Personal insurance: a no-cost option employees favor

Today an old - if somewhat unheralded - benefit is drawing a lot of newfound interest. More employers are considering offering auto, home anti personal property insurance to their employees at a discount.

Does that mean employers have gotten into the insurance-peddling game? Not really. One of the beauties of this benefit is that it requires little or no effort from employers. In fact, offering personal insurance requires virtually no paperwork or administrative time - if you choose the right insurer - says Diane Kundrat, benefits supervisor for the city of Tempe, Ariz.

In addition, personal insurance benefits have a broad appeal that matches up well with the needs of an increasingly diverse workforce. "Traditional benefit offerings no longer appeal equally to the various segments of the population," says Himanshu Patel, senior vice president of Liberty Mutual's Group Savings Plus program.

Ultimately, the biggest blessing of this benefit is that it costs employers nothing. That's welcome news at most organizations because "HR and senior line managers are looking for ways to improve their ability to recruit and retain good people and to improve morale while keeping spending down," notes Patel.

HOW IT WORKS

Insurance programs vary from one insurer to the next, but the mechanics of the programs are almost universal. Here's how they generally work.

An insurance company identifies an organization as a likely candidate, approaches it, and offers coverage that will be part of the employee benefits package. If the employer agrees, it basically becomes a conduit.

The insurance company - with some help from the employer - contacts employees and offers the personal insurance. At this stage it is vital that the employer be 100 percent committed to the program, says Patel.

"The first thing we want an employer to do is make a strong and visible endorsement of the program, which could be a letter from the CEO," he says. "Next, the employer needs to communicate information to employees on an ongoing basis, including such things as the insurer being present at benefits fairs, being listed in the benefits handbook, being a part of benefits packages for new employees and being posted on the corporate web site," explains Patel.

It is also common for insurers to communicate with employees through talks and presentations, articles in the company newsletter and notices in the employee cafeteria.

Employees who buy the insurance have their premiums deducted automatically from their paychecks.

Employees pay the entire cost of the premiums, which are usually discounted significantly. One insurer, Metropolitan Property & Casualty Insurance Co. (Met P&C), offers rates that are 10 percent to 15 percent lower than the national retail rate, according to Richard Berstein, vice president and general counsel. The company can afford the discounts because of the efficiencies of the program, which does away with agents, missed payments, cancellations and reinstatements.

THE BENEFIT TO EMPLOYEES

Personal insurance programs save employees time as well as money. "It saves them the time and effort of going through the shopping process, while providing the convenience of enrolling on the job with no down payment, no monthly bills and no finance charge - at a discount," says Patel.

And the time savings continue month after month because "it's one less bill to worry about," he says. Patel also points out that most people do not feel comfortable choosing an insurance company. "Employees enjoy the peace of mind [an insurance program] provides because the employer has done their homework and selected a good company with good value and a good reputation."

Convenience is becoming an even bigger factor thanks to firms like AIG, the world's largest insurance provider. AIG got on board with auto and home insurance one year ago. Now the company is melding its employee-sponsored program with new technology, which allows employees to purchase coverage online, says Larry Rutland, president of AIG's Group Personal Lines.

"Employees can access the Internet, pull up AIG's Buyer's Guide to learn about insurance, determine their insurance needs, obtain quotes and - at the very end - make a quick call and complete the transaction," says Rutland.

Isn't all this convenience lost when employees leave? Not completely. Insurance benefits are "portable," says Met P&C's Berstein, which means employees can take their policies with them when they leave the company. The downside for exiting employees is that they lose their discounted premiums.

(Of course, the upside for HR is that good employees have an additional reason to stay.)

The convenience factor is compelling, but skeptical HR professionals may wonder: Do employees really want to be hassled with insurance questions at work?

Apparently, they do.

Three-quarters of all employees prefer to purchase insurance through their employers, or personally, rather than from an agent, according to a survey by the Life Insurance Marketing & Research Association, International. And employees seem to like the idea of voluntary payroll deductions as a way of paying their insurance bills.

ADVANTAGES FOR EMPLOYERS

Personal insurance is as convenient for employers as it is for employees.

Berstein points out that insurers "handle all communication with the employees. The employer simply has to provide access to the payroll deduction process and help with access to the employees. That's it."

Kundrat agrees. "Benefit administrators have enough to do," she says. "Being able to offer employees a quality product at a savings that comes right out of their paychecks, once a month, without having to think about it, is very advantageous."

That convenience is one reason for the program's success. Another reason, says Berstein, is a shift toward flexible benefit plans that help HR professionals manage the work-family relationship. But personal insurance provides employers with a benefit that has much broader applicability than some other work/family benefits, such as child care. After all, not all employees have kids, but almost all workers will have a car or a home.

Ron Lamb, corporate risk manager for Digital Equipment Corp., goes even farther, noting that "all drivers, not just good drivers, are eligible."

No wonder, then, that Walter Skiva, former chairman of the HR committee at the University of Kentucky, has used the program for years and believes it creates a solid link between the employer and the employee.

Does the benefit match up particularly well with certain kinds of employers? Insurance companies say that institutions of higher education, governments, and retail and real estate companies sign up for the programs in large numbers, although the insurers have no explanation for the pattern.

The insurance companies claim that the service is applicable and beneficial to any organization that employs more than 200 people. "The only companies that don't fit the file are those with a high turnover ratio or ones with large numbers of part-time people," says Rutland. "This is not a good product for them because many workers earning low hourly rates simply can't afford the insurance payroll deduction."

TREAD CAUTIOUSLY

HR managers should proceed carefully when selecting an insurer. For example, some insurers don't make themselves truly accessible, so benefits managers get stuck with bothersome administrative problems.

Above all, pick a company you can trust. As Kundrat points out, once an employee buys a policy, "the insurer does all the work." That makes it vital for HR to choose a firm that will do it correctly.

Employee Interest in Various Insurance Types

The following percentages of employees (and their dependents) rated
these types of insurance as being extremely or very important.

                                            Self           Dependent

Medical plan                                 96%               96%

LTD                                          82                76

Auto                                         79                not
                                                              asked

Prescription drug                            78                79

Dental                                       76                79

STD                                          76                73

Life                                         71                78

Homeowners                                   69                not
                                                              asked

AD&D                                         64                63

Vision                                       62                64

Dread disease                                60                63

LTC                                          57                58

Source: 1994 LIMRA Survey

COPYRIGHT 1997 Society for Human Resource Management
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