THE GUARDIAN WORKPLACE BENEFITS STUDY

Transcription

1 Guardian in sync Market insights THE PERCEIVED VALUE OF BENEFITS AMONG TODAY S WORKING AMERICANS THE GUARDIAN WORKPLACE BENEFITS STUDY R The Guardian Life Insurance Company of America, 7 Hanover Square New York NY 10004

2 Guardian in sync Market insights Introduction 3 Background & Methodology 4 CHAPTER 1: MEASURING UP How well do employee benefits programs address the needs of today s working Americans? CHAPTER 2: THE FINANCIAL SECURITY GAP Difficult economic conditions cause workers to focus on short-term priorities rather than longer-term financial needs CHAPTER 3: EMPLOYEE BENEFITS AS A FINANCIAL SAFETY NET The workplace is a primary source of financial products and services for Americans today and those benefits can be helpful in building a strong financial future CHAPTER 4: CREATING AN EMPLOYEE-CENTRIC ENROLLMENT EXPERIENCE A dramatically new approach to benefits enrollment is needed one designed to more effectively meet the needs of today s American workforce CHAPTER 5: THE ROLE OF BENEFITS IN ACHIEVING EMPLOYEE ENGAGEMENT A variety of factors contribute to creating an engaged workforce, including having a highly valued employee benefits package

3 INTRODUCTION Welcome to the Guardian Workplace Benefits Study, which establishes the benefits value index (BVI) as an industry metric to gauge the perceived value of employee benefits among today s American workers. Our aim: to foster a better understanding of worker attitudes and the underlying drivers of benefits satisfaction, with the ultimate goal of helping companies better realize the power of benefits to increase productivity and worker engagement. Every employer wants employees to make the most of their workplace benefits. However, this study shows that the majority of workers do not place a high value on benefits. So a key conclusion is that there is a tremendous opportunity to increase workers satisfaction with their benefits and help them feel more confident about benefits decisions. It is also evident that American workers have not fully recovered from the financial crisis of With a focus on making ends meet, their financial security gap has widened as they struggle to give longer-term financial needs the attention they deserve. So the imperative to help employees take advantage of benefits that increase financial protection is perhaps greater than ever before. Putting workers front and center and treating them like customers in terms of what is offered to them, how they are communicated with and, most importantly, by giving them tools to make better financial decisions is key. This shift in philosophy will ultimately make employee benefits better understood and more successful for workers and their companies. The Guardian Workplace Benefits Study shows that an effective employee benefits experience can contribute to a workforce that ultimately is more confident, more satisfied and more engaged. We hope that you enjoy reading this research and that you find it useful., 3

4 BACKGROUND & METHODOLOGY BACKGROUND Our goal in creating the Guardian Workplace Benefits Study and benefits value index (BVI) is to better understand American workers views on the value of their employee benefits today and in the future. The index reflects the level of belief that employees have that their benefits are meeting their needs, are reasonably priced, contribute to their health and well-being, and contribute to their financial security, as well as how successfully their employers are communicating options in their best interest. Plan participant results are based on surveys conducted among 1,667 employees, age 22 or older, who work full time for a company with at least five employees. Plan sponsors were surveyed for the study during the same time period. The plan participant survey sample is nationally representative of all U.S. workers at companies with at least five full-time employees. Data shown in this report are weighted to reflect the actual proportion of U.S. workers by gender, region, race and ethnicity, education level, household income, age and employer size based on data from the Bureau of Labor Statistics and the Census Bureau. The margin of error is +/- 2.5% at the 95% confidence level. METHODOLOGY The Guardian Workplace Benefits Study research was fielded via the Internet during May and June 2012 and consists of two surveys: One among benefits plan sponsors ( Employers ) and another among benefits plan participants ( Employees ). This allows us to compare and contrast opinions of employers and employees on key benefits issues. This year s study was conducted for Guardian by the Center for Strategy Research, a Boston-based independent market research firm. OVERVIEW OF PLAN SPONSOR SURVEY Plan sponsor results are based on a national survey of 1,071 employee benefits decision-makers. Respondents included business executives, business owners, human resources professionals and financial management professionals. The survey sample covers all industries, including government, and is nationally representative of all U.S. businesses with at least five full-time employees. Data shown in this report are weighted to reflect the actual proportion of U.S. businesses by company size, industry and region based on data from the U.S. Census Bureau. The margin of error is +/- 3% at the 95% confidence level. Following is a breakdown of survey respondents by survey participant region, job function, industry, company size, approximate 2011 revenues, years in business and business ownership. 4

5 BACKGROUND & METHODOLOGY 33% 25% 7% 17% 87% GEOGRAPHIC DISTRIBUTION 22% 20% PRIMARY JOB FUNCTION 58% 18% BUSINESS OWNERSHIP 1% 12% South Northeast Midwest West Executive Director, Upper Management, Owner Accounting/ Finance, Treasury HR, Employee Benefits Other Private Public Don t know INDUSTRY Professional, scientific and technical services; Management of companies & enterprises 13% Construction 13% Retail trade 12% Other services (except public administration) 11% Healthcare and social assistance 10% Accommodation and food services Administrative and support; Waste management and remediation services 8% 6% Wholesale trade 6% Real estate; Rental and leasing 5% Manufacturing 5% Finance and insurance 4% Transportation and warehousing 3% Arts, entertainment and recreation 2% Educational services 1% Information 1% Agriculture, forestry, fishing and hunting; Mining; Utilities Public administration; Government 1%.2% 5

6 BACKGROUND & METHODOLOGY NUMBER OF EMPLOYEES YEARS IN BUSINESS 5 to 49 40% Less than 10 13% 50 to 99 21% 10 to 19 21% 100 to % 20 to 49 43% 500 to 999 5% 50 or more 23% 1,000 to 2,499 5% 2,500 to 4,999 5% 5,000 to 9,999 3% 10,000 to 24,999 3% 25,000 or more 3% 2011 COMPANY REVENUE Less than $10 million 41% $10 million to < $25 million 18% $25 million to < $50 million 8% $50 million to < $200 million 8% $200 million to < $500 million 3% $500 million to < $750 million 3% $750 million to < $1 billion 2% $1 billion or more 9% Don t know 8% 6

7 BACKGROUND & METHODOLOGY OVERVIEW OF PLAN PARTICIPANT SURVEY Plan participant results are based on surveys conducted among 1,667 employees, age 22 or older, who work full time for a company with at least five employees. The survey of employees was conducted during the same time period as the plan sponsor survey. The survey sample is nationally representative of all U.S. workers at companies with at least five fulltime employees. Data shown in this report are weighted to reflect the actual proportion of U.S. workers by gender, region, race and ethnicity, education level, household income, age and employer size based on data from the Bureau of Labor Statistics and the Census Bureau. The margin of error is +/- 2.5% at the 95% confidence level. Following is a breakdown of survey respondents by region, age, household income, racial and ethnic background, gender and education level, as well as employer industry and size. 22% 82% 37% GEOGRAPHIC REGION 22% 19% RACIAL BACKGROUND 2% 5% 11% South Northeast Midwest West White African-American Asian Other 10% 30% 85% 24% AGE 36% RACIAL BACKGROUND 15% 22 to to to or older Non-Hispanic Hispanic 7

8 BACKGROUND & METHODOLOGY 21% 27% EDUCATION LEVEL 8% 16% 28% College/ Technical school graduate Some college or technical school High school graduate Some high school Graduate school 43% GENDER 57% Male Female 8

9 BACKGROUND & METHODOLOGY EMPLOYER INDUSTRY Professional, scientific and technical services; Management of companies and enterprises 11% Manufacturing 10% Educational services 10% Retail trade 7% Finance and insurance 6% Construction 5% Healthcare and social assistance 5% Public administration; Government 5% Other services (except public administration) 4% Transportation and warehousing 4% Information 4% Accommodation and food services 3% Wholesale trade 3% Real estate; Rental and leasing 2% Arts, entertainment and recreation 2% Agriculture, forestry, fishing and hunting; Mining; Utilities 2% Non-profit 2% Administrative and support; Waste management and remediation services 1% Utilities 1% Automotive 1% Other 11% NUMBER OF EMPLOYEES AT COMPANY 5 to 49 42% 50 to 99 19% 100 to % 500 to 999 5% 1,000 to 2,499 5% 2,500 to 4,999 5% 5,000 to 9,999 3% 10,000 to 24,999 3% 25,000 or more 3% 9

10 CHAPTER 1MEASURING UP HOW WELL DO EMPLOYEE BENEFITS PROGRAMS ADDRESS THE NEEDS OF TODAY S WORKING AMERICANS? As environmental factors, including the economy and legal/regulatory actions, alter the traditional employee benefits model, workers attitudes toward the value of employee benefits may change. 10

11 CHAPTER 1 EMPLOYEE BENEFITS ARE GENERALLY VALUED BY MOST WORKING AMERICANS, YET ONLY ABOUT 1 IN 5 PLACES HIGH VALUE ON THEIR BENEFITS Results from the inaugural Guardian Workplace Benefits Study show that while many workers do value their employee benefits, the average benefits value index (BVI) score for American workers is 6.8 (based on a scale of 1 to 10, where 10 is high value and 1 is low value ). Furthermore, 20% of workers fall within the high range, 15% within the low range and the majority fall in the moderate range. This indicates that while many workers do value their benefits, there is considerable room for improvement. In addition, this study finds that several factors, including socio-economic status and life stage, influence the degree to which workers value their employee benefits. Moderate 64% BENEFITS VALUE INDEX: OVERALL SCORE DISTRIBUTION Low 16% High 20% BVI AVERAGE SCORE: 6.8 High = 9-10 Moderate = 6-8 Low =

12 CHAPTER 1 CALCULATING THE BVI Guardian created the benefits value index to provide a snapshot of how employees feel about their benefits and to better understand how those perceptions can be improved. The five items compiled to create the index are based on employees level of agreement with the following statements (each question is weighted equally in the index): My company offers benefits that meet my personal needs. My company offers benefits that are affordable to me. My company s benefits program positively impacts my personal health and wellness. My company s benefits program positively affects my personal financial security. My company s current benefits communications are effective in helping me make the right choices for my current personal and/or family situation. These attribute statements were selected because together, they measure the degree to which workers value the benefits they receive from their employer. The correlation between these five items and the rating employees give to the value of their benefits package is very high (r = 0.89). This means that the way employees responded to the statements in the index can explain 80% of the variation in answers to how much they value their benefits. With a high degree of confidence, therefore, this index can be used to predict the value of benefits to employees. By comparing the results of how various groups perform on the index, patterns emerge that show: 1) why it is important that employees value their benefits; and 2) how employee perceptions of those benefits can be further improved. 12

13 CHAPTER 1 On average, about half of workers surveyed say they are highly satisfied with their overall benefits package while 42% of employers believe their workers are highly satisfied. Furthermore, more than 1 in 10 employees report that satisfaction with their overall benefits package has worsened in the past year, compared to just 5% of employers. There appears to be general agreement between employees and employers (though workers are more emphatic) that benefits programs are not well understood/ appreciated or simply not meeting the needs of many workers. Satisfaction with Overall Benefits Package (% Highly Satisfied, 8, 9 or 10 on a 10-pt. scale) 42% Employers 49% Employees Change in Satisfaction with Benefits in Past Year (% Significantly Worse, 8, 9 or 10 on a 10-pt. scale) 5% Employers 12% Employees 13

14 CHAPTER 1 WORKER PERCEPTIONS ABOUT THE VALUE OF THEIR EMPLOYEE BENEFITS ARE INFLUENCED BY SOCIOECONOMIC STATUS A closer look comparing the characteristics of workers who place greater value on their benefits versus those of workers who value their benefits less reveals notable differences based on socioeconomic status, the types of companies they work for (size and industry), where they get their benefits and what sources they use to get benefits-related information. For example, workers who are more educated and earn more tend to have significantly higher BVI scores than those who are less educated and make far less. Higher-paid workers are more likely to have the discretionary income available to afford benefits and have developed an appreciation for how valuable these products can be in protecting themselves and their families. Those who are on the higher end of the socioeconomic range are also more likely to be working in industries that may offer more robust benefits packages to their employees. EDUCATION BVI SCORE BY EDUCATION AND ANNUAL HOUSEHOLD INCOME MEAN BVI SCORE College or more 7.0 High school or less 6.5 ANNUAL HOUSEHOLD INCOME MEAN BVI SCORE $25,000-$49, $50,000-$74, $75,000-$99, $100,000-$149, $150,000-$199, $200, Significantly above average Significantly below average 14

15 CHAPTER 1 LIFE STAGE, LIFE EVENTS AND GENERATION ALSO PLAY A ROLE IN THE PERCEIVED VALUE OF EMPLOYEE BENEFITS AMONG TODAY S WORKING AMERICANS Notably, workers who are in the family formation years and have experienced one or more life events in the past two years (e.g., having children, getting married, buying a house, etc.) actually tend to place lower value on their employee benefits. Ironically, these workers may have the greatest need for the insurance and savings products made available through their employers, as their busy work and personal lives often prevent them from proactively planning and managing their personal finances. This study indicates that as workers advance through their various life stages, and achieve greater stability in their lives, employee benefits may become increasingly more valuable. LIFE EVENTS EXPERIENCED IN THE PAST TWO YEARS BVI SCORE BY LIFE EVENTS, LIFE STATE AND GENERATION MEAN BVI SCORE None 7.0 Change in employer 6.5 Purchase new home 6.4 Loss of job 6.4 Marriage 6.1 LIFE STAGE MEAN BVI SCORE Married no children 7.0 Single no children 6.9 Single with children 6.7 Married with children 6.7 GENERATION MEAN BVI SCORE Older Boomers 7.5 Younger Boomers 6.8 Generation X 6.6 Millennials 6.5 Significantly above average Significantly below average 15

16 CHAPTER 1 ATTITUDES TOWARD EMPLOYEE BENEFITS ALSO VARY BY COMPANY SIZE; WORKERS IN SMALLER FIRMS (FEWER THAN 100 EMPLOYEES) TEND TO BE LESS SATISFIED WITH THE VALUE OF THEIR BENEFITS PACKAGE Socioeconomic factors and life stage influence the degree to which workers value their benefits, but who they work for also impacts their BVI score. Workers at larger companies (median of 500 employees) score significantly higher on the BVI than those who work for smaller companies (median of less than 50 employees). The gap can be partially explained by the fact that larger companies tend to have more robust employee benefits programs that often include: more offerings, more effective benefits-related communications and education, and greater employer contributions toward the cost of the benefits. These more comprehensive programs contrast sharply with those offered by the smallest companies. In many cases, smaller companies find it more of a financial strain to put together the resources necessary to create an effective employee benefits program. The result is that smaller firms may have weaker benefits packages overall, which can lead their workers into feeling like their benefits do not meet their personal needs. NUMBER OF EMPLOYEES BVI SCORE BY SIZE OF COMPANY MEAN BVI SCORE 25, ,000-24, ,000-9, ,500-4, ,000-2, Significantly above average Significantly below average 16

17 CHAPTER 1 WORKERS IN CERTAIN INDUSTRIES HAVE MORE FAVORABLE ATTITUDES TOWARD THE VALUE OF THEIR COMPANY S BENEFIT PROGRAM While the size of a company can be predictive of its benefits philosophy and strategy, companies in certain industries regardless of size tend to place greater focus on delivering benefits that meet their employees needs. These industries have workers who place greater value on their benefits. For example, workers in Public Administration and Education have BVI scores well above average. These public sectors tend to offer a wider range of benefits and at lower out-of-pocket cost to their employees. INDUSTRY BVI SCORE BY INDUSTRY MEAN BVI SCORE Public administration 7.7 Education 7.6 Agriculture, forestry, fishing and hunting; Mining; Utilities Utilities 7.2 Healthcare 7.2 Finance and insurance 7.1 Manufacturing 7.1 Construction 7.0 Professional, scientific and technical services 7.0 Other services 7.0 Significantly above average Significantly below average

18 CHAPTER 1 Conversely, workers in the Automotive and Accommodations/Food Services industries tend to have BVI scores well below average. Workers in these industries have experienced relatively major cutbacks in their benefits packages and increased levels of out-of-pocket expenses. Therefore, the perceived value of benefits for many workers in these industries has been negatively impacted. INDUSTRY BVI SCORE BY INDUSTRY (CONTINUED) MEAN BVI SCORE Non-profit 7.0 Information 6.9 Other 6.7 Arts, entertainment and recreation 6.6 Retail trade 6.6 Administrative and support; Waste management and remediation resources Real estate 6.1 Transportation and warehousing 5.9 Wholesale trade 5.8 Automotive 5.5 Accommodations and food services 4.6 Significantly above average Significantly below average

19 CHAPTER 1 THE MORE FINANCIAL PRODUCTS AN INDIVIDUAL OWNS VIA THE WORKPLACE, THE GREATER THE VALUE PLACED ON HIS/HER OVERALL BENEFITS PACKAGE AND THE HIGHER THE BVI SCORE Increasingly, workers are looking to the workplace for financial products and services as a result of the economic conditions of the past several years. And workers who obtain most of their financial products at the workplace score significantly higher on the BVI than those who get them outside of work. In addition, the more financial products workers obtain at the workplace, the more likely they are to place a greater value on their overall benefits package. SOURCE OF MOST FINANCIAL PRODUCTS OWNED 7.6 At workplace 6.5 Outside workplace BVI SCORE BY NUMBER OF FINANCIAL PRODUCTS OBTAINED AT WORKPLACE product Significantly above average *Includes combination of employer-paid and voluntary benefits, which are 100% paid by the employee products products Significantly below average 19

20 CHAPTER 1 In addition, workers who take advantage of their employer s benefits offerings tend to conduct more benefits-related activities than those who do not. Interestingly, employees who performed at least one or more benefits-related activity in the past year (e.g., enrolling in benefits, checking claims status, using financial planning calculators, etc.) have significantly higher BVI scores than those who performed no such activities. BVI SCORE BY LEVEL OF BENEFITS-RELATED ACTIVITY IN PAST YEAR 7.3 Any activity 5.0 No activity 20

21 CHAPTER 1 WORKERS WHO RELY ON PROFESSIONAL ADVICE IN MAKING BENEFITS DECISIONS ARE MORE CONFIDENT ABOUT THEIR CHOICES AND HAVE HIGHER BVI SCORES A majority of workers get benefits decisions help from friends, relatives or spouses, as opposed to financial professionals or educational materials/tools. However, those who depend on friends/relatives tend to be less confident in their benefits decisions and ultimately place lower value on their overall benefits package. Workers who take advantage of the educational resources, tools and information made available by their employers (e.g., enrollment meetings, benefits advisors) feel better about their benefits decisions and have a higher than average BVI score. BVI SCORE BY TOP RESOURCES FOR INFORMATION ABOUT BENEFITS Going to benefits enrollment meetings 7.2 Reading benefits enrollment materials 7.0 Speaking to the human resources department Having access to a financial professional (benefits specialist) on site during benefits enrollment Having access to a financial professional (benefits specialist) through a toll-free phone number provided by employer Having access to a financial professional (benefits specialist) online during benefits enrollment Using web-based needs assessment tools Talking to colleagues and friends 6.7 Talking to a financial professional outside the workplace Using paper-based needs assessment tools Talking to spouse/partner 6.4 Significantly above average Significantly below average

22 TITLE Because these proactive workers have a better understanding of their benefit options, they are more confident in their most recent benefits selections. Ultimately, this research shows that workers who are very confident in their recent benefits selections score significantly higher on the BVI than those who are not very confident, which shows that confidence in decision-making is a defining trait among those who highly value their benefits. BVI SCORE BY LEVEL OF CONFIDENCE IN MOST RECENT BENEFITS SELECTIONS 7.7 Very confident 5.7 Not very confident 22

23 2 HAPTER THE FINANCIAL SECURITY GAP DIFFICULT ECONOMIC CONDITIONS CAUSE WORKERS TO FOCUS ON THE HERE AND NOW RATHER THAN LONGER-TERM FINANCIAL NEEDS With employers shifting greater financial responsibility and benefits decision-making to their employees, the need for more effective benefits education has never been greater. 23

24 CHAPTER 2 THE RECENT ECONOMIC DOWNTURN HAS AFFECTED AMERICAN WORKERS, LEAVING SOME WITH MUCH LESS DISPOSABLE INCOME Workers today are managing their finances in the face of extremely challenging economic conditions. Through the recent recession and slow recovery, unemployment rates have been high and those who have remained employed have seen a decline in their disposable income. Workers are still experiencing the effects of these environmental factors. Most employees (55%) say that they have been negatively affected by economic conditions in the past six months. This trend is even more pronounced among less-educated employees and those with lower incomes. 37% IMPACT OF ECONOMY ON PERSONAL FINANCES % OF WORKERS 29% 18% 1% 15% Very Positive Somewhat Positive Somewhat Negative Very Negative Not sure 24

25 CHAPTER 2 The result is that American workers today have less money to protect themselves in the form of insurance products, and their attention is far from being focused on their long-term needs. Workers who believe the economy has positively impacted their personal finances in the past six months have a much higher than average BVI score and therefore place greater value on their employee benefits package. They are less likely to have experienced life-disrupting events such as losing a job or massive losses in the stock market. As a result, they are more optimistic about the economy and their benefits package. BVI SCORE BY ECONOMIC IMPACT IN PAST 6 MONTHS 6.0 Very negative personal impact 7.5 Very positive personal impact 25

26 CHAPTER 2 EMPLOYEES ARE MOST CONCERNED ABOUT BASIC, SHORT-TERM FINANCIAL AND PERSONAL CHALLENGES THAT OVERSHADOW THEIR LONGER-TERM NEEDS The economic recession has forced many workers to focus on their short-term necessities at the expense of long-range planning to protect their financial future. When asked how important various financial needs are, by far, the top concerns for workers today are having job security and making ends meet. In contrast, having a financial plan for achieving major financial goals and finding a trusted source to provide financial advice are ranked much lower in importance. Therefore, in general, workers are not thinking long term about the best financial decisions they could be making for their future. IMPORTANCE OF FINANCIAL NEEDS (% 8, 9 OR 10 ON A 10-PT. SCALE) 82% 80% Having job security Making ends meet (i.e. paying your mortgage, paying utility bills, buying groceries) 60% Having a financial plan for achieving major financial goals 40% Finding a trusted source to provide financial advice 26

27 CHAPTER 2 When looking at financial needs by income and generation, workers who have higher income and are older tend to place more importance on longer-term financial needs like finding a trusted source to provide financial advice and having to pay for long-term care needs of either yourself or a spouse Having job security Having job security Making ends meet Making ends meet FINANCIAL NEEDS BY INCOME (%) Having a financial plan for achieving major financial goals Finding trusted source to provide financial advice FINANCIAL NEEDS BY GENERATION (%) Having a financial plan for achieving major financial advice Finding a trusted source to provide financial advice Having to pay for longterm care needs of either yourself or a spouse Having to pay for longterm care needs of either yourself or a spouse $25-49k $50-74k $75-99k $ k $ k $200k Millennials Generation X Young Boomers Older Boomers 27

28 CHAPTER 2 MOST WORKERS LACK THE KNOWLEDGE TO MAKE PROPER BENEFITS-RELATED DECISIONS While having less disposable income in the current economy is likely driving poor participation in many insurance products, lack of education is also a likely contributor. For example, the industry typically recommends an individual have life insurance coverage that is at least five times his or her annual salary. Less than a third of workers in the study feel that they need this level of life insurance coverage. Similarly, less than 33% of workers are aware of the likelihood of a worker becoming disabled in his or her career. And only one-fifth of workers know that the cost of basic dental coverage per adult averages about $1,500 per year (including costs paid out of pocket and those covered by insurance). INSURANCE PRODUCT IQ QUESTIONS (% ANSWERING CORRECTLY) CORRECT ANSWER PERCENT ANSWERING CORRECTLY On average, how much life insurance coverage should an individual have? 5 times his/her salary 29% What is the likelihood that a male U.S. worker at age 35 will face a disabling illness or injury that requires him to take off 90 days or more from work during his working career? How much does dental care (basic care and treatment) cost per year for a typical adult, including costs paid out of pocket and those covered by insurance? 20% 1 28% $1,200 - $1, % This lack of knowledge is startlingly consistent across life stages, education and income. And workers who should have better knowledge of their financial protection needs do not fare any better on these questions, and in some cases, answer incorrectly more often than do other workers (e.g., high income workers on the Disability insurance question). INSURANCE PRODUCT IQ QUESTIONS BY LIFE STATE, EDUCATION AND INCOME (% ANSWERING CORRECTLY) CORRECTLY ANSWERED LIFE INSURANCE QUESTION BY LIFE STAGE 27% Single w/kids 36% Married w/kids 27% Married/ no kids 20% Single/ no kids CORRECTLY ANSWERED DENTAL QUESTION BY LEVEL OF EDUCATION Less than high school grad 1. CDA Personality Quotient (PDQ) calculator, 2. Based on cost utilization associated with Guardian s Dental plan experience 14% 18% 17% 20% High school grad Some college At least a college degree 28

29 CHAPTER 2 INSURANCE PRODUCT IQ QUESTIONS BY LIFE STATE, EDUCATION AND INCOME (CONTINUED) (% ANSWERING CORRECTLY) 30% 29% $25,000-49,999 $50,000- $74,999 CORRECTLY ANSWERED DISABILITY INSURANCE QUESTION BY INCOME 28% 28% $75,000- $99,999 $100,000- $149,999 25% $150,000- $199,999 21% $200,000 or more 29

30 CHAPTER 2 INADEQUATE EDUCATION ABOUT THE NEED FOR IMPORTANT INSURANCE BENEFITS, COMBINED WITH A LACK OF ACCESS TO SUCH BENEFITS AMONG SMALL EMPLOYERS, CONTRIBUTES TO MANY AMERICAN WORKERS BEING UNDERINSURED The vast majority of workers today have medical insurance (90%). Many, however, do not take advantage of other types of employee benefits that are designed to greatly improve financial stability in the case of lost income or a major health problem. Other workers are at companies who do not offer these financial protection products and therefore do not have access to these benefits. Only about half of workers today have Accident or Disability insurance (either through their employer or outside the workplace), and far fewer own products such as Critical Illness, Long-term Care or Cancer insurance. Although nearly 3 in 4 workers claim to have Life insurance, it is likely that they don t have enough coverage to provide their families with a financially secure future in the event of a premature death. Furthermore, workers who are less educated, make less income and are younger tend to be even more severely under-protected than the average worker. Checking Account and/or ATM/Debit Card Auto Insurance Medical Insurance Dental Insurance Home Insurance Life Insurance Retirement Savings Plan Vision Insurance Accident Insurance Disability Insurance Individual Retirement Account (IRA) Pension Plan Critical Illness Insurance Long-term Care Insurance Cancer Insurance FINANCIAL PRODUCTS OWNED 9% 19% 17% 35% 43% 52% 49% 60% 76% 73% 72% 76% 90% 97% 96% 30

31 CHAPTER 2 UNFORTUNATELY, WORKERS WHO HAVE THE GREATEST NEED FOR FINANCIAL PROTECTION ARE OFTEN THE LEAST LIKELY TO HAVE ADEQUATE INSURANCE Some of the most significant financial security gaps exist among groups of workers who have the greatest needs to protect themselves from adverse life events such as serious injuries or premature death. And some workers, who have significant responsibilities for taking care of others, are similarly underinsured, increasing their financial burden. Less than half of single parents and workers with special needs kids have disability insurance, which is unfortunate given that a disabling injury to the primary wage earner could have a serious impact on their entire family. Similarly, workers who support multiple financial dependents are less likely to own Disability and Dental insurance than those with fewer dependents. Also, higher income workers, whom one would argue should have Disability insurance because they have more income to protect, actually are the most underinsured group. Clearly, American workers who have challenging financial needs and have the most to lose are the ones who are least protected. 44% 72% 74% Have special needs children INSURANCE PRODUCT OWNERSHIP BY DEMOGRAPHIC SEGMENTS 47% 68% 72% 53% Single w/kids LIFE STAGE 83% 78% Married w/kids 51% 73% 79% Married/ no kids 44% 74% 62% Single/ no kids Disability % Own Life % Own Dental % Own 31

32 CHAPTER 2 48% INSURANCE PRODUCT OWNERSHIP BY DEMOGRAPHIC SEGMENTS (CONTINUED) One 75% 23% 24% $25,000- $49,999 $50,000- $74,999 57% Two NUMBER OF DEPENDENTS 81% INCOME 59% 19% 19% $75,000- $99,999 $100,000- $149,999 Three 80% $150,000- $199,999 34% Four 8% 7% 71% $200,000 or more Disability % Own Dental % Own Disability % Own 32

33 3 CHAPTER EMPLOYEE BENEFITS AS A FINANCIAL SAFETY NET THE WORKPLACE IS A PRIMARY SOURCE OF FINANCIAL PRODUCTS AND SERVICES FOR MANY AMERICANS TODAY, AND THOSE BENEFITS CAN BE HELPFUL IN BUILDING A STRONG FINANCIAL FUTURE Environmental and cultural factors have contributed to an even more independent, do-it-yourself society at a time when employers are offering more voluntary benefits and shifting financial responsibility and benefits decision-making to employees. The need for more effective education and enrollment decision-support has never been greater. 33

34 CHAPTER 3 FOR WORKING AMERICANS, THEIR PLACE OF EMPLOYMENT HAS BECOME THE PRIMARY SOURCE FOR MANY OF THEIR HOUSEHOLD S INSURANCE AND SAVINGS PRODUCTS A vast majority of today s workers obtain financial products and services through their employer. For example, 9 in 10 own employer-sponsored medical insurance while many are taking advantage of other forms of insurance products offered on an employee-pay-all basis. More than half (52%) own at least one voluntary benefit, paid for entirely by the employee. PRODUCT INSURANCE PRODUCT OWNERSHIP TOTAL AND THROUGH WORKPLACE TOTAL OWN OWN THROUGH WORK (OF THOSE WHO OWN) Medical Insurance 90% 83% Dental Insurance 76% 83% Life Insurance 73% 63% Retirement Savings Plan 72% 88% Vision Insurance 60% 82% Accident Insurance 52% 41% Disability Insurance 49% 86% Critical Illness Insurance 19% 64% Long-term Care Insurance 17% 70% Cancer Insurance 9% 60% 34

35 CHAPTER 3 The prominence of employee benefits in a household s financial portfolio has not been lost on today s workforce. Notably, 60% of workers surveyed now consider the workplace a very important source for their personal insurance and savings products. In addition, nearly half feel that the workplace plays a more important role in their personal finances compared to five years ago. And this trend is expected to continue. 60% PERCEIVED IMPORTANCE OF WORKPLACE AS SOURCE OF FINANCIAL PRODUCTS/SERVICES 9% IMPORTANCE OF WORKPLACE BENEFITS TODAY 31% Very important Important Not too important IMPORTANCE OF WORKPLACE BENEFITS CHANGE IN PAST 5 YEARS 47% 43% 10% More important than 5 years ago About the same as 5 years ago Less important than 5 years ago 35

36 CHAPTER 3 ASSOCIATIONS AND AFFINITY ORGANIZATIONS ALSO ARE AN INCREASINGLY IMPORTANT CHANNEL FOR INSURANCE AND OTHER FINANCIAL PRODUCTS In the past decade, associations and affinity organizations have expanded their member benefits to include more insurance products and services. Many of these entities have a personal connection with their members (e.g., alumni or professional associations, credit unions, volunteer/religious organizations); therefore, their endorsements of financial products can be influential. Moreover, consumers who have limited insurance benefits available to them at the workplace, find associations and affinity groups to be a reliable and convenient way to supplement individual or workplace coverage. Currently, 40% of workers report having purchased at least one financial product through an association or affinity group (mainly checking accounts/debit cards, auto and home insurance, and life insurance). INSURANCE PRODUCT OWNERSHIP THROUGH ASSOCIATION/AFFINITY GROUP : TOP MENTIONS 30% Checking account and/or ATM/Debit card 15% Auto insurance 11% Home insurance 8% Life insurance 36

37 CHAPTER 3 More than 1 in 4 workers strongly agree that purchasing insurance products through such an organization is a great idea. Associations and affinity groups are likely to grow in importance as employees seek lower-cost options for the benefits they need to round out their household s financial portfolio. Older boomers are the most receptive to purchasing insurance products through associations and affinity groups more than a third (35%) feel that it is a great idea. ATTITUDES TOWARD ASSOCIATION/AFFINITY GROUP AS SOURCE OF INSURANCE PRODUCTS PURCHASING INSURANCE PRODUCTS THROUGH AN ASSOCIATION/AFINITY GROUP IS A GREAT IDEA 17% 28% 10% 45% Strongly agree Neutral Strongly disagree Don't know 37

38 CHAPTER 3 EMPLOYER CONTRIBUTIONS HAVE BEEN FUNDAMENTAL TO THE GROWTH AND POPULARITY OF WORKPLACE INSURANCE BENEFITS Most employers continue to contribute to the cost of insurance-related benefits. Plan sponsors tend to provide the greatest financial relief to employees on big ticket benefits, or those with the highest out-of-pocket cost to their workers, such as medical insurance. In the past decade, of course, the level of employer funding for medical and other insurance benefits has trended lower, mainly due to the spiraling costs associated with healthcare. Nonetheless, ownership and the perceived value of these voluntary insurance benefits have been rising. For many workers, simply having access to affordable financial products is a tremendous value, even when they are paying the entire cost of benefits such as voluntary life, disability, cancer and accident insurance. If not for group insurance benefits, an even greater share of working Americans would be without coverage, putting themselves and their families at greater risk in the event of an unexpected tragedy. Medical Insurance Dental Insurance Retirement Savings Vision Insurance Long-term Care Critical Illness Disability Insurance Accident Insurance Life Insurance Cancer Insurance SHARE OF BENEFITS FUNDED BY EMPLOYERS AND EMPLOYEES 75% 21% 3% 1% 74% 18% 7% 71% 10% 18% 68% 21% 9% 60% 19% 16% 58% 17% 20% 44% 37% 15% 44% 23% 31% 39% 41% 19% 37% 9% 53% 1% 1% 2% 5% 5% 4% 2% 1% 1% Employee and employer share the cost Employer pays 100% of the cost Employee pays 100% of the cost Don t know 38

39 CHAPTER 3 THE MARKET SHIFT TO A DEFINED CONTRIBUTION BENEFITS MODEL HAS SPURRED FURTHER GROWTH IN THE AVAILABILITY OF VOLUNTARY BENEFITS In the past five years, the market for voluntary or worksite insurance benefits (e.g., employee-paid benefits) has been growing at a faster pace than the benefits industry in general. Since 2006, new sales of voluntary benefits are up 15%* vs. growth of 1%** for all non-medical group insurance sales. Today, 8 in 10 employers offer at least one type of voluntary benefit. Life, disability and dental insurance remain the most commonly offered voluntary benefits with more than half of employers offering these products on an employee-paid basis. *Source: Eastbridge Consulting **Source: LIMRA Disability Dental Vision Accident Critical Illness Long-term Care FIVE-YEAR GROWTH OF VOLUNTARY BENEFITS* NEW SALES PREMIUM IN BILLIONS $ $ INCIDENCE OF VOLUNTARY BENEFITS AMONG EMPLOYERS PERCENT OF EMPLOYERS OFFERING SPECIFIC VOLUNTARY BENEFITS Life 56% 31% 37% 41% 45% 53% 52% 39

40 CHAPTER 3 Larger employers are more likely to offer more voluntary benefits choices to their employees, generally to augment a core set of employer-contributory benefits, including medical, life, dental and disability. Smaller firms tend to provide fewer benefits in general, and those offering voluntary benefits often do so in place of core employer-paid/contributory benefits, such as life, dental or disability. Industries most likely to offer voluntary benefits include healthcare, manufacturing, real estate and finance. EMPLOYERS MOST LIKELY TO OFFER VOLUNTATRY BENEFITS BY SIZE & INDUSTRY SIZE (NUMBER OF EMPLOYEES) 92% 92% 85% 84% 5,000+ 1,000-4, % <50 INDUSTRY 88% 84% 84% 82% 80% 77% Healthcare Manufact. Real Estate Finance Retail Professional Services 40

41 CHAPTER 3 CONVENIENCE AND ACCESSIBILITY ARE THE TOP REASONS THAT MANY WORKERS SEE VALUE IN VOLUNTARY INSURANCE BENEFITS In today s fast-paced, time-pressured society, many working Americans (especially single parents) have difficulty making time to research, seek professional help and then take action on their household s financial needs. As a result, many individuals and their families are underinsured or unprepared for retirement. Yet, the convenience of workplace benefits has helped to address that gap. In addition to the affordability of voluntary insurance benefits, workers also feel that payment options (e.g., periodic, payroll deduction) and easier access (limited evidence of insurability) are important advantages of employee-paid benefits. Monthly or biweekly payments via payroll deduction help workers with budgeting and discipline through forced savings ( out of sight, out of mind ). Making smaller, regular payments helps workers stay committed to their original objectives/financial goals when they first decided to enroll. Voluntary benefits often cost less than if you purchase the same benefits outside the workplace Voluntary benefits through the workplace are more convenient because you pay for them through payroll deduction Voluntary benefits offered by your company give you access to a wider range of useful benefits than you might otherwise have available You can enroll in voluntary benefits without going through a medical exam or providing other evidence of insurability Your employer has done the research and shopping for you, and endorses the options that you have available Service is often better because of the relationship and contract that your employer has with the benefits provider PERCEIVED ADVANTAGES OF VOLUNTARY BENEFITS : TOP-RATED ATTRIBUTES RANKING AMONG ALL WORKERS SURVEYED Highest Rank Second Highest Ranked in the Middle Lowest Rank 41

42 CHAPTER 3 FOR MOST WORKERS, HAVING THEIR EMPLOYER ENDORSE THE FINANCIAL PRODUCTS AND SERVICES OFFERED AT THE WORKPLACE CARRIES CONSIDERABLE WEIGHT An employer s support of the voluntary benefits offered at the workplace is extremely important to many in their decision to enroll. That employers have done the homework and selected the benefits providers and products they feel are best for their employees often helps to boost employee confidence in their available choices. In fact, when asked which is more important when selecting voluntary benefits, 64% of employees say that they value the research and shopping that their employers have done for them more compared to 36% who feel the insurance company brand name is most important. IMPORTANCE OF EMPLOYER ENDORSEMENT TO WORKERS ENROLLING IN VOLUNTARY BENEFITS 64% 36% Which is more important when deciding whether to enroll in voluntary benefits? That your employer has done the research and shopping for you, and endorses the options that you have available That the insurance company name is well-known to you 42

43 CHAPTER 3 Female workers and those with higher education levels tend to place greater emphasis on their employer s endorsement of voluntary benefits compared to others. In addition, those working for larger companies and those in certain industries (e.g., manufacturing, financial services, wholesale/trade) also tend to give greater weight to their employer s endorsement. 68% Women IMPORTANCE OF EMPLOYER ENDORSEMENT FOR VOLUNTARY BENEFITS BY SEGMENT GENDER 60% Men SIZE (NUMBER OF EMPLOYEES) 60% % % % Less than high school EDUCATION INDUSTRY 64% College grad 72% 72% 70% Manufacturing Financial Services Wholesale/ Trade 43

44 CHAPTER 3 VOLUNTARY BENEFITS ARE DESIGNED TO FILL WORKERS FINANCIAL PROTECTION GAPS; THEY HAVE A POSITIVE IMPACT ON WORKER ATTITUDES TOWARD THE VALUE OF THEIR OVERALL BENEFITS PACKAGE A majority of employers say that they offer voluntary benefits so that they can give employees greater options and many want to address employees unmet financial needs. REASONS FOR OFFERING VOLUNTARY BENEFITS AMONG EMPLOYERS: TOP MENTIONS 62% To expand benefits options to employees To fulfill an employee need Nearly 9 in 10 workers agree that voluntary benefits add value to their benefits package one-third say they are very interested in their employer offering more voluntary benefits. Workers in the southern United States and those in certain industries, including arts/entertainment, healthcare and public/government entities, are even more likely to feel that voluntary benefits are a positive addition to their company s benefits program. 45% IMPACT OF VOLUNTARY BENEFITS ON VALUE OF OVERALL BENEFITS PACKAGE 58% 14% 28% Moderate Low High 44

45 CHAPTER 3 37% South IMPACT OF VOLUNTARY BENEFITS ON VALUE OF OVERALL BENEFITS PACKAGE % RATING HIGH IMPACT West REGION 31% 30% 30% Northeast Midwest 44% Arts/ Healthcare Entertainment INDUSTRY (TOP RANKED) 39% 38% 38% 38% Real Estate Public/ Government Furthermore, workers who feel that voluntary benefits add significant value to their overall benefits package also have much higher BVI scores. EXTENT VOLUNTARY BENEFITS ADD VALUE TO OVERALL BENEFITS PACKAGE MEAN BVI SCORE 7.6 Significantly adds value Adds no value Among those who would like their employer to offer additional voluntary benefits, a majority (62%) express interest in Critical Illness insurance, while half are interested in Disability insurance. Also, there is considerable interest in employee-paid Dental, Vision and Accident insurance. 5.6 TOP VOLUNTARY BENEFITS OF INTEREST TO EMPLOYEES Critical Illness 62% Disability Dental Vision Accident 31% 41% 41% 50% Retail 45

46 CHAPTER 3 WITH A WIDER RANGE OF BENEFIT OPTIONS AVAILABLE, WORKERS HAVE GREATER RESPONSIBILITY FOR MAKING THE RIGHT CHOICES FOR THEMSELVES AND THEIR FAMILIES The proliferation of benefits choices can be overwhelming for employees, which is reflected in their lack of confidence in their own benefits-related decisions. Offering a wider variety of voluntary benefits requires employees to make more decisions about the appropriateness and value of these benefits. Workers find themselves with greater responsibility for not only funding these voluntary benefits but for making decisions that could impact the financial security of themselves and their families. Interestingly, more than half of workers surveyed are highly confident in their ability to make the right benefits decisions. 42% WORKER CONFIDENCE IN MOST RECENT BENEFITS DECISIONS 54% 4% Moderate Low High 46

47 CHAPTER 3 While Baby Boomers are more confident in their benefits choices compared to Millennials and Generation X, one-third are not highly confident in their ability to make the best decisions for their financial security. Also noteworthy is that a majority of Millennials are not highly confident in their benefits decisions. Other groups with lower confidence include those working for smaller firms, with less than a high school degree and less than $50,000 in household income. 46% 47% Millennials HIGH WORKER CONFIDENCE IN MOST RECENT BENEFITS DECISIONS BY SEGMENT GENERATION Generation X 38% Less than high school EDUCATION 60% Younger Boomers 60% College graduate or more 67% Older Boomers HOUSEHOLD INCOME 44% $25,000-$49,000 69% 68% Women GENDER 60% Men SIZE (NUMBER OF EMPLOYEES) 46% 5-49 $150,000-$199,000 54% %

48 CHAPTER4 CREATING AN EMPLOYEE-CENTRIC ENROLLMENT EXPERIENCE A DRAMATICALLY NEW APPROACH TO BENEFITS ENROLLMENT IS NEEDED ONE DESIGNED TO MORE EFFECTIVELY MEET THE NEEDS OF TODAY S AMERICAN WORKFORCE Re-inventing the employee benefits experience e.g., targeted communications, personalized education and decision support, and multi-channel enrollment will help workers realize greater value from their benefits and improve their financial security. 48

49 CHAPTER 4 TO INCREASE THE EFFECTIVENESS OF EMPLOYEE BENEFITS PROGRAMS, IT IS ESSENTIAL TO CREATE AN ENROLLMENT EXPERIENCE THAT PUTS THE WORKER S NEEDS FRONT AND CENTER Given recent economic conditions and uncertainty around healthcare reform, employers have had the particularly difficult task of offering benefits that meet employees needs. While companies continue to offer more benefits choices to employees, many employers are disappointed with what they are providing and workers are not taking advantage of what is available at the workplace. Fewer than 4 in 10 employers (37%) say that their benefits communications are very effective in helping employees make the right choices about benefits. Likewise, 34% of workers feel the same way about the benefits communications they receive. So, although employers and workers see eye-to-eye on the matter, there is tremendous opportunity to improve benefits-related communications. EFFECTIVENESS OF BENEFITS COMMUNICATIONS % VERY EFFECTIVE (8, 9 OR 10 ON A 10-PT. SCALE) 37% 34% Employers Workers 49

50 CHAPTER 4 When workers feel that their benefits communications are very effective, they are significantly more satisfied with their overall benefits package. Unfortunately, less than half (49%) of American workers today are very satisfied with their benefits. Understanding what workers need in terms of communications and enrollment channels, and decision support tools, is crucial to improving the user experience. SATISFACTION WITH BENEFITS BY PERCEIVED EFFECTIVENESS OF BENEFITS COMMUNICATIONS % VERY SATISFIED (8, 9 OR 10 ON A 10-PT. SCALE) 83% Very effective 8% Ineffective 50

51 CHAPTER 4 PREFERRED BENEFITS COMMUNICATIONS CHANNELS ARE NOT INFLUENCED BY DEMOGRAPHICS In terms of how employees want to receive benefits communications, , either at home or at work, is the top choice (40%). Surprisingly, is followed closely by traditional mail, either at home or at work (36%). The popularity of these top channels is consistent across age groups, with Millennials, Generation X, and younger and older Baby Boomers preferring the same options in the same order of preference. Income, education and ethnicity also have a minimal impact on communication channel preferences. 40% , received either at home or at work TOP PREFERENCES FOR RECEIVING BENEFITS INFORMATION 36% Mail, received either at home or at work 28% 25% 24% One-on-one meetings during the workday Online non-interactive presentation Group meetings, seminars during the work day 19% Video, CD-ROM or DVD presentation Interest in receiving benefits information via social media is low, with just 5% of workers preferring to receive benefits communications through this way. Although Millennial workers (defined as ages in this study) are more likely than other age groups to choose social media as an option (14%), this is still a small minority. This may indicate that overall, workers do not consider social media as an appropriate channel for receiving benefits-related information. PREFER TO RECEIVE BENEFITS INFO VIA SOCIAL MEDIA CHANNELS (% MENTIONING) 5% All workers 14% Millennials 51