For professional insurance agents serving today’s marketplace, it’s no secret that the economic picture is ever-changing and not always rosy. There are several trends impacting consumers— rising health care costs, employees sharing more of the cost of employer-provided health benefits, and an increase in health-related early retirements. A good strategy for agents is to educate their clients about supplemental insurance and the options these policies offer to help offset these trends.
Supplemental insurance basics
As its name implies, supplemental insurance can provide your clients with an added layer of protection on top of their existing policies and can help them pay for things that are not covered by a primary insurance policy. While supplemental insurance is similar to other lines of insurance, such as life or health insurance, it is not meant to be the only means of protection for the policyholder.
It’s important for agents to help consumers understand that while major medical or life insurance policies can provide the bulk of benefits to a family after an illness or loss, supplemental insurance benefits can be used to pay for unexpected out-of-pocket costs or to help with utility bills, rent, and other household expenses. And supplemental benefits are generally paid directly to the policyholder, allowing for a personal decision on how the funds should be spent.
Rising health care costs can strain personal assets
For agents seeking to educate consumers on the harsh reality of rising health care costs and the potential impact these costs can have on an individual or family, several recent surveys shed light on the subject. According to research conducted by ABC News, the Kaiser Family Foundation, and USA Today, 1 in 4 Americans say their family has had a problem paying for medical care during the past year, up 7 percent over the past nine years. It is important for agents to communicate to their clients that lengthy illnesses or a sudden death can result in unexpected expenses beyond the cost of medical care or the significant loss of family income.
Employees shouldering more of the load
A second key trend for agents to present is the fact that health insurance expenses are one of the fastest growing costs for today’s employers. This fact is driving many companies to require that employees shoulder more of their benefits cost. In fact, the Kaiser Family Foundation employee health benefits survey reveals that employer health insurance premiums were up nearly 8 percent in recent years — twice the rate of inflation. And, according to Hewitt Associates, average out-of-pocket costs for deductibles, copayments for medications, and co-insurance for physician and hospital visits rose 115 percent between 2000 and 2004 alone.
Because traditional insurance does not always cover all health-related expenses — deductibles, copayments, outpatient care, the costs for family members staying nearby to support a hospitalized family member, or lost income when someone is unable to work — supplemental insurance can offer additional protection to help consumers fill in some of the gaps between primary health care coverage and essential treatment and care.
The real impact of retiring early out of necessity
Another critical trend for agents to explain to consumers is the reality that although more and more people need and expect to work beyond age 65, this is not always the case. According to the most recent retirement survey from Employee Benefit Research Institute (EBRI), 37 percent of workers are forced into early retirement. Of these, 28 percent retire because of their own health problems, and another 25 percent have to leave the workforce to care for a family member.
With longer life expectancies and a decrease in company-provided pensions, many people are less confident about their financial stability to retire at 65. And, many baby boomers need to work to age 66 or beyond to receive full Social Security retirement benefits. For these reasons, agents can recommend supplemental insurance programs as a protection measure against catastrophic illness, disability, and long term care and as a vital piece of a solid financial plan to ensure protection both today and in the future.
Agents educating consumers
Agents need to realize that consumers are often overwhelmed by the multiple choices offered among supplemental insurance providers and the wide range of options available. Nevertheless, finding the right protection can be simple with the help of a professional agent who is willing to take the time to understand the consumers’ individual needs and then determine the optimal coverage to meet those needs.
Tom Schmidt is vice president and national director of training for Combined Insurance Company of America. He can be reached at 800-490-1322.