To underscore the importance of insurance-based benefits, which include life, LTD, critical illness, and accident coverage, Brent Delveaux, Benefits Consultant for Vancouver-based TRG Group Benefits & Pensions Inc., divides his employee presentation into two parts: insurance-related benefits and transactional benefits.
“I want to make sure those employees understand how their insurance-related benefits work. If they have very good coverage, I reinforce that right away, and make sure they understand that.”
Delveaux also finds a lot of business owners buy life insurance for themselves, but rarely disability. “It’s really a lacking market. We talk [to clients] about how inexpensive benefits are on a group basis. We talk about situations we’ve gone through with other clients, and how difficult it has been for some of them to survive without these benefits.”
Employers sometimes resort to self-insurance, which can be attractive as it tends to be less expensive than purchased insurance, and gives them greater control over plan design. But Delveaux strongly discourages his clients from such arrangements. He says there are many examples, like Eaton’s and Nortel, where the employers had self-insured arrangements, and went bankrupt, leaving hundreds of helpless employees in the lurch.
He tells his clients, “If you want to self-insure something you better make sure the employees understand what they’re doing. When you start talking to them about putting it in writing, they realize they have to insure it.”
Delveaux also warns against partial coverage. He cites the example of a client who has an employee on a drug called Soliris. That drug costs around $500,000 a year. The employee is currently 48, and might need the drug till he turns 65. If the employer offers a standard drug plan with 80% co-insurance, the employee could have to pay $100,000/year in co-insurance. “How many employees can afford that? We routinely talk to clients about covering off some of those things so that a 100% of the benefit is covered.”
For Gary Kawaguchi, president of PRL Benefits Limited, the real value of a good benefits package (for the employer) can be measured in moral comfort and higher employee productivity. “It’s difficult for an employer, particularly a small business owner, to have an employee end up with a catastrophic issue – be it disability, medical issue, or an emergent event that happens while travelling.
Without insurance coverage, the moral issue is: it’s a good employee, how can I help? You feel obligated to help. The cost of that obligation can vary. We tell clients that a good approach is to insure the cost of that obligation and budget for it in base benefits.”
“The idea behind spending on benefits is that if done right – and done well – they wind up creating a package offering that has higher perceived value with the employees than it actually costs you as a business owner,” adds Kawaguchi.
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