Executive Summary2014 Aflac WorkForces Report for BrokersBrokers who’ve adapted to health care reformare being rewarded for their persistenceThe 2014 Aflac WorkForces Report for Brokers reveals that brokerages of all sizes haveaccepted the reality of health insurance reform and are responding to industry changes innumerous ways.Last year, when Aflac first surveyed brokers to gauge their opinions and attitudes abouthealth care insurance trends, the findings indicated their industry was at a crossroads.Changes to the way major medical insurance is shopped for and purchased had resulted2 0 1 4 some brokers have left the industry and others are still considering doing so, those who haveadapted to the new health insurance reality are determining the best ways to successfullyA F L A C W O R K F O R C E SR E P O R TF O Rindividual livelihoods.B R O K E R Sin deep concern about the state of the broker business at large, not to mention brokers’In the past 12 months, many things have changed. This year’s findings indicate that whilenavigate the changing landscape. Still, the fallout from reform continues to reverberate,as evidenced by today’s top five issues for brokers:»» Rising health care costs affecting client decisions (47%)»» Understanding the impact of health care reform (38%)»» Remaining relevant (29%)»» Diversifying benefits offerings (26%)»» Client uncertainty about health care reform (27%)Given the volume of revenue generated by majormedical insurance (see chart on next page), it’s easy tounderstand why brokers are concerned about reform’simpact on their businesses and incomes.49%of brokers at leastsomewhat agreethey are consideringexiting their industryaltogether.

Figure 1Revenue StreamSmall BrokerageMedium BrokerageLarge nsurance28%Life Insurance28%Property & CasualtyInsurance22%Life Insurance22%Health/MedicalInsurance23%Life Insurance14%Property & CasualtyInsurance21%Property & enefits14%VoluntaryBenefits15%Disability Insurance10%Disability Insurance11%Disability Insurance11%Other4%Other4%Other7%The 2014 Aflac study also found health care reformcontinues to send shockwaves throughout the community, affecting the employers – andworkers – that brokers serve. Specifically, results showedrising health care costs are influencing workers’ financialwell-being, driving a growing demand for voluntarybenefits and emphasizing the correlation between goodbenefits and business success. Details about employee67%of brokers at leastsomewhat agree thatmany of their peershave left the businessin the past year.and worker mindsets can be found in the Aflac Workforces Report National Fact Sheet.Broker choices present opportunity for othersIn the wake of reform, brokers are making tough decisions. Nearly half (49 percent) of thosewho participated in the 2014 Aflac survey at least somewhat agree they are consideringexiting the industry altogether. What’s more, 67 percent at least somewhat agree they’ve seentheir peers exit the business in the past year.Why have other brokers decided to stay the course? Put simply: opportunity. Thirty-six percentcompletely or strongly agree that health care legislationpresents an opportunity for their businesses, and 50 percentcompletely or strongly agree they are confident about theirfirms’ futures and the future of the broker industry.Smart brokers are making theirown opportunitiesWhat are these determined-to-succeed brokers doingthat others are not? They’re adapting, evolving and36%of brokers completelyor strongly agree thathealth care legislationpresents an opportunityfor their businesses.PAGE 2

looking for smart ways to replace the portion of theirbusiness that’s being eroded by reform.Voluntary insurance is growing in importance as aresult of reform, and smart brokers have taken note byexpanding their consulting services and target-clientspectrums, functioning as navigators for products soldthrough exchanges and even launching exchanges oftheir own. Notably, they’re also replacing gaps in theirportfolios and incomes by increasing their dependence50%of brokers completelyor strongly agree theyare confident abouttheir firms’ futuresand the future of thebroker industry.on voluntary health insurance sales:38%Predict the proportion of voluntary benefits they sell will increase over the next 12 months24%Have been offering their clients voluntary benefits options for less than a year23%Have been offering their clients voluntary benefits options from one year to less than three yearsThe good news? Brokers with the foresight to fills gapsin their clients’ portfolios with voluntary benefits optionsare reaping major rewards: They are more likely to beincreasing their client bases than brokers who don’t offervoluntary insurance products, and they’re also more likelyto be growing their sales.Conversely, brokers who haven’t discovered the valueBrokers who makevoluntary insuranceproducts availableto their customersare more likely to begrowing their clientbases and their sales.of voluntary insurance benefits are feeling the pinch. Those who don’t provide clients’employees with access to voluntary options are more than twice as likely as brokers whodo to be experiencing declining sales. They’re also 44 percent more likely to be coping withdecreasing client bases.The Aflac survey revealed that brokers are excited about the doors that have been opened byvoluntary insurance products and the business they generate:53%Plan to increase the amount of revenue generated by voluntary insurance47%Include voluntary insurance among their offerings because it generates a new revenue stream64%Include voluntary insurance among their offerings to satisfy the needs of clients’ employeesPAGE 3

Brokers expand theirtarget-client spectrumBrokers who don’tprovide clients’employees with accessto voluntary optionsare more than twiceas likely as those whodo to be experiencingdeclining sales. They’realso 44 percent morelikely to be coping withdecreasing client bases.Nearly 4 in 10 brokers have made changes to theirtarget-client spectrums as a result of health carelegislation, and there is good news: Their opportunitieshave expanded at companies from small to large.Many workers and businesses are confused about health carereform. Just 21 percent of employees say they understandhow health care reform affects their lives extremely or verywell. At the same time, only 40 percent of businesses saythey understand reform extremely or very well. (Details can befound in the Health Care Reform and the Transformation of Workplace Benefits fact sheet.)As a result, 45 percent of companies surveyed as part of the Aflac WorkForces Report intendto increase their reliance on brokers or insurance providers when making changes to theirbenefits plans. This provides brokers with the opportunity to leverage health care reform byusing it to generate revenue from a larger, more diverse client base:Changing target client, 201431%25-99100-499500-999Number of EmployeesIn light of the increased opportunities presented by agrowing market, how are brokers changing their behavior?First, many are increasing their value by showcasingtheir knowledge and capabilities through expandedconsulting services. Fully 78 percent of brokers atleast somewhat agree they’ve either expanded theirconsulting services or created new consulting practicesin the past year. This means they’re not only sellinginsurance; they’re also taking on a more consultative roleby educating their clients about insurance options andproviding guidance about the benefits that meet clients’16%11%1,000-4,9995,000 45%of companies surveyedas part of the AflacWorkForces Reportintend to increase theirreliance on brokers orinsurance providerswhen making changesto their benefits plans.needs and the needs of their employees.PAGE 4

Additionally, brokers are acclimatizing to the health care exchange reality by becoming part ofthe equation. More than one-third (35 percent) are functioning as navigators for insuranceproducts offered through exchanges. Some are even pursuing opportunities withinexchanges and launching their own private exchanges:38% of brokers function as producers for insurance products handled through exchanges, with:62%Functioning as producers for public exchanges38%Functioning as producers for private exchanges31%Of their total production stemming from exchange activitiesTaking advantage of the uncertaintyAfter years of uncertainty and turmoil surrounding changes to the U.S. health care system,brokers who’ve elected to continue in their careers are making positive changes to ensurecontinued success. They’re overcoming the gloom once presented by health care reform and seeclearer skies ahead: Companies’ use of brokers increased from 56 percent in 2011 to 61 percentin 2013 to 64 percent today.What’s more, brokers are beginning to view legislative changes as more opportunity thanhindrance. After all, the majority (79 percent) at least somewhat agree their clients are notprepared for health care reform.This opens the door for the 93 percent of brokers who say they understand health carereform at least somewhat well to deepen their bonds with clients, increase their value toemployees, and prove once and for all that the knowledge, guidance and worth of a broker’scounsel is priceless in today’s insurance landscape.About the Aflac WorkForces ReportThe 2014 Aflac WorkForces Report was conducted in January 2014 by Research Now.The 2014 study captured responses from 1,856 benefits decision-makers, 5,209 employeesand 314 insurance brokers from throughout the United States.Key 2014 employer and employee findings:»» Health care costs significantly influence workers’ overall financial well-being.»» The average American worker is one serious medical event away from financial hardship.»» There is a strong connection between benefits offerings and companies’ keyperformance metrics.»» Voluntary insurance options are growing in importance as the effects of health care reformbecome clear.Learn more about the Aflac WorkForces Report.PAGE 5

BrokerDemographics3%Large BrokerageMedium Brokerage21%Small Brokerage50%Other26%BrokerDemographicsNortheastern brokerages67Midwestern brokerages95Southern brokeragesWestern brokeragesTotal 3148270Key takeaways from the 2014 Aflac WorkForces Reportfor BrokersOpen more doors with voluntary health insuranceFully 90 percent of brokers at least somewhat agree that rising health care costsare making it difficult for their clients to offer adequate benefits – and 49 percent ofemployers indeed say controlling costs is a top business objective. Because voluntaryinsurance is employee-paid and has no direct effect on an employer’s bottom line, smartbrokers are adding voluntary products to their portfolios. As an added incentive,63 percent of employees see an increased need for voluntary insurance benefits in 2014compared to previous years. Of those currently without access to voluntary insuranceoptions, 52 percent say they’d be at least somewhat likely to apply for voluntary benefitsif their companies made them available.Bottom line: Voluntary insurance is a win for all concerned – for the employer, who providesworkers with added benefits at no cost to the company; for the employee, who can choose thevoluntary health insurance options that suit his or her family’s needs and budget; and for thebroker, who increases business by providing peace of mind to both clients and their workers.PAGE 6

Continue to stress the value of tailored benefitsThe health insurance needs of a 40-year-old, married employee are very different fromthose of a 25-year-old, unmarried worker. Brokers understand that, and it’s why84 percent recommend that their clients tailor their benefits packages to variousemployee constituencies. Unfortunately, just 39 percent of employers actually heed theadvice. Make it your goal to increase that percentage by stressing that smart employersunderstand and respond to the generational and demographic compositions of theirworkforces. These savvy companies increase employee satisfaction by providingcustomized benefits solutions instead of homogenous, one-size-fits-all plans.Eliminate communications blockadesMany business leaders are excellent at boardroom communication, but are lesssuccessful in their communications with rank-and-file employees. This is especially truewhen conversations center around health care benefits.More than half of employers (54 percent) believe they communicate with employeesabout the value of their benefits extremely or very effectively. However, the Aflac studyshowed that workers are largely dissatisfied with the benefits messaging they receive.Volunteer to help set up a communications plan that educates workers about benefits2 0 1 4throughout the year – not just at new hire and open enrollment. Because employeeslike to receive information a variety of ways, why not suggest strategies for writtenB R O K E R S communications, online communications, video communications and seminars?Key takeaways for brokersF O RThe 2014 Aflac WorkForces Report for Brokers revealed that brokers should dothese key things to drive business:»» Open more doors with voluntary health insurance options.R E P O R T»» Continue to stress the value of tailored benefits.»» Encourage clearer communication with employees.W O R K F O R C E S»» Urge clients to communicate about benefits throughout the year.Sources1The 2014 Aflac WorkForces Report for Brokers is the second annual Aflac broker study examining benefits trendsand attitudes. The study was conducted among 314 brokers in January 2014 by Research Now on behalf of Aflac.A F L A C Content within is for informational purposes only. This material is intended to provide general information aboutan evolving topic and does not constitute legal, tax or accounting advice regarding any specific situation. Aflac cannotanticipate all the facts that a particular employer or individual will have to consider in their benefits decision-makingprocess. We strongly encourage readers to discuss their HCR situations with their advisors to determine the actionsthey need to take or to visit (which may also be contacted at 1-800-318-2596) for additional information.Keep up to dateand follow Aflac ompany/Aflac6/14