Transcript Slide 1

Benefits strategies
for a new era
Trends, challenges
and solutions
Buyers Study: 2012 outlook
[Name] | [Date]
MK-2843 (10-12)
Agenda

Post-recession economic challenges

The impact of health care reform

New and emerging buying trends

Finding “future-ready” solutions
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Post-recession
economic challenges
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Top trends & challenges in post-recession recovery
Economic pressures
Rising health care costs
and slow economic
recovery
Health care reform
Legal mandates and
tax implications
Employee
engagement
Decreased worker
satisfaction/productivity
Administrative demands
Absence management and
employee benefits data
Employees at risk
High expense of illness
or injury
Delayed retirement
Multiple generations
in workforce
Buying trends
Benefit sales demographics
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Financial pressures continue
Rising premiums remain a top challenge

Health insurance premiums expected to increase by
double digits for the third consecutive year.1
● Average health care premium cost per employee
is above $10,000 a year.2
11.6%
11.1%
11.1%
11%
11%
11%
2009
2010
2011
2011 premiums
2010 premiums
2009 premiums
Premium growth for traditional PPO coverage3
1,3 Buck Consultants, “22nd National Health Care Trend Survey,” October 2010.
2 Towers Watson, “2010 Health Care Cost Survey 2010:New Deal, New Dividend, 21st Annual U.S. Results Report,” 2010.
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How companies are responding
Cost-control strategies change plan designs
Actions taken by employers:
33%
33%
56%
33% increased
employee
contributions1
33% raised
deductibles2
56% offered
financial incentives
to encourage
healthy choices3
1,2 Mercer, “National Survey of Employer Health Plans,” 2011.
3 Tower Watson, “Health Changes Ahead, Survey Report,” March 2012.
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How employers are encouraging wellness engagement
Wellness incentives, like health risk assessments and
employee assistance programs, add value to benefits.
1 NBGH/Fidelity, “Employer Investments in Improving Employee Health, Results from the Third Annual Investments Benefits
Consulting Survey,” March 2012.
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The impact of
health care reform
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Reform drives new strategies
Employers’ top areas of focus for health care
strategy in 2013:1

40% develop a workplace culture where employees are
accountable and supported for health and well-being

34% stay up to date and manage health care reform impacts

33% educate employees to be more informed consumers
Buying trend:
The Cadillac tax may accelerate the move toward CDHPs
1 Towers Watson, “Performance in an Era of Uncertainty,” March 2012.
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Consumer directed health plans
CDHPs offer 20% lower premiums than
Preferred Provider Organizations (PPOs)1
2006
3%
2014
(expected to enroll) 75%
0 10
20 30 40 50
60 70 80
Buying trend:
Nearly 3 in 4
employers expect to
offer account-based
CDHPs by 2014.3
Percent enrolled in CDHPs2
1 Mercer, “National Survey of Employer-Sponsored Health Plans,” November 2011.
2 Mercer, “National Survey of Employer-Sponsored Health Plans,” 2010.
3 Towers Watson, “The 2011 Towers Watson Health Care Trend Survey,” August 2011.
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Reform presents opportunities
Strategic offerings help employers and employees

HIPAA-excepted benefits — not in calculation
for “Cadillac” tax:
Life
Disability
Critical illness*
Accident
► Small
business tax credits = higher benefits ROI
*Critical illness exempt only when paid with post-tax dollars.
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Benefit relevance
after the recession
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Recession drags down employee engagement
A downward trend:1
I would choose to stay
with my current
employer even if I were
offered the same pay
and benefits elsewhere
It would take a lot for
me to look for another
employer
64%
62
60
58
56
54
52
50
2008
2009
2010
2011
1 Unum, “Employee Education and Enrollment Survey,” January 2012.
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Employees choose benefits
Two of the top five motivators
of employee satisfaction in
today’s workforce:1
 Job security
 Benefits
Employees who are offered voluntary benefits at work
report higher levels of satisfaction with their benefits
plan and their workplace2
1 SHRM, “2011 Employee Job Satisfaction and Engagement Gratification and Commitment at Work in a Sluggish Economy,” December 2011.
2 Unum, “Beyond the usual benefits: 2012, The power of education to influence workforce satisfaction,” February 2012.
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How companies are responding
A need to reward employees — within budget
With limited rewards options:
 52% of U.S. employers have difficulty finding
critical skills workers.1

21% expect to offer a wage increase —
average amount is under 3%.2

This need to reward workers has fueled growth
in voluntary benefits.
52%
Say it’s hard
to find critical
skills workers
Buying trend:
Unum data shows a 6% increase in voluntary sales during 2011.3
1 McKinsey, ”Economic Conditions Snapshot, September 2010: McKinsey Global Survey results,” 2010.
2 Mercer, “2010-11 U.S. Compensation Planning Survey,” August 2010.
3 Unum, internal data, 2011.
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Voluntary benefits help employee satisfaction
Being offered a choice of coverage influences
employees’ satisfaction with their employer
and their benefits package1
1 Unum, “Beyond the usual benefits: 2012, The power of education to influence workforce satisfaction,” February 2012.
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Job satisfaction shown to boost profits
Benefits now a must-have for successful business
40%
At companies with
HIGHLY engaged
workers, operating
income:
ZZZ
INCREASED
Percent
Operating
Income
0
19%
At companies with
LESS engaged workers,
operating income:
DECREASED
33%
(-40%)
Source: Towers Watson, “Employee Engagement in Practice,” June 2010, in comparing highly engaged workers to peer companies with less-engaged workers.
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Benefits education has strong payoff
HR professionals see a strong correlation between
employee benefits education and perception of value
87%
of employers who highly rate their company’s
benefits communications believe their workers
highly value their benefits.
45%
of employers who do not highly rate their
company’s benefits communications believe their
workers highly value their benefits.
Unum research, survey of 480 human resources professionals at the Society for Human Resource Management (SHRM) 62nd Annual Conference held in
San Diego from June 27–June 30, 2010.
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Administrative demands
press resources
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Administrative demands create data squeeze
Absence management is increasingly complex
►Family and Medical Leave
Act — frequently updated
►State leave laws —
more than 160

For additional savings and
efficiency:
Integrating FMLA with disability
coverage helps to:
●
Avoid costly leave overlaps
●
Reduces compliance liability
Buying trend:
Almost 38% of employers choose to outsource their
leave administration.1
1 DMEC/Spring Consulting, “2011 Employer Leave Management Survey,” February 2012.
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A growing trend – across case sizes
Companies of all sizes are now on board
LIMRA, “Shifting Paradigms? Examining Employee Benefits in the Midst of Economic Uncertainty,” page 150, 2010.
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More impacts of health care reform
Reform mandates create administrative headaches

Mandated health coverage for eligible dependents up to age 26

Annual budget buster: Covering ineligible dependents’ health care
6%
$3,380
$22
BILLION
increase in a company’s costs1
average cost of providing health
insurance for one ineligible dependent2
spent by U.S. companies3
1,2 Employee Benefits News, “When all else fails, pull a DEVA; Considerations for dependent eligibility verification audits,” March 2010.
3 Ceridian, “Dependent Eligibility Audits Bring employers ‘Immediate, Often Staggering Savings,” February 22, 2010.
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Administration technology boosts efficiencies
More employers want time-saving help

53% surveyed implemented a
benefits administration and/or
enrollment system — 11-point
increase over the previous year.1

53%
Electronic enrollments offer
added value
• Accurate documentation
• Effective education
• Data cleansing
• Eligibility verification
42%
2009
2010
Added benefits administration
and/or enrollment systems
1 Unum research, survey of 480 human resources professionals at the Society for Human Resource
Management (SHRM) 62nd Annual Conference held in San Diego from June 27–June 30, 2010.
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Employees need
financial protection
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Employees at financial risk
Economy has put a squeeze on workers’ resources
42% of American workers live
paycheck to paycheck1

Many have no safety net to protect
from expense of a serious illness or injury

●
●
More than 70% could not pay their
normal living expenses if a wage earner
is disabled for six months2
42%
Live paycheck
to paycheck
69% of workers say they do not own
disability insurance3
1 CareerBuilder.com, nationwide survey of more than 5,200 workers, August, 2011.
2 Charles River Associates, “Financial Security for Working Americans: An Economic Analysis of Insurance Products in Workplace Benefits Programs,” August 2011.
3 LIFE Foundation, “This May, LIFE Urges Americans to Evaluate Their Need for Disability Insurance,” May 12, 2012.
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Recession creates “life” crisis
Economic recovery opens door to meet needs
Troubling trends:
Four in 10 households
carry no life insurance1
10%
50-
year low
of insured adults own
both permanent and
term life insurance
coverage – half as many
as in 20042
Evidence of appeal:
A LIMRA survey shows high
employee interest in purchasing
life insurance at the workplace.
Of those who shopped at the
workplace, 75% ultimately
decide to buy.4
of life insurance
ownership3
1,2 Facts About Life 2011, Facts from LIMRA Life Insurance Awareness Month, September 2011.
3 LIMRA, “Household Trends in U.S. Life Insurance Ownership (2010),” by Cheryl D. Retzloff, November 1, 2010.
4 LIMRA, “Shopping on the Job: Life and Disability Insurance Sales at the Workplace,” Kimberly Landry, Research Briefings, March 2012.
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Diverse workforce requires choices in coverage
Examples: Life stages drive financial protection needs
Young Gen Y male
Insurance needs
• Little or no savings
• An injury could be financially devastating
• Can’t afford to miss a paycheck
• Accident
• Disability
• Basic life
Gen X family
Insurance needs
Boomer female
Insurance needs
•
•
•
•
Need for income during maternity leave
Active children in recreational sports
Large home and mortgage
Responsibilities growing faster than savings
• Higher salary to protect
• Aware that cancer risk increases with age
• Planning for long-term financial needs
• Individual short
term disability
• Accident
• Combination of
term and whole life
• Individual disability
• Critical illness
• Whole life/LTC rider
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The economy is forcing employees to delay retirement
61% of working Americans expect
to work at least three years longer
— up from 43% in 20081
Planning to delay
retirement – at
least three years
100%
23%
36%
think they’ll be able to take
care of basic living expenses
– plunging from 42% in
one year2
delayed a routine or elective
medical procedure to reduce
spending3
61%
43%
0%
2008
2011
1,2,3 Sun Life Financial, “Sun Life Financial Unretirement Index 2011,” October 2011.
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Older employees face highest risk
Weakened financial safety nets leave them vulnerable

21.3% of employees have taken out loans on their
401(k) balances1

They have a limited time to recover from recession

Social Security fund projected exhaustion date: 20182

Retirement savings shortfall projections
1 Workforce Management Online, “Under Pressure as
Other Options Vanish,” as of 1Q2010, August 2010.
2 Social Security and Medicare Boards of Trustees,
“Status of the Social Security and Medicare Programs:
A Summary of the 2010 Annual Reports,” 2010.
Available at:
http://socialsecurity.gov/OACT/TRSUM/index.html.
3 Employee Benefits Research Institute, “Retirement
Savings Shortfalls for Today’s Workers,” October 2010.
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Buying trends
and demographics
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The move beyond “defined benefit” plans
LIMRA: 91% of employers offer both
employer- paid and employee-paid coverages1
A strong shift from 100% employer-funded benefits
1 LIMRA, Unpublished Employer Research, sales data from 2002 to 2010.
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Funding shifts vary by product
Increase in employee contributions is highest
in long term disability funding
Buying trend:
Unum customers
reported a 24%
increase in cost
sharing across
all benefits2
1 LIMRA, Unpublished Worksite Employer studies, 2002–2010.
2 Unum, 2009 Employer Loyalty Study, December 2010. Companies with < 2,000 employees.
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Long term disability buying trends
Employee contribution funding continues to grow
Chart information taken from Unum’s 2007-2009 database of new and inforce coverage.
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Short term disability buying trends
Funding shift to employee contributions persists
Chart information taken from Unum’s 2007-2009 database of new and inforce coverage.
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Life buying trends
More employees paying for base and buy-up coverage
Chart information taken from Unum’s 2007-2009 database of new and inforce coverage.
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Individual disability insurance buying trends
Often employer-paid, high incidence of shared funding
Chart information taken from Unum’s 2007-2009 database of new and inforce coverage.
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Financial risk drives voluntary sales
2011 voluntary purchases grew despite economy
Unum recorded
a 6% sales
increase in 20111
Voluntary sales far outpaced U.S. consumer spending,
which averaged 2% for 20113
1 Unum internal data, 2011.
2 LIMRA, “U.S. Worksite Sales survey,” March 2012.
3 Bloomberg, http://www.bloomberg.com/news/2012-07-27/economy-in-u-s-grows-at-1-5-rate-as-consumer-spending-cooled.html. Cited August 22, 2012.
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Voluntary benefits buying trends
Most common plan designs for top products
Chart information taken from Unum’s 2007-2009 database of new and inforce coverage.
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Voluntary benefits: who’s buying what?
Demographic data shows trends in buying patterns

Women still purchase more often than
men, but gap is narrowing

Age varies according to product, reflecting life stage preferences

Age at purchase is largely consistent year-to-year
Chart information taken from Unum’s 2007-2010 database of new and inforce coverage. *Includes child policies.
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Voluntary benefits by industry
Professionals at the frontline of health care most
clearly see the need for voluntary coverage
The top three industries offering voluntary benefits:
#1
Health services and doctors
#2
Retail/wholesale trade
#3
Manufacturing
Chart information taken from Unum’s 2007-2010 database of new and inforce coverage.
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Which combinations do employers sponsor?
The most common voluntary offerings
Unum recommends limiting an initial voluntary benefits
offer to two or three benefit choices.
Top three most
popular
combinations:
#1
#2
#3
 Accident
 Critical illness
 Short term disability
 Accident
 Critical illness
 Life
 Accident
Chart information taken from Unum’s 2007-2010 database of new and inforce coverage.
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Which combinations do employers choose?
Today’s most common group/voluntary buying trends
Top three most popular combinations:
#1
#2
#3
 Life/AD&D
 Life/AD&D
 Life/AD&D
 Long term
 Individual short
 Long term
disability
term disability
 Short term
disability
disability
 Individual short
term disability
 Voluntary life
Tomorrow’s buying trends expected to change…
Chart information taken from Unum’s 2007-2010 database of new and inforce coverage.
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Impact of health care reform
These combinations are expected to shift as more
employers adopt CDHP health plans
Natural fits for high-deductible plans:
► Reduce
Critical
illness
Disability
Accident
CDHP
workers’ financial
vulnerability to injuries
and illnesses
► Fit
needs of various
employee life stages
► Can
lower employers’
costs and keep premium
levels below the
threshold for the 40%
“Cadillac” excise tax
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What’s next?
Creating a “future-ready” plan
Work with your benefits adviser to craft a benefits strategy that:
Is health reform-savvy and
pairs a consumer-directed
focus with financial protection
Optimizes ROI with valuable
services, including EAP and
leave management
Partners with a provider
experienced in both employerfunded and voluntary benefits
Saves HR time with technology
to streamline administration
Boosts employee engagement
with education on benefits value
Offers choices to meet the
needs of a diverse workforce
Minimizes employer touch points
and maximizes value with proven
service and claims support
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How “future-ready” is
your benefits strategy?
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and its insuring subsidiaries.
MK-2843 (10-12)
FOR BROKERS AND EMPLOYERS
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