Company Car Drivers Need Extra Care, Not Extra Costs
By David Brennan
The budget was a mixed bag for business drivers. Whether you simply own a company car or have responsibility for managing a corporate fleet, the Chancellor’s announcements have important implications.
The good news is that many businesses can expect to benefit from a competitive 22% corporation tax rate by 2014 and credit easing under the Chancellor's budget. From our own experience, and what clients are telling us, we are optimistic about a recovery in 2012, but it is fragile.
In the need to balance the books, the Chancellor is inevitably giving with one hand while taking away with the other. While the tax relief for businesses will have come as welcome news to many, this reprieve will, unfortunately, be made up in other areas. This year, it is company cars that must face a tax raid.
As many organizations rely on business vehicles to function, these unanticipated costs threaten to hit the heart of the economic recovery.
The combination of significant increases to Company Car Taxation, together with reductions in the Writing Down Allowance and Leasing Disallowance main threshold to 130 grams of carbon per kilometer, creates a challenge for vehicle manufacturers and fleet managers alike. As many manufacturers were working to the previous guidelines, there will inevitably be a period of re-adjustment, which could see demand for contract renewal and slowing in the take-up of new vehicles.
We are not surprised by the direction of this policy to reward the choice of vehicles emitting lower emissions. Indeed, we have long supported businesses' efforts to reduce the CO2 footprint of their fleets. However, the scale of the taxation does come as a surprise, given the Government's previous rhetoric and pre-budget indications.
Businesses should now be looking to their fleet providers to advise on a tax-optimized fleet profile as costs can still be contained, but the criteria for vehicle selection to make these savings will most likely be tighter than ever before.
Despite this heavy blow, there were some more encouraging automotive developments. The decision to abolish the 3% diesel supplement is a positive move. Bringing diesel vehicles into line with equivalent petrol engines from 2016 should encourage environmentally-responsible vehicle choices.
I was also pleased to see the Chancellor mapping out the planned company car tax rates for the next five years, allowing drivers to recognize and consider the long-term benefits of driving lower-emitting vehicles, as well as helping companies such as ours plan for the future.
Away from company vehicles themselves, I have misgivings about the direction being taken with regard to Government spending on the roads. While the Government's commitment to find new ways to finance our road infrastructure is welcome, this could open the door to more toll roads, which I am skeptical about.
I would highlight the example of the underused M6 toll road, which has some of the highest charges in Europe. Unsurprisingly, motorists are still opting to use the neighboring M6, where traffic levels are rising. Tackling congestion is important, but this must not come at an additional cost to business drivers – many of whom will be unwilling, or indeed unable, to pay.
Finally, there is the issue of fuel. While it is impossible to insulate the UK from the volatility of the global oil market, the Chancellor is able to control pump prices to a large extent and the decision to retain August's fuel 3.02p per liter duty hike is therefore short-sighted, at a time when business travel risks becoming prohibitively expensive for some. Right now, business drivers need extra care from the Government, not extra costs.
Read why flexible benefits don’t always have to be online
By Steve Hemsley
Whether it is reading books on a Kindle or buying groceries online, the technology industry has long proclaimed we are heading for a paperless society.
When it comes to communicating and then administering something as important as flexible benefits, HR directors can find it hard to resist the temptation to switch to an online solution.
From a time-saving point of view, changing to a web-based system should make perfect sense, because one of the reasons for dumping paper is to shift some of the back office admin work onto the employee. And why wouldn't someone want to spend some of their free time looking at an online benefits portal? After all, 85% of employees rate benefits as 'important' or 'very important', according to the CIPD.
Yet any benefits program is only successful if it engages staff by making it clear what is being given, why, how benefits will work and when new ones will be introduced.
Charles Cotton, adviser for performance and reward at the CIPD, says at first glance technology may appear to make schemes easier to administer and communicate - and in some cases cheaper. But, he argues, HRDs must think carefully before committing to what could be a hefty, long-term investment.
"Ultimately, an employer must consider how having flexible benefits supports what it is trying to achieve and what it needs from its employees," says Cotton. "If the benefits scheme is relatively simple, then paper is perfectly fine and the HR team will not gain anything from switching to online. In fact, data can go missing or be incorrectly inputted and the HRD must decide if he or she is happy for the information sent electronically to be accessed by a third party." Even when paper folders are consigned to history, there still remains an administrative burden. The HR team must study and respond to the data reports being generated, for example.
Traditionally, HR has worked closely with the payroll and the internal communications teams to communicate flexible benefits.
A switch to online can complicate the working relationship, because the IT department and a third party technology provider become involved.
HRDs can also underestimate how long it will take to implement a technology solution (up to six months) and the ongoing costs involved during the length of a web-based contract (often three years or more).
Claire St Louis, HRD at digital marketing agency Essence, whose clients include Google and eBay, agrees with the CIPD and urges HRDs not to rush into technology for technology's sake.
She says technology can be a barrier to some staff understanding and engaging with the benefits on offer, especially in companies where employees do not work in front of computers, are on the road, on the shop floor or in various manual roles.
"Many companies wrap themselves up in HR processes, ultimately forgetting the reason why they are doing them," says St Louis. "Benefits are there to retain, motivate, attract and maintain competiveness and, in many cases, people-based internal communications and paper administration is still the right way to go."
Kuljit Kaur, head of business development at the Voucher Shop, says organizations must certainly not ignore the importance of internal communications and the power of having HR staff and specialists available to explain how and why particular benefits exist.
"People are naturally cynical and think there must be a catch when it comes to benefits. A more 'people-based' approach allows you to communicate why this is not the case," says Kaur. "Using real people as advocates of particular benefits to talk to other staff face-to-face works better than just sending an email telling people to log on to a website to view benefits. Technology assumes people will make the effort to find out more."
Even Matt Waller, CEO at online provider Benefex, accepts that for some organizations a paper system can be cheaper, remove reliance on involving third parties and enable more control internally. But, he points out that an online option allows data to be centralized and makes it easier to communicate benefits to large numbers of employees.
"For businesses that want a flexible benefit or total reward scheme to reach as many people as possible in the most time- and cost-efficient way, technology has to be the way forward," he says. "Benefit selection errors can be corrected more quickly and paper document hell is avoided when informing payroll and benefit providers."
Matt Duffy, head of online benefits at Lorica Consulting, backs him up, although he agrees that technology is not right for every organization. "Online is a simpler solution for an increasing number of companies, although when setting up a flex scheme there is less of a build phase with paper," he says. "However, what actually takes the time is devising the rules and working out who is eligible and what the rules are. Companies still have to do this, even with a paper system."
In reality, this is not a black and white issue between paper and internal communications or online. Most organizations now adopt a multi-channel approach, supporting an online system with various forms of offline communication.
Even at technology giant Telefónica O2, paper has not been abandoned completely. It supports its tailored online benefits system with leaflets posted to an employee's home address. There are also benefits roadshows.
Telefónica rewards manager Kirsty Read says offline communication uses simple messaging to draw people into the website, where they can discover more detailed information on complex areas such as salary sacrifice and tax.
"We have actually re-introduced the paper leaflet after a five years' absence," says Read. "Staff told us they wanted a range of different communications relating to benefits. If they receive a leaflet at home, they can start to think about their benefits and discuss them with their family."
A multi-channel approach is supported by Thomsons Online Benefits' MD, Chris Bruce. "This is about ensuring that even with an online solution, staff can still talk to real people at workshops and clinics and read paper benefit guides alongside the online content," he says.
While it can make sense for larger employers to move online, many SMEs are concerned about the cost of the technology and perceive it as complex."
Julia Turney, head of benefits management at Jelf Group, says a flexible benefits system can certainly work without technology, particularly in small companies that have simple salary exchange benefits without complicated calculations.
"The administration side of things tends to be the deciding factor for companies moving to an online system, but technology alone will not engage staff with benefits, even if it makes the HR department's job easier," says Turney.
Benefits consultancy Mercer has teamed up with software firm Sage Employee Benefits to develop packages for organizations with fewer than 100 staff. SMEs are offered an online portal, but employers still have access to Mercer's specialist advisers.
"Technology is not always the answer," says Matthew Forrest, head of services at Sage UK. "Many SMEs want to offer benefits and can do so with paper-based and telephone support. This product allows owners of small businesses to manage a flexible benefits package at an affordable price, shaped to their needs."
The technology providers' message that online is best does seem to be winning over SMEs, with an increasing number ditching their paper systems. This trend is likely to accelerate as benefits packages become more complex and employers prepare for the phased introduction of auto-enrolment pensions this year.
Law firm D Young has 180 staff in London and Southampton and switched from paper to a predominantly online system in June 2011, with the help of Thomsons Online Benefits. An employee survey in December revealed staff are more aware of the benefits available to them now than they were under the paper system.
"In the first year, we used paper-based marketing to communicate the online benefits system, but in year two we will do this online with an e-brochure," says D Young HR manager, Jennifer Mead.
One company in the process of switching to online is Sumitomo Electric Wiring Systems, based in Staffordshire. Its HR manager, Liz Brown, says the move from paper will take place on 1 April.
"We are introducing flex benefits and felt online was a more efficient and flexible option, as we wanted something people at our different UK sites could access easily," she says. "Until now, a paper system has been adequate for the salary sacrifice and other benefits we offered our 230 staff, because there was not much data to deal with."
The technology companies will vigorously fight their corner to demonstrate that organizations running benefits programs can miss out by not moving online. Savvy HRDs, however, will only switch from paper when the time is right.
Northern Rail: paper trail
Should Northern Rail retain the franchise to run train services across the north of England, it will look to move from a voluntary to a flexible benefits system, but it won't ditch paper.
This 50:50 joint venture between Serco Group and Abellio, formed in 2004, has 4,800 staff scattered across the north, and most employees are drivers, conductors or engineers and do not have access to company computers.
An employee survey in 2009 discovered a low satisfaction rate regarding its benefits scheme, which is a combination of voluntary benefits and an employee assistance plan (EAP), as well as salary sacrifice, free travel and a final salary pension.
Northern Rail compensations and benefits manager Paul Stephens(pictured left) says communication was an issue, so the company introduced a benefits booklet and increased coverage of the scheme in its staff magazine, Your Northern, sent to every worker's home address. There is a telephone helpline and benefits roadshows are held at different depots.
"The culture of our business is paper-based and people still like to receive hard paper copies of anything to do with their job," says Stephens. "The difficulty with a booklet is that things can change and the content can become out of date quickly, but staff like to get paper copies of their total rewards statements, for instance."
Despite its traditions, Northern Rail appreciates the advantages of moving some of the administration online when the flex scheme is introduced and it is working with benefits provider, Personal Group.
Stephens wants to encourage staff to check the internet at home, but many paper aspects - such as the magazine coverage as well as the telephone helpline - will remain.
"We fear we will lose the engagement levels we have generated since 2009 if we move everything online - and we cannot afford to do that," Stephens says.
Hilton Worldwide: engagement online
Sean Thomas, cluster HR director at hotelier Hilton Worldwide, says he could not run the company's benefits scheme without technology. In fact, he says it would be "a nightmare".
He is convinced paper-based schemes will die out within a few years and everything relating to employee benefits will be online, especially in large organizations.
Many of Hilton's thousands of staff globally are young and have an expectation of a technology solution. For the HR team, it makes administration simpler and the reports the online platform generates mean the scheme is more effective, according to Thomas.
"We can see from the click through rates what things people are interested in and what is not so popular and react to that in a timely fashion.
"I believe that without technology, communicating when the benefits window is open would be harder. We send regular emails, although we do support this with posters around the offices."
He says that, as a US-centric organization, the whole group has to adapt to ideas and technology coming out of the US designed to help the business.
"Without this technology, I do believe it would be much harder to communicate our benefits to staff and they would be much less engaged with them."
There can be confusion among employers about whether a flexible or voluntary benefits scheme is right for their organization. A flexible scheme lets employees choose the benefits package that best suits their lifestyle and personal circumstances. They may prefer tax-efficient benefits such as childcare vouchers or to make salary sacrifices to boost their pension.
Flexible or voluntary?
Flex is a good way to bring consistency across a group of companies, as part of a harmonization process, or to tailor benefits to staff if a workforce is diverse.
Staff can usually change their core benefits once a year, during what is known as a 'benefits window' and, whether it is a paper or an online solution, employees can see a menu of benefits and the price of each. They usually receive a 'total rewards statement' outlining their total remuneration.
An employer can make a scheme as flexible as it wants to, so staff feel valued. Ultimately, a well thought out flexible benefits package can help to retain and attract talent.
Companies often add additional voluntary benefits, which are products and services staff can buy, at a discount. The main difference between voluntary benefits - such as retail discounts or gym membership - and flexible benefits is that they are paid for by an employer allowance or benefits pot, or their own salary, through payroll.
Many employers use the tax and national insurance savings gained from introducing salary sacrifice benefits to fund the cost of administering a voluntary benefits discount program.
Workers aren’t taking full advantage of benefits options
By Marli D. Riggs
Americans may be overly optimistic when it comes to thinking they won't ever be diagnosed with a serious illness or experience an accident, according to a recent survey.
Six out of ten workers believe it's not very or not at all likely they or a family member will be diagnosed with a serious illness like cancer, and 55% of respondents say they were not very or not at all likely to be diagnosed with a chronic illness, such as heart disease or diabetes.
The 2012 Aflac Workforces Report analyzes forces impacting the trends, attitudes and use of employee benefits. The online survey of nearly 1,900 benefits decision-makers and more than 6,100 U.S. workers was conducted in January and February 2012 by Research Now.
According to the American Cancer Society one in three women and one in two men will be diagnosed with cancer at some point in their lives, says a recent survey. The National Safety Council says that more than 38.9 million medically consulted injuries occur in a year.
Meanwhile, another recent study from the American Heart Association shows that one in six deaths in the U.S. were caused by coronary heart disease.
"The fact that American workers aren't aware of their medical risks and the potential financial impact of those risks is a very real concern that is only compounded when workers don't take full advantage of available benefits options or adjust their savings strategies to be more prepared," says Audrey Boone Tillman, executive vice president of corporate services at Aflac.
"Now, more than ever, people need to understand that wellbeing means more than just good health — it's being prepared for the reality of whatever life may bring and taking the necessary measures to protect themselves and their families,” she adds.
Despite optimism about their physical health, the study reveals that American workers also are concerned about their financial health, and many admit they are unprepared to handle the financial consequences of a serious illness or accident in their family.
The report finds that:
- Half of American workers are trying to reduce debt.
- Fifty eight percent don't have a financial plan to handle the unexpected.
- Only 8% of U.S. workers strongly agree their family will be financially prepared in the event of an unexpected emergency.
- Twenty-eight percent have less than $500 (51% have less than $1,000) in savings for emergency expenses.
When asked how they would pay for out-of-pocket expenses due to an unexpected illness, 57% of respondents say they would have to tap into savings, while 30% would use a credit card and 19% would have to withdraw funds from their 401(k) plans to cover the costs.
"Most individuals are looking to their employers to educate them about all available benefits options, not just traditional benefits changes or choices, to better understand how they can have a more secure safety net," says Tillman. "It's critical for employers to effectively communicate year-round about how new benefit options, like voluntary insurance, can help with high out-of-pocket expenses associated with a serious illness or accident."
The report also finds 60% of respondents would be at least somewhat likely to purchase voluntary health insurance plans if offered by their employer because these policies such as accident, critical illness and short-term disability are among benefits options that can help protect the financial security and well-being of the plan participant and their families.
Supporting staff to become more resilient has to go beyond telling them to ‘pull themselves together’
By Stephen Bevan
There seems to be no end in sight to the gloomy economic outlook: growth stagnant, unemployment still growing, fear of job losses high and pressure on workers and families building. Business continuity – keeping on track when the firm is buffeted by external shocks – has become a major challenge.
'Resilience' is needed by individuals, organizations and indeed whole communities, if we are to meet these challenges.
There is a lot of press about resilience at the moment. People are invoking the spirit of the blitz, the old-fashioned 'stiff upper-lip' and the need to 'keep calm and carry on' in a period of national adversity. But there has to be more to resilience than stoicism. We need to think of what ordinary people in business can do - or be - to help them cope with adversity, setbacks and uncertainty. Doing so will allow them to do a good job.
Numerous theorists have attempted to define psychological resilience. All agree on one important thing: that it improves an individual's chances to compensate for the uncontrollable negative impact of pressure. The Latin origin of resilience, resilire, means to 'rebound' and our use of the term reflects this quality. For many, resilience is related to flexibility, being 'both the capacity to be bent without breaking and the capacity, once bent, to spring back', in the words of George Valliant, in The Wisdom of the Ego (Harvard University Press, 1993). Applied to the work environment, it is a preventive attribute that equips individuals or a team to anticipate stress and maintain mental wellbeing. One other characteristic of 'resilience' is the ability to build and sustain adaptive capacity. This is beneficial to future work situations: 'being resilient encapsulates the flexibility in adapting to and overcoming adversity, so that personal growth can occur' (Mary Gillespie, PhD thesis, Griffith University, 2007).
I have worried for some time that, by contrast, our use of the term 'stress' has moved beyond its original meaning and in some quarters become negatively associated with learned helplessness or else has been over-musicalized. It is true some are subject to intolerable pressures from a number of work and non-work sources that damage their mental wellbeing and may make them ill. Indeed, the latest forecasts from Age Concern suggest over 7 million people of working age in the UK will have a mental health condition by 2030. Despite this, I find it hard to accept that nothing more can be done to enhance a natural capacity for resilience and adaptability, which - though it resides in us all - can be difficult to deploy effectively in troubled times. Supporting people to become more resilient has to go beyond telling them to 'buck up' or 'pull themselves together'.
We know from research that the resilient tend to have a sense of humor and realistic optimism under stress. They are also better equipped to view problems as opportunities and to learn from mistakes or failures. We know less about whether resilient people or teams are more productive or innovative, whether resilience distinguishes great leaders from also-rans and whether it can (or should) be spotted early during induction. Crucially, we need to know more about how to sustain workforce resilience as a driver of both personal wellness and business continuity.
I am not convinced engagement alone will deliver high performance and smart productivity growth, without a concerted effort to understand, develop and exploit the latent capacity of UK workers to bounce back from adversity. We will need these qualities in spades when the recovery gathers momentum.
Employees Placing Greater Reliance on Benefits
By Brian M. Kalish
Tough times have employees placing greater reliance on benefits for financial security, as employers affirm their commitment to sponsoring those benefits albeit with increased cost sharing.
That’s one upshot from the 10th Annual MetLife Annual Study of Employee Benefits Trends released Monday. It found that since 2002 employer’s top benefits objectives -- controlling costs, attracting and retaining employees and increased productivity – have remained fairly constant. However, some delivery aspects have changed, such as the growth of auto-enrollment features in 401(k) plans. For advisers, the trends seem to point toward stable expenditures for core benefits, but greater funding from employees, including voluntary benefit purchases.
Nearly half of the 1,412 employees surveyed said that, because of the economy, they are counting on their employer to help them achieve financial security through employee benefits such as disability and life insurance and health.
For younger generations, that number is even higher. More than half (55%) of Gen X and two-thirds of Gen Y workers said economic pressures leave them counting on employers’ benefits program to help with their financial projection needs, according to the study, presented by MetLife’s National Medical Director Dr. Ron Leopold, an EBA Advisory Board member, at a MetLife Symposium in Washington.
Employers say they are hearing these concerns and rising to the challenge. Regardless of company size, of all companies surveyed, only 10% said they planned to reduce their benefits.
“The workplace has changed rather dramatically over the last decade since MetLife began doing its annual study,” says Anthony Nugent, executive vice president of MetLife. “Ten years ago, many Baby Boomers were planning to retire at age 65, Gen Y workers were just entering the workplace, and communication vehicles like Facebook and Twitter didn’t exist.”
As employees rely more on benefits, they are willing to bear most of the cost of them. Of surveyed Gen X and Gen Y employees, 62% said they are willing to bear more of the cost of their benefits rather than lose them.
And that may happen. While a third of employees believe their employer is likely to soon cut benefits, 70% of surveyed employers said they intend to maintain their current level of employee benefits. However, 30% will do this by shifting costs to employees. Some 57%, are interested in a wider array of voluntary benefits offered by their employer, as compared to 43% of Baby Boomers. The study also found that employers recognize this interest as 62% of employers agree that in the next five years employee-paid benefits will become a more important strategy than they are today.
With the ever-changing benefit landscape, loyalty continued to fall. Only half (42%) of employees feel a strong sense of loyalty to their employer, a seven-year low. Conversely, 59% of employers said they feel a very strong sense of loyalty to employees. One in three people would like to work for a different employer in 2012, but that number climbs to one in two for Gen Y employees.
Younger buyers buying asset-based LTC
By Marli D. Riggs
The sale of asset-based long-term care insurance protection continues to grow significantly, reveals research by the American Association for Long-Term Care Insurance.
More than half (53%) of male LTC buyers were under age 65, up from 48% in a prior year’s study, while women buyers under age 65 also increased to 50%, up from 44%, according to data gathered from insurers.
Meanwhile, premiums increased nearly 20% and the number of covered lives increased 13.5%.
"We expect the sale of asset-based or linked LTC products will continue to grow as they offer some highly attractive benefits to a category of buyers looking to protect their retirement savings," says Jesse Slome, AALTCI's director. "The growth of sales will only continue as more large players enter the marketplace.”
In 2011 the study finds that the initial single premium face amount of policies purchased was $100,000 or greater for 73% of new policies. Meanwhile, 96% of new life and LTC policies issued did not include a benefit increase option that bumped up available benefits to keep pace with inflationary growth of costs. Additionally the study of traditional individual LTC insurance policy sales finds that in 2011 some 96% included a growth option.
“At a time when long-term care is increasingly top of mind, these life insurance-based solutions avoid the ‘use it or lose it’ risk associated with traditional long term care insurance,” says Chris Coudret, vice president of OneAmerica. “In most cases, people make a single payment, effectively removing the risk of future premium increases.”
Too cash strapped for longevity, many consumers also lack life insurance
By Chris McMahon
As Americans are living longer they are concerned that they are not financially prepared to live into their 70s, 80s and 90s.
With age comes wisdom supposedly, but even as more Americans are living longer they are not financially prepared for their retirement years and also lack life insurance. According to the Centers for Disease Control, the average American’s life expectancy has increased to 75.7 years for men and 80.6 years for women. Of those age 65 and coupled, there is a better-than-even chance one partner will live to age 94, and one-of-10 couples will have a partner that lives to 100 or more.
Unfortunately, a new study finds that while Americans are living longer, almost half are concerned that they are not financially prepared to live into their 70s, 80s and 90s.
Can’t afford to live…
The “Longevity & Preparedness Study,” conducted by Northwestern Mutual, asked people how financially prepared they feel to live to age 75, 85 and 95 and revealed that only slightly more than half (56%) feel financially prepared to live to the age of 75. Fewer than half (46%) feel financially prepared to live to age 85; and only about one-third (36%) feel prepared to live to age 95.
“These findings underscore that there is room to further educate clients—not only with respect to increasing longevity, but also more broadly about the value of long-term planning,” said Greg Oberland, Northwestern Mutual EVP. “So we, as an industry, must emphasize that the plan is as important as the goals. And that plan is like a roadmap that helps clients stay on course.”
According to the research:
• Women on average live five years longer than men and feel less financially prepared to live longer lives.
• Men regardless of age are significantly more likely than women to feel financially prepared to live to age 75 (65% vs. 48%), 85 (55% vs. 37%), and 95 (43% vs. 30%).
• Younger Americans (25-59) feel less prepared than older Americans (60+) to live to 75 (47% vs. 79%), 85 (37% vs. 66%), and 95 (29% vs. 52%)
“No matter what age you’ll live to, it’s important to protect the dollars you’ll eventually depend on to provide an income in your retirement years,” Oberland said.
Can’t afford to die…
The findings of the “The Insurance Barometer Study,” an annual study conducted by the Life and Health Insurance Foundation for Education and the Life Insurance and Market Research Association to better understand the public's opinions, attitudes and behaviors regarding life and health insurance are separate but consistent with the “Longevity & Preparedness Study.”
The study found that almost one-third of respondents believe they need more life insurance; that number includes 20% of current policyholders and about half with no coverage.
The two excuses most cited for not purchasing adequate amounts of life insurance are that it is too expensive (83%), and that they have other financial priorities (85%).
Respondents were asked to estimate the annual costs of a 20-year level-term life policy for a 30-year-old and wildly over shot, guessing the cost at $400. Younger adults, those most likely to qualify for preferred pricing, overestimated the actual cost of $150 by a factor of seven.
“Our research has suggested for years that consumers believed they couldn’t afford life insurance, yet they had no idea how much it actually cost,” said Robert Kerzner, president and CEO of LIMRA, LOMA and LL Global. “This is the first study that clearly quantifies the wide gap in consumers’ understanding on the affordability of life insurance.”
The cost of basic term-life insurance has fallen by about 50% over the past 10 years, offers Marvin Feldman, CLU, ChFC, RFC, president and CEO of the LIFE Foundation.
“We know these misconceptions are hindering people from taking steps to get the coverage they need. In essence, life insurance is falling down the priority list,” Feldman said.
According to the study, many are more concerned with paying their mortgage or rent (31%), or losing money on investments (26 %) than with buying life insurance. Interestingly, saving for retirement continued to be the top financial concern (50%).
As the U.S. economy recovers, insurers have an opportunity to help consumers rethink their investment and retirement strategies to ensure they have enough money set aside to maintain the life they’re accustom to and to fund new plans, Feldman observes.
“We want companies and producers to better understand the consumer attitudes and perceptions that are contributing to the gap in coverage that exists today so that they can better respond and help us educate the public about the importance of financial protection and taking personal financial responsibility,” Feldman said.
Technology can play an important role in those educational efforts by creating direct access to quality information and pricing.
“We need to engage younger generations —who live online—more creatively, using the platforms and technology they use in their day-to-day lives, to convey this information so that they know that they can afford the life insurance their family needs,” Kerzner said. "While we have seen some insurers begin to advertise the price of their products in their marketing materials, and others place quoting tools more prominently on their websites to better educate consumers, all insurers should take a look at how they can make it easier for consumers to access this vital information and better understand the real cost of life insurance."
Chris McMahon is the senior editor at Insurance Networking News, a SourceMedia publication.
The Value of Discomfort
BY MIKE SULLIVAN
One of my colleagues has a paperweight on her desk with the quote, “Being uncomfortable is the price of growth.” I don’t know who said it, but I feel like printing the message on a flag and wildly waving the banner every time I encounter someone in our industry.
If you work in the employee benefits sector and are feeling nostalgic about your job, I suspect you’ll be in serious trouble in the not too distant future.
When dealing with the monumental change confronting our industry, the only viable option is to transform yourself and your approach to business. It requires expanding your knowledge base, developing new revenue streams and adding value. It means leveraging new resources, expanding your conceptual framework about compensation and repositioning your agency. You must do things differently. Much differently.
Most of us engaged in thinking about tomorrow spend a lot of time devising specific tactics to get there. Regardless of what innovative solutions we develop, I’ve recently come to a significant conclusion: The biggest obstacle standing in our way is our own resistance to change.
While it’s annoying for most of us to stretch past our comfort zones, I am sometimes astonished at the barriers others create for themselves. Once we get past our formative years, our species seems inclined toward inertia.
In reality, the past decade-plus in the health benefits business reinforced this behavior. For those of us specializing in small- and mid-sized markets, we could focus on the three Rs (reading, relationships and responsiveness) and watch our revenue grow at rates of 10 percent annually, simply because rates increased. In effect, if you were well informed and worked hard, you could watch your income grow. Compared to the energy we need to exert today, the effort was equivalent to pulling the lever on a Barcalounger to lift the leg rest.
To succeed in this evolving world, we need to unlearn what we know and take fresh approaches. While many of us already have new tools and resources in our sales solution kits, it is fascinating to watch advisers default to their old scripts. We want to stick with what’s familiar. So, how do we get people to stop saying what they’ve always said and acting as they always have? How can we inspire others to broaden their perspectives beyond their comfort zone?
As our industry undergoes transition, our leaders must motivate those around them to move with it. If we want to be agents of change and, quite frankly, remain relevant in the future, we must foster environments that encourage discomfort. After a couple of pleasant decades coasting around in a Lexus, the allure of learning to ride a unicycle disappears. It is too much work, and there is too much risk. Yet those who embrace such challenges will be rewarded. This applies equally to individuals and agencies, as well as sales and service personnel. Each of us must go through a bumpy phase until the new concepts and solutions become ingrained.
We must nudge each other to the edge of the proverbial cliff. When I prompt others in such a direction, I'm often met with these responses:
- “I’m too busy to relearn so much.”
- “I feel like you’re asking me to go back to school.”
- “I can’t handle the amount, and speed of, change.”
When most of us entered into this business, we were highly motivated. Yet, I feel our success has inspired us to become…content. Perhaps success has us more inclined to play defense and hold on to things as opposed to playing offense and capturing new market opportunities. People who were A students at the beginning of their careers now perform at a different level. In essence, we do need to go back to school. For those operating independent agencies, following is list of subjects to master:
- Analytics to support plan design decisions
- Defined contribution software solutions
- Emerging decision support tools for employers and employees
- Health care costs and quality transparency tools
- Truly integrated voluntary and worksite solutions
- Payroll and benefits administration technologies and solutions
- Care support solutions
- Next generation wellness and lifestyle management solutions
Education has always been a powerful tool in the change arsenal. It certainly was in my personal tale. I grew up on the south side of Buffalo, N.Y. It’s a blue collar, Irish Catholic enclave with a church and bar at almost every intersection.
Alliances were divided between the area’s two steel mills and proximity to the closest Catholic school. I was surrounded by family and friends, and ensconced in a comfy existence attending P.S. 67 with all my buddies. During eighth grade, someone got the bright idea that I had the aptitude to attend a top prep academy in Buffalo, the elite Nichols School on the north side of town. I took an entrance exam and was admitted. My reaction: There’s no freaking way I’m going to that place.
It was gut-wrenching to leave my happy life and board multiple city buses for the daily rides to and fro, accompanied by adults commuting to work. I was ripped from everything I knew and felt like a poser trapped in a school populated by wealthy kids. Somehow I made peace with it. Accepting the change resulted in a rewarding outcome. I excelled academically and socially. I even saw the value of money and thought I might like some for myself one day. Initially, it was one of the most uncomfortable experiences I’ve ever had—yet it changed the trajectory of my life.
Those trips to Nichols each day of high school taught me a lesson I’ll never forget. Although I experience echoes of that same discomfort in my career these days, I am now exhilarated by the lure of what can come next. There’s a rough trip ahead, but if you don’t get on the bus, you’ll never reach your destination.
Wellness Perks and Relocations
FITNESS FIRST
Discounts for fitness centers tops employees' favorite wellness perks, according to the Principal Financial Well-Being Index. One quarter of respondents picked gym discounts as the most valuable perk, followed by on-site preventive screenings (22 percent), access to nutritionists (21 percent) and on-site fitness facilities (19 percent). However, gym discounts figure as the third most popular wellness perk offered by employers, preceded by online wellness information (19 percent) and educational tools (18 percent), and tied with printed wellness information (17 percent).
MOVE TO WORK
Many employers are willing to shell out cash to help new hires relocate, according to a new report by CareerBuilder. Among companies polled, 32 percent of employers said they'd be willing to pay to relocate new employees, while 44 percent of workers said they'd be willing to relocate for a job opportunity. Companies in the engineering and technology fields were the most likely to say they'd cover moving expenses for new hires, the report said.
CONTRACEPTION COMPROMISE
The Obama administration has proposed a compromise to quell the backlash about a new women's health services requirement from a number of religiously affiliated organizations. President Barack Obama announced that religiously affiliated universities and hospitals would not be forced to cover contraceptives for their workers. However, insurance carriers would be required to provide complete coverage for birth control at no charge for any woman at those institutions. This rule, which still excludes women employed by churches, will take effect for employers on Aug. 1. Religiously affiliated groups will have an additional year before the rule affects them.
IN THE CARDS
Prepaid credit cards and gift cards are among the most popular incentives doled out by companies, according to a new survey. Young America Corp.'s survey of 355 executives found that 46 percent use prepaid cards for their rewards programs, compared with 33 percent who use cash and 47 percent that cut company checks.
CALIFORNIA QUESTIONS
A new law that expands the California Insurance Equality Act may have an impact outside the state. The previous law barred insurance carriers from issuing policies that treat spouses and "registered domestic partners" differently, according to a press release by Corporate Synergies. However, the new law clarifies that an insurance policy cannot discriminate against domestic partners (including same-sex partners) of California-based companies, even if the employees don't work in the state. The law also applies to employees who work in the state for companies headquartered elsewhere. Experts suggest employers review their policies but seek professional advice before making any moves regarding their plans.
INDIAN HEALTH SERVICES
The IRS recently issued guidance clarifying whether patients who use Indian Health Services (IHS) facilities can also contribute to a health savings account (HSA). The IRS states that individuals who are eligible for IHS services can make tax-free contributions to an HSA as long as they have not used IHS services in the previous three months.
RETIREE BENEFITS
About 22 percent of U.S. employers offered supplemental health coverage for retirees in 2011, down slightly from nearly 23 percent in 2006, according to a report by Compdata. On average, employees had to work for 12 years under their employer to be eligible and had to pay about 65 percent of the premium.
HAPPY GRADS
The average starting salary for new college graduates with bachelor's degrees was $41,701, up 2.3 percent compared with the class of 2010, according to a report by the National Association of Colleges and Employers. Graduates in the engineering and computer science fields fared the best in overall starting salaries, with computer science graduates enjoying the largest overall increase, the report said.
VEHICLE VALUES
The IRS has changed the vehicle value calculation for employers that own fleet vehicles. The maximum vehicle values for 2012 include:
- Cars (for which cents-per-mile valuation rule is applied): $15,900 -- up from $15,300 in 2011.
- Trucks or vans (for which cents-per-mile valuation rule is applied): $16,700 -- up from $16,200 in 2011.
- Cars (for which fleet valuation rule is applied): $21,100 -- up from $20,300 in 2011.
- Trucks or vans (for which fleet valuation rule is applied): $21,900 - up from $21,200 in 2011.
3 simple programs to incorporate wellness into the workplace
The biggest challenge facing HR professionals looking to devote resources to wellness initiatives in their organizations is responding to the question, “What’s the ROI?” It seems intuitive that if you create a healthier workforce, your cost for health insurance should go down. But intuition only goes so far these days when it comes to expending corporate resources, and quantifying ROI continues to be a somewhat elusive target.
Sure, there is lots of evidence to support the notion that health management programs do pay off. Mercer's National Survey of Employer-Sponsored Health Plans has found that employers that demonstrated a greater commitment to wellness and health management experienced annual cost increases that were two percentage points lower, on average, than those of other employers. But, as compelling as that data is, it still doesn’t constitute scientific proof.
A recent study published in the American Journal of Health Promotion did provide some hard data on the ROI of a “comprehensive” health and productivity management program. Start-up costs led to negative ROI for the first year, but strong ROI in years two and three produced a combined 2.45:1 ROI for all three program years of the study.
The study represented the results of over 20,000 program participants each year and identified the following components for what researchers considered a “comprehensive” program: comprehensive program design, management support, integrated incentives, comprehensive communications, dedicated onsite staff, multiple program modalities, health awareness programs, biometric health screenings and vendor integration.
Whew!
Clearly, the study benefitted from the law of large numbers. When you have 20,000 participants, virtually any health management program you install is going to benefit somebody. But not every company has that luxury. Also, not every company will have the resources to incorporate every single aspect of a comprehensive program as outlined above.
Does that mean you shouldn’t even start down that road? No, absolutely not. Wellness and health management programs can be scaled to fit the needs of companies of almost any size, as long as you have the data to help identify what the needs are. But even without a lot of data or a lot of money to spend, a walking program, a healthy eating campaign or a “know your numbers” program will not only heighten awareness of health issues, it will send employees a message that their employer’s concern for them extends beyond what’s included in their job description. A healthier, more engaged workforce should be a more productive workforce, and everyone benefits from that.
Many clients may think that all this wellness stuff is a bunch of “hooey”; but with health costs continuing to escalate faster than wages, and employees’ increasing difficulty to afford cost shifts, savvy advisers will be prepared to discuss the many advantages of a well-designed health management program.
By George Lane