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May 11, 2003 at 08:00 PM
Group UL And VUL Programs Muddle Through The Slump
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Executives in the group universal life and group variable universal life markets are facing some serious obstacles these days.
“The stock market certainly hasnt helped our cause,” says Tony Trani, president of Paragon Life Insurance Company, St. Louis, a MetLife Inc. affiliate that sells group VUL programs.
Trani and Bill Gray, who is director of life product marketing at Principal Financial Group Inc., Des Moines, Iowa, report that year-end, bonus-related group VUL contributions fell in 2002, because of widespread cuts in bonuses.
Even many of the relatively well-paid, well-educated executives and professionals who still put cash in group VUL plans are warier of investment risk than they used to be.
Trani estimates that Paragon group VUL participants are putting about 40% of new contributions in a new investment option that pays a fixed return of 5.6%.
But Trani, Gray and other executives interviewed also agreed group UL and VUL products are doing better than outsiders might expect, under the circumstances.
Employees regular monthly contributions and sales of plans to employers are holding steady, executives say.
For the most part, “people arent bailing out of the market,” Gray says.
The American Council of Life Insurers, Washington, reports that, in 1999, U.S. insurers sold group UL coverage with a face value of about $36 billion and group VUL coverage with a face value of about $21 billion.
Trani estimates that group UL and VUL programs generate about $1.5 billion in premium revenue per year.
Although the group UL and VUL markets are much smaller than the group term life market, in the group UL and VUL markets, “theres some potential for growth,” says John LaPrade, manager of group UL sales at Massachusetts Mutual Life Insurance Company, Springfield, Mass.
Most employers that can afford and want group term life programs already have them, but LaPrade estimates that only about 25% to 30% of the employers that should have group UL or VUL programs have them.
A group UL insurance policy is a group policy with a flexible premium schedule. Returns may be fixed temporarily but depend indirectly on the returns the insurer earns on its own investments.
A group VUL insurance policy offers a combination of a flexible payment schedule and returns based on each individual plan members investment decisions. Plan members can choose from a menu of investment options that resemble investment vehicles such as mutual funds.
