Banks Urged To Sell Bundled Employee Benefits

Businesses with fewer than 100 employees can generate millionsin revenue for a bank willing to pursue the market for bundledemployee benefits, one leading insurer contends.

There was almost a 20 percentage point increase in the number ofsmall employers with group medical plans between 1994 and 2000,from 52 percent to 71 percent, according to the Life InsuranceMarketing and Research Association in Windsor, Conn., noted WilliamLeary, senior vice president at American General Financial Group inHouston.

A good deal of the growth was spurred by the debate over anational healthcare plan early in the Clinton administration, hesaid. “It awakened the need for healthcare coverage among smallemployers,” he added at a conference earlier this month in SanFrancisco, sponsored by the Corte Madera, Calif.-based FinancialInstitutions Insurance Association.

Selling group benefits strengthens a bank's ties to smallbusinesses, and can enhance revenue for a variety of otherinsurance lines offered by the bank, according to Mr. Leary. Againciting LIMRA data, he noted that group disability sales increased 8percent in the first quarter of 2001 compared to the same periodlast year, while group life during that time grew even moreimpressively–42 percent for both term- and permanent life.

Small businesses needing a way to recruit and retain employeeswant to offer benefits, even though many can afford to offer onlyemployee-paid or voluntary benefits, Mr. Leary noted.

American General has 34,000 small-business clients for variousgroup plans, mostly life and long and short-term disability, headded. Of these, 31,000 have fewer than 50 workers. AG sells theplans through a variety of channels, including banks. With itsrecent acquisition by New York-based AIG, the combined companyranks number 12 in the employee benefits marketplace, he said.

Kevin Gannon, president of Niagara Benefits Group inWilliamsville, N.Y., urged banks to see themselves as a way to helpfill the benefits advisor gap for small businesses. Fewer than halfof small businesses have an advisor who assists with benefitspurchases, according to Mr. Gannon, whose company works withAmerican General, banks and other partners to administer benefitplans.

Offering bundled benefits helps a bank take advantage of theneeds of this market, he said. Typically, such programs consist ofan HMO, plus dental, disability, group and individual life, andadministrative services. “This is a natural product for banks. Youhave the customer base,” he said.

Banks are a good channel for producing group benefits programsbecause small-business owners want to work with advisors theyalready know, he observed. “My company will write 12,000 newcontracts this year, 10,000 of which will be for businesses withunder 50 workers,” he said.

Another advantage of going after small employers is theirendurance as customers, with about 90 percent staying with his firmyear after year, he said. Most of those who leave do so onlybecause theyve gone out of business or been acquired, he added.

Financial institutions can often work with insurance carriers toco-brand products for small businesses, he noted.

Banks can often make inroads by showing small businesses howthey can offer a full range of benefits at no cost to them, throughvoluntary benefits that fit the needs of people at various stagesin their lives, Mr. Gannon said.

Not all employers will be ready to take on a bundled package ofbenefits, he noted. But once an initial product is introduced at awork site, an entr?e is gained to offering more and more benefits,he added.

Trevor Thomas is an assistant editor with NU's Life &Health/Financial Services edition.

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, October 29, 2001.Copyright 2001 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.

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