Advisors finding new success with cross-selling opportunities
by Deborah Sternberg
Ms. Sternberg is President and a principal of Starmount Life Insurance Company and AlwaysCare Benefits. She oversees the company's individual life and health insurance division, including operations and new business development, as well as group marketing and corporate communications. Connect with her by e-mail: [email protected]
Imagine all of the skeptical looks if five years ago, you told a room full of employee benefit brokers that at least half of them would soon start selling individual dental and vision insurance plans.
A few brokers might have wisely conceded that the popular rise of voluntary benefits1 opens more cross-selling possibilities. But, in 2010, independent group brokers would state that individual dental plans require too much work for small commissions with a limited market.
But, that was five years ago. Within the last few years, multiple factors have drastically altered the insurance market, including the method in which consumers purchase insurance. Rising healthcare costs and recent federal healthcare reform are causing more employers to shift costs back to the employee, as well as expand the individual market.
With recent market changes, more brokers are finding success with cross-selling supplemental coverage. However, the most surprising phenomenon may be the significant sales increase of individual dental plans with the steady, albeit slower, growth of group dental coverage.
Online distribution, retiring baby boomers and effects of healthcare reform are some of the components contributing to the recent prosperity in both the individual and group dental markets. This explanation may also provide insight to why previously skeptical brokers are now seeing an opportunity with individual dental and vision plans.
Technology and online distribution
One contributing factor to this “phenomenon” includes expanding distribution channels to online outlets. Without debate, the insurance industry has been slow to join the digital revolution compared to others, such as the retail industry. However, consumers are pushing the insurance industry into cyberspace for accessible information and a convenient online shopping method.
Consumers can now find websites that compare and promote insurance plans, but that doesn’t mean they’ll be replacing health insurance brokers anytime soon. Although insurance shoppers are demanding an online outlet, approximately 75 percent of consumers still prefer to consult with a professional or broker before actually buying.2 However, buyers want the online purchasing power option, and brokers should not ignore these digital demands or the changing distribution channel.
Whether through a private exchange or directly selling on the Internet, individual and group brokers are looking for new products and opportunities for existing and new clients. Online individual dental and vision purchasing platforms present easy ways for brokers to cross-sell these products to their existing client base, and possibly replace lost revenues due to ACA. Moreover, consumers and brokers both receive instant gratification from products purchased from fully automated websites.
Brokers are capitalizing on this new technology while increasing their online presence and replacing lost revenues due to ACA. In fact, Starmount Life Insurance’s individual dental and vision automated website, dentalforall.com, experienced a 50-percent increase of new agent requesting custom links. Thus, new online distribution channels have helped expand the individual dental market reach, but what about demand?
Retiring baby boomers are flooding the individual market
In 2011, a large portion of baby boomers started leaving the workforce and entering the individual health markets – which includes dental and vision. And, boomers will continue to increase the demand for individual plans for the next 15 years. As one of the largest generations, baby boomers consist of approximately 30 percent of the U.S. population.3 According to U.S. Senator Rob Portman’s article, “Heading Off the Entitlement Meltdown”, in The Wall Street Journal, 10,000 baby boomers retire each day, and the entire generation will reach retirement age by 2030.
As members of this generation leave the workforce, they are also leaving access to employer-paid and voluntary group benefits, such as dental and vision. Retiring their dental benefits could be problematic for those individuals who do not find paying full out-of-pocket costs for dental service appealing. Unlike previous generations, more baby boomers correlate dental health with overall health. In 2013, a WellPoint survey revealed that more baby boomers, compared to preceding generations, consider dental care important and expressed interest in obtaining more information in dental plan options.4 Therefore, this generation is considered more likely to purchase some type of dental coverage post retirement.
Many individual dental plans cover people of all ages, including over 65 years of age, and some carriers offer consumers the opportunity to add vision coverage to dental plans. The additional vision plan can be extremely appealing for older adults facing age-related vision problems.
This shift from group to individual products is not insinuating a decline in group dental or vision sales. On the contrary, group dental sales remain steady while dental insurance maintain its popularity as a core benefit offering among employers and employees alike.5 Although not quite as large as the baby boomers, millennials make up approximately 25 percent of the U.S. population, and are entering the workforce as baby boomers exit, according to the U.S. Census Bureau. Therefore, group dental benefits are ushered from retiring baby boomers to this new generation of workers.
Despite the continuing increase in retiring baby boomers and online distribution, these are not the only reasons for the market’s recent dental benefit trends. The biggest influencers have been the rising cost of healthcare and recent legislation related to healthcare reform.
The costs of healthcare, ACA & being a small employer
For the last five years, the Patient Protection and Affordable Care Act (ACA) has directly and indirectly affected individual and group dental insurance markets, among other supplemental insurance markets. This article will omit the elaborate ACA details, and focus instead on the abstract explanation of ACA’s impact on the dental markets.
ACA’s primary purpose was to help reduce the costs of healthcare and increase the quality and affordability of health insurance by pacing employer, carrier and coverage mandates. The law includes standards of coverage without pre-existing conditions exclusions, requires coverage for all, and provides premium subsidies to lower-income Americans to purchase health insurance. Theoretically, individuals would use these government subsidies in state exchanges, a competitive marketplace where the economic concept of supply and demand could further drive down premiums. However, state exchanges did not produce the competitive marketplace expected.
State exchanges or public exchanges are competing with other marketplaces, such as private exchanges, brokers, third-party administrators and directly with the carriers. In addition, ACA’s employer mandates are particularly troublesome for some businesses and employers.6 Many employers have been shifting more healthcare costs back to employees by increasing employee contributions toward monthly premiums and altering plan designs and benefits. And some smaller businesses previously offering group employer-sponsored benefits, may find it advantageous to discontinue group coverage.7 Both scenarios may result in employers moving employees from the group health market to the individual health market – and from the group dental market to the individual dental market, as well.
It should be noted that many employers consider dental benefits an integral part of their benefits package, according to Society of Human Resource Management (SHRM) members. Even when offered as a voluntary benefit, employers will commit the time and resources necessary to use a group dental plan for recruiting employees. Therefore, brokers must consult each client based on the business’s unique circumstance and desired outcome.
There might not be a one-size-fits-all solution to the individual or group dental question, but successful brokers are the ones that can provide the innovative solutions. It’s clear that online distribution channels, retiring baby boomers and the ACA, among other factors, are blurring the once clearly defined line between individual and group dental and vision sales. As an insurance broker, you have to stay ahead of market trends, offer unique benefit solutions and partner with carriers and third-party administrators that do the same.