Commentary: Given the significant spend associated with medical insurance (fees for family health plans average $16,800) and the annual increase in cost (5.1% per year 2003-10 and 4.1% per year 2010-13), its no surprise that any employee benefits conversation is dominated by the medical space. Even more so when you consider the regulatory changes both carriers and employers have had to manage over the last two years.
Protecting an employees health and the health of their family should of course be of paramount importance when creating benefit programs, but what about after that? Where should attention turn then? Would providing protection for employees shelter and their ability to earn a living be a close second?
When you evaluate the nonmedical space and the products with the greatest level of applicability to an employee although traditionally considered largely a voluntary and noncore product auto and home insurance provides significant protection, comfort and well-being to an employee and their family.
Almost all employees have or have a need for protection of their home, apartment or vehicle. All employees go home at night to a house or apartment, and the fact is that in our commuter economy, 86.2% of employees drive to work. The car remains one of the most important tools to ensure continued employment and productivity. Combine that with the average mortgage size in the U.S. having recently reached $280,500 and 71.5% of the coverage amounts for home policies being written for between $50,000 and $300,000 the need for comprehensive protection of both an employees house and vehicle is key.
The employer can play a pivotal role in providing this protection to its employees and creating a simplified method for benefit communication and solution delivery. Offering auto and home protection on a group basis to employees has several distinct advantages to both the employer and employee:
- The savings generated by on behalf of the employee by offering the protection on a group chassis can go some way to offset the increasing demand for employee contributions for health coverage. This is a very real benefit to an employee, and one the employer can rightfully claim credit for.
- The employer can offer payroll deduction for the coverage. This not only makes the process easier for the employee and generates potential additional savings, it also ensure participation level continuity, and eliminates the risk of missed payments and lapsed coverage, providing yet more guaranteed protection of the employees key assets.
From an employer standpoint, the ability to offer auto and home protection to employees is getting easier with a number of avenues available to add the protection into the suite of employee benefits offered:
- Working with an Insurer: Working directly with a carrier that offers group auto and home is the simplest way to add the coverage for employees. Unlike traditional group products, auto and home policies are individually priced and underwritten, negating the value of full competitive bid process. This allows for the quickest implementation and has minimal additional administrative requirements.
- Working through a voluntary benefits broker: Working through an existing broker that has expertise in voluntary benefits is another method to add the coverage. This does increase the lead time to implement the product, but does allow for some competitive comparison to test the marketplace.
- Utilize a private exchange: Working through a private exchange provides the greatest level of flexibility for both the employer and employee, and could be used as a litmus test for employers thinking of joining an exchange for their provision of their core benefits. Many of the larger Broker-driven exchanges are now offering voluntary products and would enable the employer to competitively bid the offering and create choice for the employee through a multi-carrier solution.
The efficient protection of employees assets, productivity and livelihood should be a key consideration in any employee benefits discussion. The inclusion of auto and home protection as central to the employer offering deserves greater consideration in the overall benefits conversation and can be a true win-win for both the employer and employee.
Tom Kavanaugh is partner and David Warden is a director with PricewaterhouseCoopers.
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