Jobless Recovery, Other Trends
Influence Worksite Market
As agencies, brokers and carriers build their marketing and distribution strategies for the worksite market, they need to anticipate future changes. They need to understand how economic, demographic and industry trends affect the market potential for employee benefits and voluntary products.
While there are indications that the U.S. economy is on the mend, so far it has been a “jobless” recovery. Employers, not yet comfortable enough to hire regular full-time workers, continue to look to part-time, contract and temporary employees. Offshore outsourcing also has become a cost-effective strategy in todays economy. As a result, the pool of benefit-eligible employees has remained flat, limiting short-term growth in the employee benefits market.
As market potential has stagnated, there is less competition in the employee benefits marketplace due to merger and acquisition activity. Key players have been acquired or merged with other firms in a bid to maximize distribution effectiveness and economies of scale.
Driven in part by lower investment returns, carriers are less willing to buy market share. Pricing, profit margins and expense management are overriding concerns when companies develop new products and services.
In addition, there is continuing uncertainty among employers over double-digit medical premium increases. Employers have reacted by increasing deductibles, co-payments and employee premium contributions for medical coverage.
At the same time, employers are hesitant to make drastic changes to benefits because of the effect on employee morale and retention.
Here are 3 scenarios that suggest opportunities for growth in the voluntary benefits market based on the impact of medical increases on employees.
? Replacement. If increases in costs of medical benefits squeeze employees too much, they will cut back or even drop medical. On the flip side, they could pick up other coverages as a stop-gap measure. For example, accident, cancer, critical illness and supplemental medical insurance all provide limited amounts of health coverage. While far from comprehensive, the plans do offer at least some form of coverage as employers cut back on traditional medical plans. Although not a rosy scenario, it does present an opportunity for voluntary carriers marketing these plans.
? Challenges. Medical increases may push some products to the sideline as employers strive to pay the higher costs.