulting Group Inc., 2012.
2 Eastbridge Consulting Group Inc., “Voluntary Participation Rates,” Spotlight Report, August 2010.
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Health Insurance Underwriter
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