As someone who has spent more than 30 years advising companies on their benefits, I know first-hand the importance of comprehensive employee benefits in fostering a loyal and satisfied workforce.
So it’s disheartening that there is still a big gap when it comes to life insurance.
The individual-group divide
While it’s heartening to know that more than half of Americans possess some form of life insurance, I find it concerning that many employees are totally reliant on their employer-provided group coverage policies.
But these group policies typically have meager payouts and often aren’t portable when employees jobs. As such, I believe this is a major coverage gap that leaves many people feeling highly under-insured.
To close that gap, I believe individual life insurance policies must become an integral part of any robust employee benefits package.
And it’s not just about securing the financial security of valued employees. I also think it’s about ensuring organizations maintain a competitive edge in their benefits offerings.
Why individual life insurance?
Group life insurance has long been a standard inclusion in many benefits packages. While group plans do provide guaranteed coverage for all employees, they also fall short in addressing the specific needs of employees.
Part of the reason for this is that group plans were never really intended to serve as the core part of an employee’s coverage.
Instead, they were meant to supplement an existing individual policy that an employee already had. That might have worked when most employees had individual policies.
But since the 1980s, the number of people with individual coverage has steadily declined.
As a result, many people today must rely entirely on their group policies, which – as we have said, have meager payouts, and have practically no customization.
This isn’t just bad for employees; it’s also bad for employers.
Having nothing more to offer than a group plan can make a benefits packages look pretty unappealing. At a time when many people – particularly Millennials and Gen-Z’s – are job-hopping at an unprecedented rate, not having a competitive benefits package can spell disaster for an employer’s recruitment and retention prospects
Employers must consider offering individual coverage
It’s for these reasons that I believe more employers should consider offering individual coverage alongside their group plans.
Doing so would provide employees with access to far more comprehensive coverage that is fully portable and specifically underwritten to their needs and situation.
Moreover, by empowering employees to tailor their policies to suit their specific requirements, employers can demonstrate a genuine commitment to their employees’ well-being and long-term financial security.
Leveraging big data
There’s a good reason why most employers don’t already have individual life insurance in their benefits package.
As mentioned earlier, the number of people with individual coverage has been in decline since the 1980s. While there are multiple reasons for this, one of the main reasons is that underwriting has become a lot more difficult.
The need for repeated medical exams, blood tests, and mountains of paperwork made the whole ordeal more trouble than it was worth.
Adding to that, the average time to underwrite an individual policy was about six weeks.
However, this have all changed in recent years with the development of big data and AI-powered analytics.
Provided an insurer can gain access to an employee’s personal data – medical, financial, household – any actual underwriting shouldn’t take more than a few minutes.
This opens the doors to seamless underwriting for almost anyone.
What’s more, many employers already have most of the necessary data on file and they’re not even using it.
When discussing employee benefits with employers, I always get a little pushback when I talk about using employee data.
I suspect that these misgivings come from a fear of breaking HIPAA regulations.
But here’s the thing, HIPAA doesn’t actually say you can’t use employee data. It says you must secure and protect that data, but you can use it for the benefit of employees or legitimate business purposes.
I’d argue that using employee data to provide them with custom-tailored individual coverage more than meets those qualifications.
The value of personalized benefits
In today’s world, personalization has become crucial in enhancing employee satisfaction.
For example, a 2021 study found that 72% of customers were willing to share their personal data if it meant receiving a tailored insurance offer.
While changing demographics and the rise of remote work are certainly driving this need for greater personalization, there’s also something I like to call the “Amazon effect.”
Amazon’s site is incredibly personalized to its users’ preferences and the same can be said for a lot of other services such as social media or streaming platforms like Netflix. In short, personalization isn’t so much a need any more but an expectation for today’s customers.
And when it comes to individual life insurance coverage, personalization really takes center stage.
Unlike group policies – be they medical, life, or dental – individual life insurance has a customized touch.
Employees with individual plans can personalize their coverage and gain a sense of empowerment and ownership, not just for themselves but also for their spouses and children.
This level of personalization extends to rates, coverage amounts, and even the length of the policy term.
This holds tremendous value in assuring employees of their long-term financial security, resulting in a more satisfied and engaged workforce.
Gone are the days when benefit plans were concrete, providing limited choices with little room for personalization.
Today, businesses must cater to individual preferences and needs.
For employers and their HR teams, it is crucial to provide a level of personalization to their benefits offerings. Otherwise, they cannot hope to remain competitive in the war for talent.