When I first entered the ancillary products market as a new broker, the only products available to sell were worksite products sold face to face with an employer. Over the last several years, I have noticed a trend of the emergence of group ancillary products being introduced to the market. These products were first used for large employers because of guaranteed issue and group underwriting. It makes enrollment and fulfilment much faster and more efficient. It also makes moving the data to a payroll system a much smoother process.
In the past, worksite products required human underwriting (answering health questions). This meant the employee and the HR/payroll department had to wait until the underwriting was complete before the product could be added to the payroll system in order to deduct premium. The wait for the underwriting caused problems when the employee was denied coverage. At other times, the employee decided to cancel the application after waiting to see the underwriting outcome. Each of these changes, on and off the payroll system, caused issues for the HR/payroll departments. Also, these changes caused persistency issues for carriers. These issues were especially problematic for those worksite carriers who provided advance commissions to their agents and brokers. Now, commissions had to be reversed and carrier commission departments had to take on additional work, so they could collect the reversed commissions.
Smaller employers had the same issues; however, they were exacerbated by the fact that smaller employers (less than 100 lives) did not have HR departments, therefore they usually outsourced their payroll. This made insurance payroll changes costly and time-consuming. With these issues, why did the large worksite carriers not move to group products to help solve many of these problems?
My first thought was they had captive agents and had to keep them satisfied. About 10 years ago, those large carriers began to allow brokers to offer their products at the same time as their captive agents. This move had limited success but did not address the product issue. In the past, there was also the issue that technology did not exist to quote and enroll products totally online. Thankfully this technology does exist today and is available in the ancillary marketplace. It is interesting that the top ancillary product sold, after dental and vision, is accident insurance. All three of these products do not require human underwriting.
Group ancillary products such as accident, dental, vision, voluntary life, cancer, and even critical illness are being sold on a guaranteed issue underwriting basis and can be quoted, proposed, and enrolled online. This can be done with a link which provides the information to the employee to make these decisions at home with their spouse causing no work interruption and significantly increasing persistency. This increased persistency also solves issues with entering data into the payroll system. The technology is there to allow the enrollment to come directly into the payroll system without human intervention.
Enrollment costs are reduced, which is important because we are now seeing insurance regulators impose minimum loss ratios for ancillary products, a trend developing nationwide. Group products pay less commission than worksite products, which also helps with loss ratio requirements. These group products do not require face to face enrollments but having licensed agents available to answer employee’s questions is recommended to make the enrollment process go smoothly.
What do I see in the future? I see private group exchange platforms stocked with group guaranteed issue products, no human underwriting, and digital eligibility files sent directly to payroll systems and carriers. These changes are here but are just now becoming available to brokers for small employer groups. If you, as a broker, are not on board with these new technologies, then you may be left behind at the starting gate. I highly recommend that you study the market closely, find the carriers who are offering these products, and begin working with those carriers now.