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The Enrollment Challenge

Retirement readiness decisions are a daunting task for most employees. According to a 2012 Participant Engagement Study conducted by Lincoln Financial:

  • 41 percent of employees are only somewhat engaged or fully disengaged from any retirement plan
  •  7 percent of employees only are fully engaged and interact with their retirement plan on a regular basis.

Plan communication and education can provide people with the financial knowledge needed to better understand their employee benefits and make better enrollment decisions to achieve better outcomes.

Communication Is Key

The U.S. Employee Benefits Security Administration’s ERISA Advisory Council published a key report in 2010 on how plan communication practices and design options impact participation and contribution rates. They researched strategies for tailoring communications to different subgroups of employees through direct communication, and their effectiveness in influencing participants of diverse demographic market segments, including segments categorized by income level, household status, generation, gender, and ethnicity.

The report then provided recommendations of best practices for enrollment that are statistically proven to be effective, including education to plan sponsors on specific proven techniques and communication practices. In evaluating what communication methods are most effective in encouraging participants to save for retirement, the following considerations were made:

  • Cost: an effort was made to balance the need for comprehensive plan communications against cost.
  • Delivery: A variety of methods were explored including the use of current and emerging social media.
  • Plan Design: The study reviewed how plan designs relate to increasing participant enrollment and savings. In particular, the Council studied the use of automatic features. Automatic enrollment plans automatically choose the employees’ contribution percentage and enroll the participant in an investment vehicle. This raises participation rates to close to 90 percent. However employees enrolled at low contribution rates of 3% or less tend not to deeply consider or increase their contributions.


9 Recommendations and Best Practices

The Council found that effective plan communication and education can provide people with the financial knowledge needed to understand their employee benefits, make better financial decisions, and achieve better outcomes.

Given that the most successful plan communications make use of many channels from print to external websites, online tools, social media, and creative marketing, the Council highlighted best practices that balance personalized, targeted content to help employees evaluate benefit offerings with cost efficiency. They highlighted specific techniques and communication practices that have been statistically proven to be effective in increasing the involvement of employees in saving for retirement. The following are 9 recommendations:

  1. Communications tailored to particular segments drive results
  2. One-on-one or small group meetings increase participation
  3. Immediate “on the spot” communication is most effective
  4. Short, simple and focused communication drives participant response
  5. Multiple “touches” with various creative formats increase participation
  6. Increased technology use is effective and cost efficient
  7. Behavioral economics and “social norming” can increase participant involvement and savings
  8. Incentives given by sponsors and “gamification” help trigger participant involvement
  9. Responsive marketing principles may assist plan sponsors in improving communications

Here is a brief synopsis of these 9 practical recommendations and some best practices:

1. Communications Tailored to Particular Segments 

tailored-skill-development-imageThe Council found that communications that target participants based on their interests, background, and/or economic status were more successful than the “one size fits all” approach.

Understanding the culture and background of the workforce being targeted is key. For instance, since Hispanics will soon constitute one-third of the US population, Council member Donna MacFarland of Lincoln Financial Group stated that in her experience education materials typically are translated from English to Spanish, whereas she recommended that sponsors design the material using the reverse approach, developing  materials first in Spanish to address specific cultural needs and language differences.

Human Resource professionals also have found that allowing employees to map out an action plan rooted in realistic scenarios is an extremely effective tool. Some plan sponsors have successfully used a “three-pronged” approach to reach out to their participants by combining simple income replacement projections, behavioral finance strategies and a personalized message. For example, JP Morgan developed 36 different personas based on three age groups (younger than age 30, age 30-50 and older than 50). The firm also targeted participants based upon their regional median income (e.g., Kansas’ median income is $30,000 while in New York City it is $70,000). The basis for this approach was to enable these groups to compare themselves against their peers and take the appropriate action toward saving for retirement.

By narrowly tailoring their target audience on behalf of the plan sponsors that retained them, JP Morgan subsequently monitored whether employees opened their email communications and took action toward saving for retirement. If the individual took action, that person was considered “active,” while someone who opened the email but did not take action was considered “interested.” Based upon the action taken by the individual, the participant received specifically targeted information. This technique resulted in three to four times the response rate of participants who were not targeted.

However, some witnesses advised that there is a general concern regarding the use of targeted communications because complex data collection may provide gender or ethnic identification. Thus, there is concern over whether specific segments identified based upon race or gender could raise discrimination or deferential treatment issues. The Council heard testimony from Donna MacFarland of Lincoln Financial and Thomas Ryan of Fidelity that the use of particularly sensitive demographic information causes concern among plan sponsors. There are also practical concerns about housing information technology. Nevertheless, the overwhelming opinion received during testimony was that targeted communications work.

Branding helps targeting through the use of communications that include a unique positive image that is the group can relate to.

Here are some best practices of participant-centric communication methods:

  • Best Practice 1 – The Power of Example: Trustees of the Elevator Constructors 401(k) Plan used materials featuring the story of three employees who made different savings decisions during their careers. The narrative of the three employees was used throughout one-on-one sessions with printed materials to demonstrate how a 401(k) contribution would benefit participants in a variety of circumstances including temporary layoffs, hardships and early retirement. As a result, plan participation rates increased from 26.56 percent to 29.82 percent in 2011. The plan also experienced an 85 percent increase in plan activity from meeting attendees.
  • Best Practice 2 – Employer/Employee-Centric Content: M.A. Mortenson Company, an international construction firm, employed construction-related themes in its financial education to engage participants and foster pride in the company. Financial education was made mandatory and workshops were divided by career stage, age, and gender. The plan sponsor focused on participants’ preferences by surveying them after the workshop and making recommendations based on their feedback to yield desired results.
  • Best Practice 3 – Bilingual: Consolidated Citrus Limited Partners wanted to 1) increase attendance at plan educational meetings, 2) increase plan participation, 3) increase deferral rates and 4 encourage participants to maximize their match. Ninety percent of the workers spoke only Spanish, and the majority of their day was spent in the orange groves. An in-language campaign was initiated. The company’s Spanish speaking leaders met with small groups in the orange groves. Straightforward collateral in both Spanish and English Collateral were available on site, including announcement posters. By bringing the meetings to the employees, 95 percent of the targeted group attended the meetings. Plan participation increased from 40 percent to 75 percent and deferrals expanded from 4 percent to 8 percent.
  • Best Practice 4 – Branding: The Animation Guild 401(k) Plan was implemented for artists working at Southern California animation studios. The sponsors worked with the Guild’s representatives to obtain insights and develop a branded communication urging participants to remember to enroll. The response rate increased over eight percent from the previous year, with 135 new enrollees. Another employer cited in the research increased participation by 30 percent by keeping the message fun, simple and “cool” to target younger workers.
  • Best Practice 5 – Multicultural: The Four Seasons 401(k) Plan needed to convey an important plan change to an employer profit sharing employer matching contribution. The sponsor obtained feedback from bilingual meeting presenters in designing the campaign, and provided materials tailored to Hispanics and presentations also were created in Spanish designed to be culturally and linguistically accurate. As a result, the average deferral rate of the targeted group rose from 2.9 percent to 5 percent, and significantly increased beneficiary designations.

2. One-on-One or Small Group Meetings 

OneonOneAfter a study by Lincoln Financial found that 66% of participants prefer one-on-one guidance, Lincoln made it a component of its financial education model. They found that the need for individualized information is particularly acute for groups with low participation rates, including women and minorities.  Various studies have shown good enrollment and contribution results when employees request in-person group workshops facilitated by financial experts.

  • Best Practice for One-on-One Meetings:In 2012, MassMutual representatives spoke with 150,000 employees in face-to-face meetings. Forty-six percent of these individuals took action to improve their retirement readiness and, in one-on-one meetings, 75 percent of employees took action.
  • Best Practice for Small Group Meetings: Costs and timing may prevent plan sponsors from providing one-on-one meetings, but small group meetings and audience segmentation have also been successful. The FINRA funded Nurses Investor Education Project had small group meetings for well-educated nurses interested in taking action toward their retirement. They found that generally, the nurses’ lack of basic knowledge, or their perception that they did not know enough to attend these sessions, prevented them from attending their plan sponsor’s meetings. As a result of using small group meetings as a forum, the nurses perceptions changed and attendance at their employer’s retirement plan sessions improved.

3. Immediate “on the spot” Communication 

onthespotThe ability for participants to take action at the time they are thinking about retirement savings is more effective in increasing enrollment. For example, having computers in the room at the time employees are learning about the plan would allow them to sign up and take immediate action.

  • Best Practice: A US Army mandatory financial management course found that providing the enrollment forms for the Thrift Savings Plan during the financial management course resulted in a sizeable increase in participation, with soldiers signing up for the Plan before leaving the classroom.

4. Short, Simple, Focused Communication 

focusedBehavioral studies show that the most effective communications use simple, straightforward language specific to a participant’s personal situation.

  • Best Practice: Time constraints mean that any impediments to action should be identified and mitigated. For example, on a website, any extra step, such as the need to retrieve a PIN, may prevent employees from taking action. Solutions include sending the PIN directly to their email account or a mobile number, or mailing a postcard with the website’s uniform resource locator (URL).

5. Multiple Touches With Various Creative Formats 

profileConsistent, continuous and on-going meaningful communication can be achieved by repeatedly sending out simplified mailings. Social media can help alleviate the cost of additional touch points, and yet, few companies use social media channels for retirement information.

  • Best Practice: The Council’s Professor Madrian cites a company in which the third mailing of a simplified reply form requiring the checking of a box to enroll doubled enrollment from 22 percent to 45 percent of non-participating employees.

6. Cost Effective Technology 

advancement-of-technologyEvery demographic group is now using the Internet as a preferred source of information, via home computer or mobile devices. In addition, electronic media provides the ability to track responses, which is unavailable when the communication is sent through printed materials and regular mail. Another cost effective technological advance is Dynamic Page Publishing,  reviewed at the conclusion of this article.

A Deloitte study in 2012 that found:

  • 93 percent of Americans place Internet access as the most valued household subscription;
  • 54 percent of Americans own smartphones, and the rate is increasing 29 percent annually.
  • One of three Americans over age 50 has downloaded an application to a smartphone, and 28 percent access their bank accounts via smartphone.

Engaging Millennials: Electronic media is the most effective method of communication to engage younger generations in retirement planning, including Generation X (born between 1965 and 1979).  In order to combat inertia caused by competing financial priorities, such as student loan debt, it is important for this group to be engaged through “YouTube” videos, Facebook forums, Twitter, email and mobile delivery, including providing “one click” transactions and incorporating elements of “gamification.”   Millennials also demand simple, personalized, and action-oriented communications, and prefer human contact for complex tasks.

  • Best Practice – Email: Thomas Ryan of Fidelity Investments testified to the Council that Fidelity makes all channels of communication accessible, and finds that email communications have generated higher response rates than direct mail.
  • Best Practices for Engaging Millennials – Fidelity: Fidelity has studied the preferences of Generation Y, or “Millennials”  for using electronic communication, and found that this group tends to rely heavily on the Internet to interact with representatives from Fidelity, although they appear to be the least engaged when it comes to the frequency of contact. Millennials serviced by Fidelity have the lowest 401(k) participation rate, at 58 percent, compared to 67 percent for all other populations. Design changes made to simplify online interaction with Millennials resulted in a 40 percent increase in web utilization by this group.
  • Best Practices for Engaging Millennials – Putnam: Lori Lucas of Callan Associates discussed Putnam’s roll out of a plan primarily for Millennials that encouraged participants to bring their tablets to an nteractive meeting to log on to the benefits website. As a result, 40 percent of attendees increased their deferrals within 90 days after attending the meeting.
  • Best Practices for Engaging Millennials – MassMutual:: Offering enrollment and savings increases using iPod Touch devices in group meetings resulted in action rates of 85 – 90 percent among those attending. The use of targeted and tested mail and email campaigns resulted in $150 million in new deposits over three years and a 3.9 percent increase in action rates.

7. Behavioral Economics and “Social Norming” 

choiceThe way certain information is presented can have a resounding impact, including the way choices are presented to the participant, a method referred to as “anchoring”

Presenting options in a different order or with a higher default percentage has increased deferral rates. While communications traditionally list contribution percentages in ascending order from one to five percent, studies have shown that reversing this order so that the first option shown is five percent markedly increases enrollment in the five percent option. This method is referred to as “placement.”

 “Social Norming” reflects the fact that people tend to benchmark themselves against their peers. Statistics from the Bureau of Labor Statistics show that participants tacitly compete against peers in similar socioeconomic conditions.

8. Incentives and “Gamification” 

carrotThe use of games (gamification) is an effective tool in reaching  individuals who may not be easily engaged in retirement decisions (“non-savers”). Gamification can be used to reward people if they engage in the correct behaviors. Plan sponsors may also use incentives to provide rewards to participants with who exceed a certain benchmark contribution amount. Other techniques include raffles.

  • Best Practice 1: The NFL’s “Play 60” campaign  incorporates the use of the NFL brand to incentivize children to play a game for at least 60 minutes a day.
  • Best Practice 2: A rug manufacturer in northern Georgia had a series of meetings for people working multiple shifts, giving away lottery tickets to encourage attendance, and experienced standing room only for the meetings.

9. Six Marketing Principles Improve Communications

Communications that are uninspiring and difficult to undmarketing-300x200erstand leave employees confused, bored and unmotivated. The communicator’s “curse of knowledge” is a bias in which the communicator’s knowledgeability makes it difficult to demonstrate it from the perspective of lesser-informed people. The Council highlighted six principles of communication that plan sponsors should consider when drafting documents or presenting to their participants that will inspire action:

1. Show Empathy

empathyTo  determine the relevance of a message to an audience, it is necessary to engage them and ask questions that the content of the presentation or the communication should then be tailored to answer. For example, an energy company developed a program to help consumers understand and lower their energy bills, using this computerized question:

Can I help you with your bill?

  1. Yes, help me understand my bill.
  2. Help me save money.
  3. Both of the Above.
  4. I’m Here for Something Else.

By showing empathy to what the consumer cared about and giving information and tips to help them feel more in control, these questions presented helped raise consumer satisfaction.

2. Use Metaphors and Analogies

analogCommunications also reference a metaphor or visual picture to help the recipient relate to the message. For example, when Ridley Scott presented the screenplay for Alien to his producers he used the popular movie Jaws as a reference, and the metaphor “it’s like Jaws in space,” to frame a concept that the producers easily understood

3. Use Storytelling

icon-storytellingPeople tend to forget facts that are presented but usually remember a story. Stories are easy to absorb when people are overwhelmed with information. They also eliminate extraneous facts to capture the recipient’s interest and relate to him on an emotional level.

4. Use a Conversational Voice

conversationalUsing overly technical information, compliance or legal jargon can loose an audience. For example, it is difficult to convey the benefit of voluntary life insurance individual and spouse buy-up options in which election of coverage for a spouse can equal up to half an individual’s buy-up,  depending on the desired level of coverage. An effective way of communicating this is as follows:

“The company is going to buy life insurance for you. If you want, you can buy extra life insurance. Whatever extra life insurance you buy for yourself, you can also buy up to half that amount for your spouse. Now, depending on how much additional insurance you’d like, one or both of you may need to answer some questions about your health to see if you qualify for it.”

5. Surprise the Recipient

boxing-glove-surpriseUnexpected methods of engaging the recipient get the individual’s attention when a subject is ordinarily challenging and abstract. The use of humor, as shown below, can be considered an example.

6. Use Humor

humorUsing a little humor in the message will keep the audience engaged and make the message easier for audiences to relate to.


Plan Design Considerationsicon-design

Automatic Enrollment

A study by Brigitte Madrian and Dennis Shea shows that automatic enrollment increases average participation rates from 65 percent to 85 percent. It is particularly helpful for low-income workers with annual wages under $20,000, where participation increased from 27 percent to 82 percent. Average participation for employees under age 30 doubled from 41 percent to 82 percent, and the best improvements have been among the segments that had the lowest participation rates.  This was corroborated in as presented in the testimony of Lori Lucas.

Mandatory Contributions and Automatic Escalation

Defaults that are too low can  impact workers who would otherwise have contributed more. Since studies have shown higher default contribution rates have not increased opt-out rates, employers should consider recommending higher default contribution rates.

One solution is a stretch match (increasing the maximum amount of pay that can be matched and decreasing the percent matched, to keep the employer’s costs flat.

Another way to increase savings is automatic escalation in which sponsors automatically increase a worker’s contribution rate by one to two percent  of salary at each pay anniversary until a cap, such as 12 percent of pay.

Best Practice – TIAA-CREF: David Richardson of TIAA-CREF found that 403(b) plans typically have much higher contribution rates, ranging from 10 percent to 15 percent of pay compared to 5 percent to 7percent for all 401(k) plans, due to mandatory contributions from both employers and employees as a requirement of employment.  The 403(b) plans TIAA-CREF administers experience much higher annuitization rates — 40 percent compared to 4 percent for all 401(k) plans.

 Conclusions and Implications

red pencilThe Council found that continuous, simplified, personalized communication using multiple channels, connected with humor and empathy, are effective ways to communicate with plan participants to encourage participant engagement.

Benefit Program Marketers seeking to increase employee plan participation need to be more flexible, customizable and responsive than ever to introduce, present, promote and clarify the particular offerings and choices the employer has agreed to sponsor. Dynamic Publishing platforms are becoming a key tool in executing this strategy DPP is a way of designing publications in which layout templates are created which can contain different content in different publications. In cases where the same content is being used in multiple layouts, the same layout is being used for several different sets of content, or both, dynamic page publishing can offer significant advantages of efficiency over a traditional system of page-by-page design. Future articles will explore Dynamic Publishing in greater depth.

Related Blog Article:


Benefits Are More Costly – But More Important


Employers are struggling with employee benefit decisions.

In addition to the challenging economic  and competitive environment, employers now face three key difficulties


  • healthcare reform, 
  • precipitously rising benefit costs,  and 
  • a less loyal workforce.  

The conundrum employers face is that employee loyalty has been steadily declining, while employees are demanding benefits more.  The ninth annual MetLife Study of Employee Benefits Trends, respectively, showed that employees reported:

  • a 12% decline in “strong loyalty” to employers from 2008 to 2011.

Voluntary Life Benefit Programs Help Bridge the Gap

There is renewed interest among employers in voluntary benefits as a means of  promoting loyalty and retention while curtailing benefit costs. And the eleventh annual MetLife Study of Employee Benefits Trends reports that employees are keenly interested in them as well:

  • 61 say benefits meeting their individual needs would make them more loyal.
  • 51are willing to bear more of the cost to have more benefits to choose from.

Voluntary life insurance benefits are highly valued.  A special advantages of life insurance benefit programs is the flexibility that they provide employers in structuring a plan to meet their needs:

  • Avoids complicated reporting and nondiscrimination requirements, giving employers control over whom to reward. 
  • Costs and benefits can be split among employer and employees to fit the needs of the business. 
  • Employers can control the incentives by designing their plan with or without “strings.” 

Here are 3 popular ways that employer-sponsored life insurance benefits are  offered to select key employees

1. Split-dollar – for Cost and Benefit Sharing

RestrictedAccessBenefits: The costs and benefits of a policy are shared between the employer and a select key employee.

During employment: The employer and a select key employee each pay an agreed percentage of the premium.  This could be called a “consumer-directed plan” because it allows the employer to provide an executive with a life insurance benefit with low outlay.

At death: A tax-free death benefit is paid to the employee’s beneficiary,  and a portion goes to the employer to recoup it’s contributions.

At separation from service:  the policy’s cash value may reimburse the employer for his share of the premiums and allow the employee to purchase and keep the policy.

According to National Underwriter, this  continues to be a vital and popular planning tool.

Anticipated Results: Costs and benefits can be split according to the employer’s needs. The “rollout” of the benefit to the employee upon separation of service can be used to tie the employee to the company for a long period, encouraging loyalty and retention.

2. Deferred Compensation – for Executive Retirement

quote_executivesBenefits: Non-qualified Deferred Compensation plans can create tax-leveraged financial security for key employees by allowing them to defer a portion of their income into a cash value life insurance policy. The plan can provide benefits in lieu of or as a supplement to a qualified pension plan.The employee elects to receive less current compensation and defers receipt of that amount to a future tax year.

  • The cash value can provide supplementary retirement benefits, even if the employee is already receiving the maximum benefits under the company’s qualified plan.
  • The employer gets a tax deduction when the employee receives the compensation.  
  • The employer can avoid the cost and administration of a qualified plan and the cost and complexity of covering all employees.
  • The death benefit can allow the business to recover costs.

Anticipated Results: The deferrals provide a way for employees to save for retirement. The employer can select who receives benefits, when they receive them and how much they receive, and there are fewer administrative issues than under unlike tax qualified plans –  since the Department of Labor has ruled (Advisory Opinion Letter 90-14A) that this arrangement is not subject to Labor Regulations Section 2510.3-102, which requires participant contributions to an ERISA pension or welfare plan to be held under a formal trust arrangement.

3. Executive Bonus – for Trusted Key Employees

exe_bonusBenefits: The employer provides additional monthly compensation to the employee, and receives an annual tax deduction.

The bonus pays for the premiums of a life insurance policy owned by the key executive – a valued personal asset  giving the employee access to the cash values and providing a death benefit for his/her beneficiaries.

Anticipated Results: A Section 162 Executive Bonus Plan is one of the simplest and most transparent plans. For a more personal organization, it provides transparency and trust. It’s tax deductible to the employer, and provides a fully paid, fully vested life insurance benefit for a particularly important and trusted key employee.

A Good Broker/Benefit Specialist Is Key

Given the flexibility of these plans, it is important to have a qualified benefits specialist or broker, knowledgeable in life insurance planning to:

  • help the employer select the implementation strategy that fits its specific needs and objectives.
  • provide a prototype agreement for plans that require one.
  • promote participation and appreciation for the employer’s sponsorship.

Research indicates  that 68% of employees spent little time or effort in making their benefit selections; however,  employers who provide outstanding communications are more highly effective in enrollment and are more likely to report that their employees are highly satisfied with their benefits (82% vs. 61%.)

Voluntary Life Insurance Benefits can help give employers an edge in retaining valued, qualified key employees –  who are often the engines of growth for a business or practice. Retaining superior key employees also means retaining a superior benefits broker who can help with the planning, the implementation and the communication.

Related Posts:

Michelle Singletary, Columnist for the Washington Post, points out that it’s time to elect a health Care plan. At the end of the year, employees have the opportunity to make changes to their workplace benefits for the next year.

Costly Mistakes in Open Enrollment

During open-enrollment season, most people fail to make a choice but just go with what they already have. Even worse, many employees make costly mistakes. A survey of 2,500 consumers conducted for Aflac finds :
  • 56% of employees estimate they waste up to $750 annually because of their errors during open enrollment, such as electing the wrong level of insurance coverage or choosing benefit options they didn’t need.
  • 61% said they are only sometimes or not at all aware of changes to their insurance policies each year.
  • 89% simply default to the same options every year.
  • Only 16% say they contribute the right amount to flexible spending accounts.

The Fear Factor

A survey by Aetna also found that workers consider it extremely difficult to choose health-care benefits. Employees surveyed said:

  • Health enrollment is the second most difficult major life decision behind saving for retirement.
  • Choosing health-care benefits is more difficult than purchasing a car, making decisions about medical tests or treatments, parenting and selecting other forms of insurance.

What’s the Problem?

The employees surveyed by Aetna said that the reasons they found these benefits decisions so difficult is that:

  • The information they are given is confusing and complicated.
  • There is conflicting data.
  • It’s hard to determine which plan is the right for them.

What Can Health Insurers Do?

Considering how vitally important this decision is, it is truly unfortunate that health care insurance providers have not been able to crack the code in distilling highly complex product information into easy-to-grasp and compelling value propositions.

One of the reasons for this is that health care industry is far behind the curve in customer-centricity. Only now in the wake of health care reform is the health insurance industry beginning to understand that they need to move toward a more consumerist individual retail model. This is vitally important because:

  • “Consumer-driven plans”– Employers are shifting more responsibility onto the individual employee in the form of  in which the employee needs to be more actively engaged in his or her health care decisions.
  • Health care exchanges under healthcare reform require individuals to compare providers online to make decisions about their coverage options.
  • More Medicare coverage options today include traditional Medicare, and plans provided through private insurers including: Medicare supplement policies, Medicare Advantage Plans, and Medicare Part D Prescription Drug coverage.

Since the choices consumers face are complex, and personally significant, Marketers now face the awesome responsibility and challenge of simplifying the decision process for the consumer. Behavioral economics studies have shown that how the enrollment choices are presented make a huge difference to consumers in empowering them to better evaluate their plan choices.

Where’s the Support?

To elect the right coverage for their needs, it is vital that people take the time to calculate their yearly medical expenses. However, Aetna found:

  • 43% of employees rarely or never track how much they spend on out-of-pocket health-care costs.

Marketers clearly need to offer more clear and intuitive enrollment materials. They also need to provide a good marketing media mix. For example, while some people are more comfortable reviewing materials on their own, others prefer 0nline guidance or telephone support. The Aflac survey found that half of employees said they would feel more informed if they sat down with an insurance consultant during enrollment. This points to a great need to improve open enrollment meetings.

Best Practices: Some of the information that Aetna provides can be viewed at www.planforyourhealth.com, including:

Aetna’s research has shown that members who use the Member Payment Estimator may save as much as $170 on out-of-pocket costs for more than 30 commonly selected health care services they can research with this tool.

To help consumers better understand how health care reform impacts them personally, Aetna created the Health Reform Connection website which provides information on the different elements of health care reform.

The Genius of Simplicity

While large health care insurers like Aetna are taking the initiative to create innovative tools to ease the enrollment decision and empower members to make more informed decisions, still the sheer volume of Aetna’s web-based materials can itself be overwhelming, and the danger of overwhelming consumers with too much information remains an issue.
The key is to provide tools and systems that are informational, consumer focused and, most importantly, effectively simplify the consumer decision process. Less is often more. Carmine Gallo in Forbes summed up how important simplicity is to Apple’s success:

Your customers demand simplicity and simplicity requires that you eliminate anything that clutters the user experience.

The key to marketing success is to simplify your customer’s buying process for your products or services, and to simplify your communication messages to one core promise for your key customers.
This infographic tells the story of how much obesity costs employers. We in the U.S. are, as a nation, obese. It’s a serious problem, and it’s taking a heavy physical, psychological and economic toll on us. Matthew Pelletier, C&S Safety Training Videos Director of Public Relations, has offered to share this great infographic:

An Industry In Retreat

As reported in Health Life Pro, Prudential Group Insurance, a division of Prudential Financial Inc., which manufactures and distributes group life, long-term and short-term disability as well as corporate, trust-owned life insurance, accidental death and dismemberment and other coverage and plan administrative services, announced on October 9, 2012, that it is discontinuing the sale of dental insurance, offered primarily to the small-group market.

Prudential’s decision to drop these lines of business is consistent with a general trend among many large carriers to drop supplementary lines of business and  concentrate on their core strengths, in order to focus resources on more profitable product lines.

Hartford recently sold their individual life unit to Prudential, including  universal life, variable universal life, indexed universal life, term life and whole life insurance products, which they had offered through a variety of distribution channels in the U.S.  As a result of the sale, Prudential will reinsure about 700,000 life policies that provide about $135 billion in coverage, giving them control over the $7 billion in assets and reserves backing the policies, and allowing them to take over management of $5 billion in separate account assets.

As I reported here, the Hartford was pressured by their largest shareholder to sell off supplementary businesses and focus on their core product suite.According to John Nadel, analyst at Sterne Agee, the sale of its individual life business frees up roughly $1.5 billion of statutory capital, “well more than the estimated $1 billion investors were expecting.” This transaction is the last of three planned business sales intended to allow the Hartford Group to focus on its strategically important businesses, in which it has greater scale and competitive advantages.

Concerns Over Long Term Care Insurance

Prudential’s decision to drop this line of business follows their decision in July to discontinue sales of new group long-term care insurance, due to complications with this type of product.  The decision is said to be a tactical one which  Prudential hopes can help them focus on their life and disability products, where it sees the greatest opportunity for long-term growth. Prudential discontinued sales of LTC group coverage in all states except Indiana, Iowa, Kansas, Louisiana and South Dakota, where the company is required by law to continue to offer products for a period of time. The decision is based on the continuing effects of low-interest rates and Prudential’s desire to achieve appropriate returns, enhance its long-term risk profile and maintain sustainable profitable growth, in its core group life and disability lines of business, according to the company.

A Troublesome Industry Trend

In recent years, a number of companies have expressed concern over the complicated nature of long-term care insurance. MetLife, Allianz, Aetna, UNUM and Guardian have all exited the business, largely because they say it is difficult to anticipate payouts due to the a rapid increase in healthcare costs. Genworth remains the last remaining major insurer in the Group LTC business.

With other leading insurance carriers leaving the group LTC market, there has been speculation about whether this product line can continue. Considering that Long Term Care costs are not covered under Medicare, and that the costs of Long Term Care can be devastating to seniors and their family members, this trend can be seen as troublesome.

Should we be concerned about the exodus of leading insurers from Group LTC?

Why LTC Matters

Annual health care spending increases with age

What Is Long Term Care Insurance (LTCI)?

Long Term Care expenses are the non medical costs of caring for a person who cannot take care of him/herself due to a chronic medical condition. Long term care services are not typically covered by health insurance or Medicare and can include:

  • In-home care
  • Nursing home or skilled nursing facility care
  • Assisted living facility care
  • Adult day-care
  • Alzheimer’s unit care
  • Hospice care

Since these costs are very expensive, and not covered by Medicare, uncovered LTC expenses can quickly devour a family’s financial assets:

  • In 2008, the average cost to stay in a semi-private room in a nursing home for one year was $68,000.*
  • The average cost of one year of in-home care was $18,000, assuming care was given by a home health aide about three times a week.*
  • Long term care costs increase about 4 percent per year.**

See Long Term Care costs in your state.

Government benefits are only offered when a family has spent itself into poverty and qualifies for Medicaid. While people may try to transfer assets out of their name to qualify for Medicaid, the states can’t afford this anymore, and has been tightening the loopholes so that only the truly indigent will qualify for government support. Yet, according to the Department of Health and Human Services:

  • 70% of Americans over 65 will need some long-term care at some point in their lives.
  • Only about 3% of adults have a private LTC policy.

Long Term Care Insurance (LTCI) safeguards a person’s financial benefits.

Is LTC Dead?

As Frank Zappa said about Jazz: “It isn’t dead; it just smells funny.”

According to Richard W. Samson of Employee Benefit Adviser, the exodus from Group LTC does not mean the death of the long-term care industry. He believes that the LTC industry will not only survive, but “may be preparing for vigorous new growth.”

Rather, it appears to be a fight for dominance between “multi-life” and “true group” plans.

And, in addition to multi-life, there are also LTC combinations, such as LTC riders on life insurance or annuities, that are being marketed by a number of insurers.

True Group vs. Multi-Life

True group benefit programs are typically used by larger companies, while multi-life programs are marketed to organizations of all sizes. The differences:

  • True group long-term care insurance issues a master policy to the employer or sponsor, has a group premium structure, and is typically guaranteed issue.
  • Multi-life LTC insurance issues no master policy, but individual policies to each insured member, and has generally greater policy design flexibility. However, in comparison with ordinary individual policies, it provides discounted standard rates and simplified underwriting for active employees.

While Genworth Financial is the last major insurer that continues to promote its true group as well as individual and multi-life plans, several carriers promote multi-life plans, including LTC. They include:

  • MedAmerica Insurance Company
  • LifeSecure Insurance Company
  • United of Omaha Life Insurance Company
  • Mutual of Omaha Insurance Company
  • Transamerica Life Insurance Company (U.S.A.) and Transamerica Financial Life Insurance Company (NY)
  • American General

Samson interviewed representatives of these companies, including Bill Jones, president of MedAmerica, who agrees that the industry is making a fundamental shift from group to multi-life. He states:

 The traditional group plan is being outpaced by multi-life LTC insurance, which is more flexible and fine-tuned for modern organizations.

Med-America has introduced the LTC Complete Worksite Solutions product portfolio, which allows employees to enroll in a low-cost starter plan that may be expanded later.

LifeSecure, after their second year in multi-life LTC, reports that it now accounts for 75% of their placed premium.

A Transition Toward Voluntary Benefits

Samson reports that Eric Cantrell, president & CEO of Collateral Benefits Group, predicts that in the next 10 to 20 years, workplace benefits will largely be voluntary, and multi-life LTC insurance is well suited to a menu voluntary benefits.

Cost Sharing: This is consistent with the current trend in employee benefits, in which the burden of coverage is increasingly shifting from the employer to the employee.

Personalization: Additionally, with the commoditization of healthcare benefits, and increased focus on the individual’s needs, the “one-size-fits-all” or “cookie-cutter” traditional group plans simply don’t give employees enough choice among benefit features and premium costs. Multi-life has the advantages of greater flexibility and personalization, largely due to emerging technology. Benefit brokers and LTC insurance specialists, using electronic systems, can give employees individual attention and greater personalization without taxing the resources of the company.

Higher participation: As a result, while fewer than 10% of eligible employees typically choose to participate in traditional plans, multi-life programs tend to generate much higher, double digit participation rates – between 10% and 20%.

Larger market: True group plans tend to be limited to larger organizations, which tend to prefer to work directly with an insurance carriers. However, the Bureau of Labor Statistics reports that 54% of American workers (59 million) work for companies with fewer than 500 employees. Considering the larger market, and the higher potential participation rates, the market potential for multi-life LTC could grow to represent 70% to 80% or more of the total market.


A challenge for LTC insurance today is that most don’t yet recognize the risk.  But as the American workforce ages, and we live and work longer and longer, the growing need for LTC protection will be increasingly understood, boosting the value of LTC benefits for recruiting and retention.

The market potential is enormous. The American Association for Long Term Care Insurance reports that total earned premium for the LTC industry in 2010 was about $11.7 billion. Based on the estimate of 10% market penetration, LTCI represents potential revenues of over a trillion dollars, $3 trillion over 30 years.

Despite the need and the market potential, awareness remains the major roadblock. Complex Long Term Care products have been a hard sell.

The one-to-one personalization that benefit brokers bring to multi-life worksite products could help overcome that barrier.

*www.longtermcare.gov, October 2008.
**U.S. Bureau of Labor Statistics, Consumer Price Index Detailed Report, September 2009.

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Wellness Programs Reduce Medical Costs

Savings generated from wellness programs based on a meta-analysis of multiple workplace wellness programs

BY  of BenefitsPro highlights a recent study by Zoe Consulting Inc. on behalf of Interactive Health Solutions Inc., a provider of performance-based health management solutions for employers.  The analysis is based on multiple years of medical claim data from two comparable population groups.

The reason this issue is so significant, according to Joseph O’Brien, president and CEO of Interactive Health Solutions, is that health care spending has grown to over 25% of total labor expense. However, the study finds that employers using wellness programs experience a significant average medical cost trend reduction that includes:

  •  6.1% average annual medical cost trend reduction.
  • 13.5% average annual medical cost trend reduction among members with core conditions, including:
    • asthma, coronary heart disease, chronic obstructive lung disease, diabetes and hypertension.
  • Many health effects from core conditions can be managed through early detection and compliance with prescribed therapies.
  • 7.7% reduction in per member per month for the survey’s final year.
  • 85% of members maintain or lessen their health risk levels.
  • Fewer days off due to workers’ compensation and short-term disability claims.
  • 9 day earlier returns to work under workers’ compensation
  • 17 days earlier returns to work for short-term disability.

The Consumer Decision is More Complex than Ever

According to McKinsey Research, consumers are changing the way they buy – from the traditional metaphor of a “funnel”of narrowing brand choices to a “consumer decision journey” with increasing touchpoints and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer. 

But Are We Ready for Prime Time?

The Supreme Court’s decision to uphold the Affordable Care Act creates new market opportunities for healthcare insurers. However, this means that they will now have to meet retail market challenges they have not previously focused on, including competition, price and margin pressure, and consumer education.

Already, group insurance carriers were in a quandary about how to differentiate their brand in a crowded market space in which consumers find it difficult to evaluate competing carriers. This considerably raises the bar for all insurance providers.

The Consumer Dilemma is the Marketer’s Dilemma

The problem is that the array of coverage choices and similarities of the underlying product offerings make it difficult for the average consumer to make informed decisions. A fundamental principle of consumer product marketing – the primacy of the end user in the purchase decision – has yet to penetrate the financial services industry.I was reminded of this when I recently met with a 30-odd-year veteran of insurance product marketing who asked me the rhetorical question of which is the easier customer to market to: the agent/provider/broker or the end user. His answer was that the end user is the easiest customer to market to.  This is the old marketing paradigm that is out of touch with a brave new world of increased product commoditization and peer-to-peer connectivity.

The Brave New World of Consumer-Driven Marketing

The old paradigm that the end user was the easiest to market to – is symptomatic of the essential disconnect that the financial services industry faces today. What this veteran didn’t yet understand is that, while the business owner providing insurance to his employees and the individual insurance consumers will continue to rely on sales intermediaries for financial advice, in today’s connected world, the producer’s recommendations are just another input in a more complex multi-variable decision process.

Research highlighted on this blog shows that consumers increasingly turn to peers, elders, social networks and their own online research for input. Add to this the viral nature of information on the internet, and you now have so many consumer touch points that it has become increasingly difficult to quantify what works and what does not. This creates a real dilemma for marketers attempting to measure the effectiveness of marketing efforts. In today’s environment, the consumer is the most important, and most complex customer to serve. 

Consider the business of financial services. We deal in intangibles that promise value. Regardless of whether the product is tangible or intangible, informed marketers have long known this essential marketing principle: you must create differentiation around consumer values.

Develop a Retail-Style Customer Service Capability or Die

To implement this strategic vision through tactics in an increasingly complex social marketing environment, you must create a symphony of consumer touchpoints that reinforce the value of the brand in the consumer’s mind, making it relevant and personal.Ashu Roy, Co-founder, Chairman and CEO, eGain recently guest posted an insightful article in Forbes titled Why Customer Service Matters in the New Healthcare Insurance Landscape.  He pouts it this way:

“Cost-effective, yet, reliable direct-to-consumer customer service before, during and after the initial “sale” will be a critical competence for success. Insurers need to develop this retail-style customer service capability not only within their business but also in their ecosystem of providers, exchanges, brokers and other distribution channels.”

3 Strategic Principles to Implement

 1. Replicate The Best Contact Center Agents through Knowledge Management Systems

Since insurance products have historically been sold through human-assisted channels like brokers, many potential insurance buyers are likely to want to speak to a contact center agent even when purchasing online.

With the prospect of increasing numbers of customers upon implementation of the ACA, to scale customer service across millions of consumers and guide them through the initial purchase, on-boarding and ongoing service, this means that insurers need to make all their agents as good as their best ones so that they could all become effective advisors and brand ambassadors.

Even if your customer base is not expected to grow, creating an experience in which all consumer touch points reinforce the basic values of the brand is key to purchase consideration is key in today’s market.

The knowledge and know-how of star agents can be captured and disseminated at the point of customer engagement to all agents by modern knowledge management (KM) systems. This knowledge can be extended to any customer touch-point as well as to your ecosystem selectively so that your entire network is well-informed and empowered to sell to and serve the consumer.

 2. Make it Easy to Buy and Enroll

Consumers go through three distinct phases when they buy insurance:

  1. Find options.
  2. Compare.
  3. Buy.
When they find obstacles along the way, they simply go elsewhere. In retail, this is called “shopping abandonment,” but the phenomenon is equally rampant in other industries, including insurance. Carriers that make it easy for the consumer to go through these steps will be able to grab and expand market share.
Considering each of the purchase phases, how can insurers make it easier for consumers to buy from them?

Find: Insurers can help consumers find things easily by going beyond basic keyword search, which famously lacks in intelligence, by leveraging technologies like natural language search, chatbots and GPS-style guided help, based on sophisticated AI (Artificial Intelligence) technologies like CBR (Case-Based Reasoning).

Compare: Insurers can also make it easy for the consumer to compare by aggregating results from their search not only from what’s on their own website but also from third-party sources like review sites and online forums.

Buy: Insurance companies are investing in more seamless enrollment platforms. They can make it easy for the consumer to buy and enroll through technologies such as collaborative form-filling, where agents can talk to a customer on the phone, while simultaneously helping the customer fill enrollment forms online. With modern collaborative browsing technology, the insurer can preclude the agent from seeing confidential customer information or taking actions that only the consumer should be able to.

3.  Serve Consumers Where They “Live”

The rapid adoption of social networks and new consumer devices means that to reach and serve them, insurers need to go where they are. Consumers hop across these touchpoints, and expect these interactions to be connected so that they don’t need to repeat information and provide context again and again. They want consistent answers and service through each touch-point. Insurers that take an integrated approach to member engagement across touchpoints can deliver on this expectation, while others will lose market share.

Where Brand Meets Customer Service

Recent McKinsey research provides two important findings:

  1. Consumers have changed the way they make decisions, but we haven’t changed the way we engage them. Or not enough.
  2. Consumer decision process in nonlinear and dynamic.

According to McKinsey:

Marketing has always sought those moments, or touch points,

 when consumers are open to influence. For years, touch points have been understood through the metaphor of a “funnel”—consumers start with a number of potential brands in mind (the wide end of the funnel), marketing is then directed at them as they methodically reduce that number and move through the funnel, and at the end they emerge with the one brand they chose to purchase. But today, the funnel concept fails to capture all the touch points and key buying factors resulting from the explosion of product choices and digital channels, coupled with the emergence of an increasingly discerning, well-informed consumer. A more sophisticated approach is required to help marketers navigate this environment, which is less linear and more complicated than the funnel suggests. We call this approach the consumer decision journey. Our thinking is applicable to any geographic market that has different kinds of media, Internet access, and wide product choice, including big cities in emerging markets such as China and India.
While the funnel metaphor does help by providing a way to understand the strength of a brand compared with its competitors at different stages, highlighting the bottlenecks that stall adoption, and making it possible to focus on different aspects of the marketing challenge, McKinsey points out that the decision-making process is a more circular journey, with four primary phases (as illustrated in the graphic at the top of this article) representing potential battlegrounds where marketers can win or lose:
  1. Initial consideration.
  2. Active evaluation, or the process of researching potential purchases.
  3. Closure, when consumers buy brands.
  4. Postpurchase, when consumers experience them.
Some key points:
Deal With Empowered Consumers: Traditional marketing remains important, but the change in the way consumers make decisions means that marketers must move aggressively beyond purely push-style communication and learn to influence consumer-driven touch points, such as word-of-mouth and Internet information sites.
Focus on The New Loyalty Touchpoints: 60% of consumers of facial skin care products go online to conduct further research after the purchase — creating a touch point.When consumers reach a decision at the moment of purchase, the marketer’s work has just begun: the postpurchase experience shapes their opinion for every subsequent decision in the category, so the journey is an ongoing cycle.
Of consumers who profess loyalty to a brand, some are active loyalists, who stick with it and recommend it. Others are passive loyalists who stay with a brand but are open to messages from competitors who give them a reason to switch.  McKinsey’s research found as much as a sixfold difference in the ratio of active to passive loyalists among major brands, so companies have opportunities to interrupt the loyalty loop. The US insurers GEICO and Progressive are doing just that, snaring the passively loyal customers of other companies by making comparison shopping and switching easy.

All marketers should make expanding the base of active loyalists a priority, and to do so they must focus their spending on the new touch points. That will require entirely new marketing efforts, not just investments in Internet sites and efforts to drive word-of-mouth or a renewed commitment to customer satisfaction.

Tailor messaging:  New messaging may be required to win in whatever part of the consumer journey offers the greatest revenue opportunity. Evaluation may show that a general message cutting across all stages may need changing. Instead, you may need to address key weaknesses at a specific point, such as initial consideration or active evaluation.

Invest in consumer-driven marketing: To look beyond funnel-inspired push marketing, companies must invest in vehicles that let marketers interact with consumers as they learn about brands. The Internet is crucial during the active-evaluation phase as consumers seek information, reviews, and recommendations. Strong performance at this point in the decision journey requires a mind-set shift from buying media to developing properties that attract consumers: digital assets such as Web sites about products, programs to foster word-of-mouth, and systems that customize advertising by viewing the context and the consumer. Connectivity lets marketers provide rich applications to consumers learning about products. Marketers can influence online word-of-mouth by using tools that spot online conversations about brands, analyze what’s being said, and allow marketers to post their own comments. Content-management systems and online targeting engines let marketers create hundreds of variations on an advertisement, taking into account the context where it appears, the past behavior of viewers, and a real-time inventory of what an organization needs to promote.

Integrate All Customer-Facing Activities

Today, different parts of the organization undertake specific customer-facing activities—including informational Web sites, PR, and loyalty programs. But these activities are seldom integrated sufficiently with appropriate leadership.

The full scope of the consumer decision journey goes beyond the traditional role of CMOs focusing on brand building, advertisements, and market research. What’s now required of CMOs is a broader role that realigns marketing with the current realities of consumer decision making, intensifies efforts to shape the public profiles of companies, and builds new marketing capabilities.

Companies need an integrated, organization-wide “voice of the customer,” with skills from advertising to public relations, product development, market research, and data management. McKinsey argues that to unify these activities, the CMO is the natural candidate to do so.

Snap! principle of consumerization of financial services:

Creating a symphony of touchpoints begins with a consistent vision and communication throughout the organization.