Page 3 Profile
Lori High
Employee benefits in today's economy
by Carolyn S. Ellis
Costs for employee benefits have risen steadily in recent years, bringing turmoil to the market and increasing competition among benefits brokers and consultants. The recent economic downturn has found many employers scrambling to provide much-needed benefits while containing costs. Education and communication are crucial so employees can understand fully the benefits they have, what they need, and why changes have been necessary.
Prudential, a leading provider of group life and disability, recently released the report, "A New Day in Employee Benefits," based on interviews with plan sponsors and brokers/consultants in 2009. The report highlights what is happening with benefits budgets, cost containment, and cost management strategies. While most respondents think their companies will do better in 2010, they aren't so optimistic that their benefits budgets will increase. We spoke with Lori High, president of Prudential's Group Insurance.
L&HA: The title chosen for Prudential's 2009 report, "A New Day in Employee Benefits," sounds hopeful. Is that the intent?
LH: Our perspective is positive, although employers have had a difficult year. They are looking at employee benefits and asking themselves what can they do for their employees that is positive. Most of them are coming to the conversation with a fair amount of energy and even excitement about what they can influence. It's created an opportunity.
L&HA: After many years of annual increases in benefits budgets, "A New Day" shows that in 2009 many companies are holding benefits level or decreasing them. How is Prudential responding?
LH: Employers are using their buying power for additional benefits their employees can purchase at work. These voluntary benefits are price-competitive for employees, and they have become a big part of our strategy. In our business, life insurance and disability, benefits tend to be based on salary amounts. Salaries are salaries, but we can provide additional services within those benefits. These might include EAP (Employee Assistance Program) services as part of disability, beneficiary counseling as part of life insurance, or other add-on services.
L&HA: What size employers are we talking about?
LH: We divide our business into three segments. Our national accounts are employers with over 10,000 employees; most of our business is in the national account arena. Our middle-market customers are those with 1,000 to 10,000 employees, and our small businesses are those with fewer than 1,000 employees. A smaller employer is much more interested in the add-on services than a large, national account customer.
L&HA: How important are voluntary benefits today?
LH: Worksite marketing has become very important. We find that for life insurance and disability employers are keeping their benefits level. If they have covered one or two times salary, they will continue to do that. Rather than increase their benefit, they may now offer an employee the opportunity to buy another eight times salary at work, and they negotiate that on their behalf. Through worksite marketing, we are telling the benefits of life insurance to employees, and they are paying the premium on that additional amount if they want it. That can be true on disability benefits as well. Employers are very good negotiators on behalf of their employees.
L&HA: Is this a place for benefits brokers and consultants to step in, and does this account for the increase in their business cited in "A New Day?"
LH: As employers are challenged either to use their dollars more wisely or cut costs, they are looking to experts in the broker and consultant worlds to provide that more agnostic viewpoint of the business and the carriers. That's why in our report brokers and consultants say 2009 wasn't a bad year for them. There's probably not an employer out there that multiple brokers and consultants are not calling on. It's a relationship-driven business, but it's an expertise business as well. Our business has always been fiercely competitive, and it continues to be. With so many carriers, prices stay very realistic.
L&HA: For many, the workplace has become the best and only source for products that provide financial protection, and yet many employers have to reduce benefits staffing. How can Prudential and others fill this gap?
LH: We consider it part of our responsibility to educate. There has been a reduction in corporate staff in non-revenue producing areas including Human Resources, so we provide services to supplement what HR used to do. In the past we only sold to an employer, and we considered our job was done. Now we look at what we consider a second sale, to the employee.
L&HA: What are the ways employees learn about their benefits?
LH: Employers use the enrollment period as an education process. We try to communicate to employees based on their demographics: are they a young family, a retired family, or a single parent. Different age groups want communication in different ways. Our staff goes to the worksite; we offer group meetings and webinars. We communicate through mail at home. A website makes possible an evening look so a spouse can be involved in the decision. Employers decide how robust they want that communication.
This is more of a social comment, but I do think that employees are inadequately covered in many of these things, like life and disability. As carriers we are challenged every day to educate and get people to focus on this. If someone has one or two times life insurance and something unfortunate happens, that's not enough if they have young children. There's a social responsibility to get employees to look at their needs.
Most employees make their selections for medical, dental, vision, and health spending accounts from a large benefits menu at the same time. It's hard to peel it all apart in a two-week period. We are encouraging employers to look at some of these things not around when you are doing the medical selection.
L&HA: Does it boil down to technology?
LH: Today we're all working people who don't have any time during the day to do anything but our jobs. We have to make it easy for people to come in, be educated through us, and make their decision. Employees can fill out their information online at night from the comfort of their homes, answer the health questionnaires, and get approved right then while they are on the web, without additional follow-up. It's all about, "I need to do it on my own time, and I need not to have to come back to this. Once I do it, I need to be done." It's all about technology.
L&HA: Do you feel Prudential is leading the curve?
LH: In voluntary benefits we are a leader, and we think our technology spend on support is one of the higher ones. We intend to stay a leader because technology spends in communicating with employees is the future, and the future is here.
L&HA: There is some concern that American workers do not have the retirement savings they will need. If 401ks are not attracting savings sufficient for retirement and defined benefit plans are too strict, is there anything new on the horizon?
LH: I agree many people are short on retirement savings. To help with this, we have a refresh of a product very popular in the late 1980s and early 1990s, and that is group universal life. It's life insurance that allows you to put funds in a side-fund that are pretty liquid and can be taken out. They grow at a tax-deferred rate.
L&HA: How do you see current conditions playing into the future?
LH: In times of stress people evaluate their situations and make decisions. So far this year we have seen an increase with our employer groups that do a lot of communication. We are looking at how the social media like facebook, twitter, and myspace affect the workforce population because the younger generation needs to communicate differently. As employers' budgets are compressed, technology can help us to deliver the value and a better end-product. In "A New Day," plan sponsors and brokers both look to 2010 to be a better year.