Fall 2007 / No. 73
The small business market—underserved but how badly?
Several recent articles cite the very poor job we, as an industry, are doing in selling voluntary benefits to small businesses (less than 100 employees). One article said that only 10 percent of small businesses offer a voluntary benefit; another said it was 13 percent. Both Eastbridge and LIMRA have done independent studies over the last two years and arrived at the same results: 50 percent of small employers offer at least one voluntary benefit. There is a big gap between 10 and 50 percent!
Both studies focus on small businesses with at least 10 employees, thereby eliminating sole proprietors, self-employed, and very small business. This may or may not be the reason for the differences in results—we don’t really know. But we do know that the market definitely offers significant opportunity due to the large number of businesses and employees.
According to the U.S. Census, there are about 1.25 million businesses with 10 to 100 employees, and these businesses employ almost 46 million people. That represents a significant opportunity for our industry. Yet, many small businesses do not offer voluntary benefits. Over half (59 percent) of the small employers surveyed said they don’t offer voluntary benefits because the benefits package they provide their employees is adequate. Thirty-one (31) percent said that voluntary benefits are not important to their employees. The following chart shows the percentage of employers who rated each reason as “very important” or “important” in their decision to not offer voluntary:
| Reason |
Percent |
| Our package is adequate without voluntary products |
59% |
| Voluntary products aren’t important to our employees |
31% |
| Administration is too complex |
28% |
| Products are too expensive |
26% |
| Product features are not suitable |
21% |
| We have never been approached |
10% |
It is interesting that all of the reasons cited, except never having been approached, are likely erroneous beliefs by the small business owner. We agree that, as an industry, we aren’t serving the small business market well. With this group of employers, we still have a lot of educating to do about voluntary benefits and what role they can play for the small business and its employees.
For more information about the needs of small businesses, call us at (860) 676-9633.
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