BREAKING DOWN THE MYTHS

Transcription

1 RESEARC H REPORT 2005 Prudential Group Insurance BREAKING DOWN THE MYTHS Research Among GI Plan Sponsors

2 F or more than 85 years Prudential has been developing and delivering unique Group Insurance products. We put our financial strength and experience to work every day on behalf of our 22,000 clients, insuring more than 15 million lives. This research provides valuable insights about plan sponsors and their evolving needs. We hope that by sharing this data we will open the door to increased dialogue and understanding between employee benefits professionals and group insurance carriers. Vivian Banta, Vice Chairman, Prudential Financial S ervice is our hallmark and our service is fueled by the passion we bring to every client relationship. As we learn more about our plan sponsors what they want and how they want it delivered we are better equipped to satisfy their diverse needs. Edward Baird, President, Prudential Group Insurance

3 Breaking Down the Myths Can Help GI Carriers Better Serve Their Plan Sponsors Needs GROUP INSURANCE: EVOLVING PROGRAM NEEDS OF PLAN SPONSORS Employers are facing new challenges and tougher decisions as they seek to maintain an effective benefits program for their employees. These evolving challenges will bring new demands and require more innovation from the carriers that provide employee benefits. Rising benefit costs, employee concerns, stretched HR staffs, and new legislation regarding employee benefits are among the issues that plan sponsors face today. As such, group insurance carriers have to develop solutions that go beyond claims processing and offering competitive pricing. Carriers today are being asked what they will do to continue as effective partners with plan sponsors. Prudential undertook a study of plan sponsors to explore their perceptions of the group insurance industry. The study uncovers many of the expectations that plan sponsors have of group insurance carriers. The research findings address key questions: Do plan sponsors perceive differences among group insurance carriers? Are product innovations keeping pace with the evolving market? What s more important: superior service or lowest price? ABOUT THE STUDY Prudential polled 1,105 senior employee benefits professionals. To qualify for the survey, these professionals had decision-making responsibility for group insurance plans in companies with at least 100 employees. In addition, their companies current group life or disability insurance plans are provided by one of the leading carriers. These carriers, identified by LIMRA, have a combined market share of 70% in group life and 77% in group disability. Interviewing Services of America, an independent market research firm, administered the survey via telephone interviews. Interviews were conducted between December 1, 2004, and January 14, The margin of error is ±2.9%. Survey findings that reflect the total sample (1,105) are weighted to represent accurate proportions of eight carriers combined market share of group life and group disability business. The weighting is based on 2004 YTD sales as reported by LIMRA in its 3Q04 Group Insurance Sales Report. 1

4 GROUP INSURANCE: Plan Sponsors Want Quicker Response and Innovation PRODUCT DEVELOPMENT LAGS SPONSORS NEEDS In the eyes of plan sponsors, the leading group insurance carriers may not be as nimble or responsive as desired. Only one in four plan sponsors (23%) firmly believe carriers are in sync with and can quickly adapt products and services to their changing needs. Most plan sponsors (57%) would agree that carriers do not have a consistent track record for keeping up with the changing demands of employers group insurance needs. PRODUCT INNOVATION CAN LEAD TO OPPORTUNITIES Most plan sponsors believe carriers have ample time to expose the marketplace to a new product or service before it is copied by competitors. Only one in four plan sponsors (26%) agree that product innovation is short-lived. These findings suggest that plan sponsors do indeed recognize and appreciate the advantages that product and service innovation offers. For sophisticated carriers, these findings offer the opportunity to create differentiable and sustainable advantages for their clients. % Agreeing... Disagree Strongly/ Somewhat Carriers are quick to offer products/services that keep pace with changing demands 20% Innovative GI products/services are quickly copied by competitors 26% Agree Somewhat 57% 61% Strongly 23% 13% 2

5 Products Can Differentiate Group Insurance Carriers GROUP INSURANCE: PLAN SPONSORS PERCEIVE TOO MUCH SAMENESS When choosing a group insurance carrier, seeking out the difference among carriers is very important. Without this knowledge, how can companies be sure that they are obtaining the best products, services and value for their benefit dollar? According to our study, however, more than half of plan sponsors cannot identify the performance differences between companies (53%) or the benefits and features of the companies products (58%). Understanding how carrier capabilities differ is especially important when a current carrier is not fully serving a client s needs. MANY SEE IMPORTANT DISTINCTIONS Importantly, nearly half of the plan sponsors (47%) disagree with the statement that large carriers are alike, and 42% see differences in group insurance products. The difference is more evident to plan sponsors in large companies. Fifty-seven percent of sponsors in companies with 10,000 or more employees see company distinctions and 44% feel products are differentiated. There is a bright spot in that very few see no differences (15% products, 13% carriers). Perceptions About Group Insurance Products and Carriers Group insurance products are commodities meaning they are basically all the same Strongly Agree Plan Sponsors Who... Somewhat Disagree Strongly/Somewhat 15% 43% 42% Large carriers are alike nothing really sets them apart from each other 13% 40% 47% 3

6 GROUP INSURANCE: Total Value Is More Important Than Lowest Price OUTSTANDING SERVICE OUTWEIGHS LOWEST PRICE The importance of service prevails over lowest price by a margin of almost four to one. As long as group insurance premiums are competitive, plan sponsors overwhelmingly would prefer carriers that provide superior HR and employee service (77%), to carriers that offer the lowest price (23%), but compromise on service. Today, plan sponsors recognize that superior service can lower overall benefit expenses if it eases administration burdens and reduces employee complexity and concerns. LOW PRICE IS DOUBLY IMPORTANT TO LARGE SPONSORS, BUT SERVICE STILL TRUMPS Six in 10 large plan sponsors (10,000+ lives) want service as their primary criteria. Because of the amount of their annual premiums, large plan sponsors have more leverage. Consequently, large plan sponsors are wellpositioned to negotiate favorable service components at attractive pricing. What s More Important: Superior Service or Lowest Price? More Important... Having the lowest possible premiums for group insurance benefits Total Sample By Employee Lives ,000-9,999 10, % 21% 23% 21% 39% Receiving superior service at a competitive premium for group insurance 77% 79% 77% 79% 61% 4

7 Best Coverage or Streamlined Administration? How About Both! GROUP INSURANCE: BEST COVERAGE PLAN SPONSORS ALSO WANT SUPERIOR SERVICE While six in 10 prefer best coverages, four in 10 require streamlined administration. But, need these goals be mutually exclusive? They should not be, if carriers want to meet plan sponsor goals. Among those wanting best coverage, 78% are willing to pay for superior service, and 84% want the products from large carriers those presumably with the breadth to offer superior products and streamlined service. STREAMLINED ADMINISTRATION PLAN SPONSORS WANT COMPETITIVE PRICE AND PRODUCT CHOICE Over four in 10 want streamlined administration. And 75% will pay above lowest cost for the better service. Yet, does any carrier expect these plan sponsors to give up much on what they need for product coverage? The answer seems to be that both qualities are critical to have successful plan sponsor/carrier relationships. What s More Important? Best coverage by using multiple carriers Streamlined administration by using a single carrier Total Sample Employee Lives Under 1,000 1,000-4,999 5,000+ % Saying More Important Lowest possible premium, or Superior service at competitive premium Smaller firms that specialize in product areas, or Large firms that offer broad range of products 58% 42% 59% 41% 57% 43% 57% 43% 22% 25% 78% 75% 16% 11% 84% 89% % Agreeing GI products are commodities they re all the same Strongly agree Somewhat agree Somewhat/Strongly disagree 14% 17% 43% 43% 43% 40% 5

8 GROUP INSURANCE: Plan Sponsor Challenge: Finding the Time and Knowledge to Make Smart Carrier Choices INSUFFICIENT TIME MAY LEAD TO SUB-OPTIMAL CARRIER SELECTION Nearly half (46%) of plan sponsors strongly agree that they do not have the time to keep up with the different advantages of various carriers. Yet, 39% feel products may be quite different and 44% feel carriers have distinguishing features. Interestingly, plan sponsors with the time to make GI carrier comparisons are even more likely to recognize important differences. STREAMLINED ADMINISTRATION APPEALS TO BUSY PLAN SPONSORS Bundling services through a single carrier appeals to many inundated plan sponsors. Nearly half (46%) prefer streamlined benefits administration through a single carrier versus using multiple carriers to obtain the best coverage. When plan sponsors have the time, carriers have the opportunity to both showcase the quality of their products and their administrative effectiveness when multiple products are provided. Don t Have Time to Follow News About GI Carriers That You Have Not Yet Used Strongly Agree Somewhat Agree Somewhat/ Strongly Disagree Total Sample % Agreeing GI products are commodities they re all the same Strongly agree Somewhat agree Somewhat/Strongly disagree Large GI carriers are alike nothing sets them apart Strongly agree Somewhat agree Somewhat/Strongly disagree % Saying More Important Best coverage by using multiple carriers, or Streamlining administration by bundling with a single carrier 46% 42% 16% 16% 14% 14% 45% 45% 35% 39% 41% 51% 11% 14% 11% 44% 37% 36% 44% 49% 53% 54% 60% 69% 46% 40% 31% 6

9 Surprisingly, Requirements Are Similar Across HR Level/Position GROUP INSURANCE: SENIOR MANAGEMENT IS NOT UNIQUELY DIFFERENT The conventional wisdom that senior management has different needs and perspectives than manager/ director level HR colleagues is not borne out by the research responses. Lowest price is not the criteria; value of products and services for a fair price can win the day. THE LARGEST FIRMS OFFER THE ADVANTAGES According to the research participants, the largest firms are best-positioned to offer breadth of product, service and streamlined administration. Survey Respondents by HR Title VP & Higher Director Manager Specialist % of Respondents 23% 27% 50% Don t have time to follow news about carriers you have not used Strongly agree Somewhat agree Somewhat/Strongly disagree Large GI carriers are alike nothing sets them apart Strongly agree Somewhat agree Somewhat/Strongly disagree % Saying More Important Lowest possible premium, or Superior service at competitive premium 47% 47% 46% 35% 39% 39% 18% 14% 15% 18% 13% 20% 36% 41% 42% 46% 46% 38% 28% 25% 19% 72% 75% 81% Smaller firms that specialize in product areas, or Large firms that offer broad range of products Best coverage by using multiple carriers, or Streamlining administration by bundling with a single carrier 17% 11% 13% 83% 89% 87% 57% 64% 55% 43% 36% 45% 7

10 GROUP INSURANCE: Summation 1. PRODUCT AND SERVICE INNOVATION CAN HELP MEET EVOLVING PLAN SPONSOR NEEDS Only 23% of plan sponsors agree strongly that carriers offer product and service innovations that keep pace with their changing needs and provide competitive advantage for the plan sponsor client. 2. GROUP INSURANCE PRODUCTS ARE NOT COMMODITIES, AND CARRIERS ARE NOT ALIKE Too many plan sponsors think group insurance products are commodities (58%) and that nothing really sets carriers apart (53%). A healthy industry deserves more differentiation. However, 42% of plan sponsors believe there are important features and benefits that differentiate group insurance products. Despite the similar size and credit ratings of the leading carriers, 47% of sponsors see important difference between these carriers. 3. FOR ALMOST EIGHT IN 10 PLAN SPONSORS, LOWEST PRICE IS NOT THE ANSWER If given a choice, 77% of plan sponsors prefer superior service compared to 23% who would opt for lowest premium. Most realize the right mix of competitive price, combined with effective administration and employee services, often achieves the lowest total cost. Even with large plan sponsors (10,000+ lives) superior service trumps lowest price for 61%. These plan sponsors can have both because they have leverage to negotiate stringent service requirements at favorable premiums. 4. WHILE PLAN SPONSORS HAVE LIMITED TIME, MANY BELIEVE THERE ARE IMPORTANT DIFFERENCES ABOUT CARRIERS THEY NEED TO UNDERSTAND Despite being hard pressed for time to follow new developments in carriers they are not currently using, four in 10 believe there are unique attributes that distinguish carriers (44%) and their products (39%). 5. WHETHER BEST COVERAGE OR STREAMLINED BENEFITS ADMINISTRATION IS THE FOREMOST CONCERN PLAN SPONSORS REALLY DEMAND BOTH Fifty-eight percent of plan sponsors think it is more important to receive best coverage by using multiple carriers than to have streamlined administration by using a single carrier. The remaining 42% believe the opposite. Regardless of whether plan sponsors place more emphasis on coverage or administration, about eight in 10 of them consider receiving superior service and a broad range of products to be critical. 6. THE REQUIREMENTS OF SENIOR MANAGEMENT ARE NOT UNIQUELY DIFFERENT FROM THEIR HR/BENEFIT DIRECTORS AND MANAGERS. The challenge is identifying carriers who really offer the right combination of products, services and price to meet each company s specific needs. 8

11 2005. The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ All Rights Reserved. Prudential Financial and the Rock logo are registered service marks of The Prudential Insurance Company of America and its affiliates. IFS-A Ed.10/05