U.S. Group Life Market Remains Stable And Competitive

Adding the education benefit “was a response to the market, but more a need for support of the family when an accidental death occurred,” Smith says. “Our life product is in tune with the family.”

Standard and other insurers are also offering special counseling programs and checking accounts for the bereaved.

But the main benefit, the death benefit, has not changed much.

Of course, group life insurers are facing some major, difficult-to-analyze risks right now. Two are Severe Acute Respiratory Syndrome and the threat of a massive terrorist attack.

But Michelle Fallahi, a vice president in the Minneapolis office of ING Re, doubts SARS will have much effect on the typical U.S. group life carrier.

“Even though its given a lot of press, I dont think that its had a catastrophic effect on health care costs at all,” Fallahi says. “There are other diseases out there that are claiming lives, too. You can look at heart disease or cancer and say they claim more lives than SARS.”

Goldeen was already selling insurance in late 1968 and early 1969, when the Hong Kong influenza pandemic killed 33,800 Americans.

From the standpoint of benefits brokers, the Hong Kong flu “was all talk,” Goldeen says. “More people died of lung cancer.”

Goldeen is a little more interested in the possibility that terrorists might unleash a deadly smallpox epidemic.

ING Re executives see definite signs that reinsurers and insurers of group life plans are making more of an effort to avoid concentrating too much risk in one location or one community.

But Borgatti has not seen evidence of the fear of terrorism having much effect on retail group life pricing, or on the sale of basic or supplemental life coverage.

“Catastrophe reinsurance prices skyrocketed in 2002, averaging 700% over 2001 levels,” Borgatti says. “However, this did not affect 2002 group life pricing in any substantial way that we saw.”

Meanwhile, at the worksite, the increasing cost of health benefits, worries about the economy and worries about national security have outweighed the effects of the Sept. 11, 2001, terrorist attacks on awareness of the need for life insurance, Borgatti says.

She does see signs the soft economy and rising health insurance prices are affecting the group life market.

Because so many people are looking for work, employers no longer feel as much pressure to add traditional, employer-paid benefits to attract good candidates, Borgatti says.

At LIMRA, she adds, some survey results hint that the smallest employers are dropping group life coverage. But most employers still want to offer a competitive benefits package, and most want to maintain strong employee relations, she says.

Moreover, because group life accounts for only 0.2% of total compensation costs, few employers view cutting existing group life benefits as a way to make a major dent in expenses, Borgatti says.

Some life insurers and producers have talked about employers shifting to voluntary, employee-paid life benefits programs.

But recent data suggest that, for now, employers and workers are using employee-paid life benefits mainly to supplement employer-paid programs, not to replace the employer-paid programs, Borgatti says.

Reproduced from National Underwriter Edition, May 12, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.