Personal insurance: a no-cost option employees favor

HR Magazine, Nov, 1997 by Joanne M. Cole

Today an old - if somewhat unheralded - benefit is drawing a lot of newfound interest. More employers are considering offering auto, home anti personal property insurance to their employees at a discount.

Does that mean employers have gotten into the insurance-peddling game? Not really. One of the beauties of this benefit is that it requires little or no effort from employers. In fact, offering personal insurance requires virtually no paperwork or administrative time - if you choose the right insurer - says Diane Kundrat, benefits supervisor for the city of Tempe, Ariz.

In addition, personal insurance benefits have a broad appeal that matches up well with the needs of an increasingly diverse workforce. "Traditional benefit offerings no longer appeal equally to the various segments of the population," says Himanshu Patel, senior vice president of Liberty Mutual's Group Savings Plus program.

Ultimately, the biggest blessing of this benefit is that it costs employers nothing. That's welcome news at most organizations because "HR and senior line managers are looking for ways to improve their ability to recruit and retain good people and to improve morale while keeping spending down," notes Patel.

HOW IT WORKS

Insurance programs vary from one insurer to the next, but the mechanics of the programs are almost universal. Here's how they generally work.

An insurance company identifies an organization as a likely candidate, approaches it, and offers coverage that will be part of the employee benefits package. If the employer agrees, it basically becomes a conduit.

The insurance company - with some help from the employer - contacts employees and offers the personal insurance. At this stage it is vital that the employer be 100 percent committed to the program, says Patel.

"The first thing we want an employer to do is make a strong and visible endorsement of the program, which could be a letter from the CEO," he says. "Next, the employer needs to communicate information to employees on an ongoing basis, including such things as the insurer being present at benefits fairs, being listed in the benefits handbook, being a part of benefits packages for new employees and being posted on the corporate web site," explains Patel.

It is also common for insurers to communicate with employees through talks and presentations, articles in the company newsletter and notices in the employee cafeteria.

Employees who buy the insurance have their premiums deducted automatically from their paychecks.

Employees pay the entire cost of the premiums, which are usually discounted significantly. One insurer, Metropolitan Property & Casualty Insurance Co. (Met P&C), offers rates that are 10 percent to 15 percent lower than the national retail rate, according to Richard Berstein, vice president and general counsel. The company can afford the discounts because of the efficiencies of the program, which does away with agents, missed payments, cancellations and reinstatements.

THE BENEFIT TO EMPLOYEES

Personal insurance programs save employees time as well as money. "It saves them the time and effort of going through the shopping process, while providing the convenience of enrolling on the job with no down payment, no monthly bills and no finance charge - at a discount," says Patel.

And the time savings continue month after month because "it's one less bill to worry about," he says. Patel also points out that most people do not feel comfortable choosing an insurance company. "Employees enjoy the peace of mind [an insurance program] provides because the employer has done their homework and selected a good company with good value and a good reputation."

Convenience is becoming an even bigger factor thanks to firms like AIG, the world's largest insurance provider. AIG got on board with auto and home insurance one year ago. Now the company is melding its employee-sponsored program with new technology, which allows employees to purchase coverage online, says Larry Rutland, president of AIG's Group Personal Lines.

"Employees can access the Internet, pull up AIG's Buyer's Guide to learn about insurance, determine their insurance needs, obtain quotes and - at the very end - make a quick call and complete the transaction," says Rutland.

Isn't all this convenience lost when employees leave? Not completely. Insurance benefits are "portable," says Met P&C's Berstein, which means employees can take their policies with them when they leave the company. The downside for exiting employees is that they lose their discounted premiums.

(Of course, the upside for HR is that good employees have an additional reason to stay.)

The convenience factor is compelling, but skeptical HR professionals may wonder: Do employees really want to be hassled with insurance questions at work?

Apparently, they do.

Three-quarters of all employees prefer to purchase insurance through their employers, or personally, rather than from an agent, according to a survey by the Life Insurance Marketing & Research Association, International. And employees seem to like the idea of voluntary payroll deductions as a way of paying their insurance bills.