Perceptions, potential and

voluntary benefits Sun Life Financial Thought Leadership Results

Presented by:

Tom Gilligan

Vice President of National Sales

Voluntary Benefits

Sun Life Financial

Agenda

Get to know your audience

• Long-term disability

• Critical illness

Guided decision making

Long-term Disability

Research Methodology

• Conducted by Kelton Research in March 2012

• Online survey

• Polled 2,011 U.S. full-time employees age 18 and over

• +/- 2.2% margin of error

Full-time workers

One-third (33%) of

surveyed full-time

workers say they don’t

have group long-term

disability insurance.

Men purchasers versus women purchasers Nearly 30% more men purchased voluntary long-term disability

insurance than did women.

Married versus single

More married workers bought long-term disability insurance compared

to single ones

Married Single

42% 35%

Over half (53%) of respondents believe if they’re disabled the

government would cover expenses.1

But only 35% of SSDI annual claims applications are approved.2

1. 58% of respondents age 40 and over believe that if they are disabled for two years, government programs such as Social Security will

cover their living expenses once their savings run out. In contrast, younger workers are less likely to feel this way: only 47% of workers from

18 to 39 express such unbridled confidence in Social Security.

2. As of 2011, the average wait time to obtain even a decision from the Social Security Administration on a claims request was one year.

www.ultimatedisabilityguide.com/ssdi_ssi_hearing_wait_times.html and www.ssa.gov/oact/STATS/dibStat.html.

Misconception about Social Security

Personal bankruptcies: Medical problems contributed to 62% of all personal bankruptcies filed in the United States in 2007, a 49.6% increase over

results from a similar 2001 study. The American Journal of Medicine, June 4, 2009. David U. Himmelstein, MD; Deborah Thorne, PhD; Elizabeth

Warren, JD; Steffie Woolhandler, MD, MPH, “Medical Bankruptcy in the United States, 2007: Results of a National Study.” Home foreclosures:

Medical problems contributed to half of all home foreclosure filings in 2006. Christopher Tarver Robertson, Richard Egelhof, and Michael Hoke,

“Get Sick, Get Out: The Medical Causes of Home Mortgage Foreclosures,” Health Matrix, Journal of Law-Medicine, August 8, 2008.

50% of all

foreclosures

62% of all

personal bankruptcies

How a disability affects financial security Medical problems contribute to:

The gambler The mole The ostrich

They hadn’t thought

about whether they

need coverage

They don’t think their

chances of suffering a

disability warrants

paying for coverage

They don’t like thinking

about the possibility of

experiencing a disability

38% 38% 19%

Why workers don’t buy coverage

79%

Own Dental vs. Long-Term Disability

Dental

58%

Long-Term Disability

More workers own dental than disability

Workers need to understand the risks Risk of disability vs. dental incident (for worker earning $50,000 salary)

Probability

Very

High

Probability

Very

High

Financial Risk

Low

Financial Risk

Low

Dental incident Disability

($50,000+)

($600)

Sun Life Financial disability projections are based on information from the Society of Actuaries, Group Long-Term Disability Actuarial Tables,

1987, latest available data as of February 2012. Sun Life Financial estimates dental financial loss using an annualized average for what an

individual can expect to pay in dental costs during their professional lifetime if uncovered by dental insurance.

Who chooses to buy voluntary LTD coverage?

The responses of workers in the following industries were compared to one another and to the overall pool of respondents: technology (115

respondents), education (242 respondents), health (188 respondents), and manufacturing (119 respondents). Only the tech workers

displayed significantly distinguishing behavior.

58%

38%

Tech

Workers

Workers in

Other

Industries

46%

37%

Minorities Non-

minorities

44%

29%

Younger

Workers

(18-49)

Older

Workers

(50+)

Tech Workers Minorities Younger Workers (18–49)

Who are underserved? How to reach them? For women, singles, and older workers

MINIMIZE complexity and

use PLAIN LANGUAGE

• Long or short

• Benefit amount

• Elimination Period

• Duration

• Optional benefits

• Optional services

Bring the WHY and the WHAT

• Why disability insurance?

• What it means to me?

Consider demographic

messaging

CRITICAL ILLNESS

Research Methodology

• Conducted by Kelton Research in August 2012

• Online survey

• Polled 4,116 U.S. full-time employees

• Median household income: $51,000

• Median investable assets: $11,000

• Median age: 43

• Male: 56%, Female: 44%

• Married: 60%, Single: 25%, Divorced or separated: 13%

• +/- 1.5% margin of error for total sample (4,116)

• All responses have a minimum sample size of 100

36%

<5%

Think that they have critical

illness insurance

U.S. workers who actually have

critical illness insurance,

according to industry estimates

Scarcely more than one fifth of employers even offer access to workplace critical illness insurance. Those few employers who do offer such coverage

generally offer it as a voluntary benefit. And only about 10% of employees offered such coverage actually purchase it. Thus, perhaps less than one

twentieth (5%) of U.S. workers actually have critical illness coverage: Weathering The Storm, LIMRA, 2011 & LIMRA estimates.

Workers think they’re covered, but it’s more

likely that they are not

Many workers fear the financial impact of a critical illness—even more

than dying from one

Workers understand there’s a financial impact

47% Finances

29% Dying

22% Emotional burdens

2% Other

Understanding financial concerns

X times more likely to be concerned with finances than with dying

Workers

age 40-50

Single

workers age 40-50, earning

<$50,000 in HHI

Single

parents age 40-50, earning

<$100,000 in HHI

Single

women age 40–50, earning

<$50,000 in HHI

2X more likely

3X more likely

4X more likely

Who worries most?

HHI = Household income

Understanding financial concerns Workers in which industries worry most?

Industry

X times more likely to be concerned

with finances than with dying

Transportation/utilities 2.0

Professional business services 1.9

Manufacturing 1.8

Wholesale / Retail 1.6

Finance (ex. ins.) 1.6

Education 1.5

Health / Wellness 1.5

Tech 1.5

Construction 1.5

Leisure / Hospitality 1.2

Critical illness is relevant and relatable

Employees worry most about a cancer diagnosis

48% Cancer

32% Heart attack

15% Stroke

5% Other

2012 CDA Long Term

Disability Claims Review

Claim diagnosis

category

% of new

2011

claims

Cancer and

Neoplasms 14.4%

Cardiovascular/

Circulatory 8.7%

More women fear cancer,

more men fear a heart attack

Critical illness of most concern Women Men

Invasive cancer 56% 42%

Heart attack 25% 37%

Stroke 14% 16%

More younger workers fear cancer,

more middle age workers fear heart attack

Critical illness of most concern

Younger

workers

(age 22-39)

Middle age

workers

(age 40-54)

Invasive cancer 53% 45%

Heart attack 29% 35%

Stroke 12% 16%

Personal experience with a CI

Of workers who had personally experienced a critical illness:

66% say they had to make significant financial sacrifices

37% say that the illness required them to stay out of work

for 4 months or longer

Personal experience with a CI

Out-of-pocket

medical costs

by condition

Based on 2007 medical

claims data adjusted for

health care inflation

Based on medical claims data of 319,580 employees (including their spouses and dependents) who are covered under multiple employer-

sponsored health plans. First dollar claims data provided by Sun Life Stop-Loss policy holders.

Though cancer, heart attack, and stroke are the three most commonly occurring critical illnesses, the average total out-of-pocket costs for “critical

illness” ($7,575) includes numerous and varied diseases weighted by incidence rate.

$7,575 $6,740

$14,234

$17,680

Critical

Illness (avg.)

Cancer Heart Attack Stroke

Personal experience with a CI

Where they turned to for money

Dipped into savings earmarked for future needs

Tapped emergency funds

Borrowed money from family or friends

Declared bankruptcy

Sold or foreclosed on their primary residence

Borrowed from a bank or other lending institution

28%

28%

21%

12%

11%

11%

Respondents were able to choose more than one option.

Know your audience for critical illness

insurance

MINIMIZE fear,

encourage

conversation

Bring the WHY and

the WHAT

• Why critical illness

insurance?

• What it means to me?

Explain how it

complements health

and LTD

Consider demographic

messaging

Agenda

Get to know your audience

• Long-term disability

• Critical illness

Guided decision making

How to make choosing easier

Press here

for video

Voluntary Benefits are increasing

As many as 1 in 3

employers is

considering replacing

employer-paid benefits

with voluntary benefits

“Voluntary Worksite Benefits: Penetration and Market Potential,” LIMRA, 2011.

Voluntary Benefits are increasing

Total 2012 industry

Voluntary sales

$6.0 billion

Source: Eastbridge Consulting Group, U.S.

Worksite/Voluntary Sales Report—Carrier Results

for 2012, April 2013. Used with permission.

LTD

$429

STD

$834

Term Life

$1,113

Accident

$855

HI

$596

Vision

$338

AD&D

$68 CI

$294 Cancer

$436

Dental

$577

UL/WL

$433 LTC

$26

Top Voluntary Products Sold

Source: Eastbridge Consulting Group, Inc. 2013, “What’s

up with Brokers and Voluntary Benefits?” Used with

permission.

Product

Benefits

brokers

Short-term disability 60%

Term life insurance 54%

Dental insurance 45%

Critical illness insurance 38%

Accident insurance (personal injury, not AD&D) 36%

Vision insurance 33%

Cancer insurance 25%

Long-term disability insurance 21%

Non-Traditional Products Sold

Product

Benefits

brokers

Wellness programs 73%

Discount health programs 38%

Legal plans 31%

ID theft coverage 29%

Pet insurance 16%

Computer, appliance, furniture purchase programs 8%

Vacation programs 5%

Source: Eastbridge Consulting Group, Inc. 2013, “What’s

up with Brokers and Voluntary Benefits?” Used with

permission.

Choice Architecture

“If you indirectly influence the choices other people make,

you are a choice architect. And since the choices you are

influencing are going to be made by Humans, you will want

your architecture to reflect a good understanding of

how humans behave.”

Nudge

By Richard Thaler and Cass Sunstein

Google this article:

“A Better Choosing Experience”

By Sheena Iyengar and Kanika Agrawal

Published in strategy+business, Issue 61, Winter 2010

Prioritize choices

Prioritize the benefits menu order intentionally;

SHELF SPACE MATTERS

•Is LTD more important than dental? Accident?

•Is cancer coverage more important than life

insurance?

•Talk about sick pay and voluntary disability together

•Talk about employer paid life and voluntary life

together

Categorize their options

Sephora

High, Mid, Low plan designs

Basic, Good, Best

Bronze, Silver, Gold

Personalize

Personalized enrollment forms

can increase participation

• Avoid generic, multi-dimensional

charts

• Show cost per pay period

Prevent errors and regret

Paycheck “guard rails”

• Employee cannot spend more than 1 hour per

week of wages on a voluntary benefit

• Incorporate constraints in choices offered

Review “total spend” of all Voluntary products at

employee level

Create confidence through recommendation

Independent industry expert recommendations

such as LIMRA or Disability Council

Guarantee Issue levels

Highlight recommended choice

First choice is recommended choice

Choice expertise = competitive advantage

“If the market for your product is saturated with choice, you can’t gain a

competitive edge by dumping more choices into the mix. Instead, you can

outthink and outperform your competitors by turning the process of

choosing into an experience that is more positive and less

mind-numbing for your customers. You can design a more helpful

form of choice.”

— Sheena Iyengar and Kanika Agrawal,

A Better Choosing Experience

Summary

Using research and an applied approach

to managing choice, you can . . .

• better understand how different employees view, want,

and need different types and levels of insurance

protection

• make the education and enrollment process simpler and

more meaningful

• help more employees make better choices for

themselves and their families

Thank you

The Sun Life Financial group of companies operates under the “Sun Life Financial” name. In the United States and elsewhere, insurance products are offered by

members of the Sun Life Financial group that are insurance companies. Sun Life Financial Inc., the publicly traded holding company for the Sun Life Financial

group of companies, is not an insurance company and does not guarantee the obligations of these insurance companies. Each insurance company relies on its

own financial strength and claims-paying ability.

Group insurance policies are underwritten by Sun Life Assurance Company of Canada (Wellesley Hills, MA) in all states except New York. In New York, group

insurance policies are underwritten by Sun Life Insurance and Annuity Company of New York (New York, NY). Product offerings may not be available in all states

and may vary depending on state laws and regulations.

© 2013 Sun Life Assurance Company of Canada, Wellesley Hills, MA 02481. All rights reserved. Sun Life Financial and the globe symbol are registered

trademarks of Sun Life Assurance Company of Canada. Visit us at www.sunlife.com/us.

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