7% rise falls short of previous 5 years double-digit track record

By Trevor Thomas

New insurance sales made to U.S. workers at their places of employment rose 7% to just over $4.3 billion last year, the first time in 6 years that the worksite employee benefits industry failed to show less than double-digit growth.

In contrast, the 2002 figure of $4 billion in new sales was up 15% over 2001 and was the 5th straight year of double-digit increases in worksite business, according to a report by Eastbridge Consulting Group, Avon, Conn.

Eastbridge executives blamed the slowdown on sales fluctuations among a few key players in the market. “If you pulled them out [of the data], most every other number would have been the same as before,” says Bonnie Brazzell, vice president of Eastbridge.

Despite the general slackening, a number of companies had strong increases in 2003, she says.

For example, one of the top 15 experienced nearly a 200% increase over its 2002 results, while 3 others in this top group saw sales growth of more than 20%, Brazzell says.

“Several of the top players had slower than normal years in 2003, but we expect them to be back in the double digits for 2004,” adds Eastbridge president Gil Lowerre.

Life insurance led among voluntary benefits, with about 25% of sales, up 11% from 2002. Voluntary term life sales accounted for about 54% of that volume, according to Eastbridge.

Disability insurance, which last year was first in worksite sales for the first time, dropped back to second place with 23% of sales. Sales of both short- and long-term disability products still gained more than 5% over 2002.

The highest growth in the worksite market was for hospital indemnity and supplemental medical plans, which rose 55% over 2002 to capture 7% of voluntary worksite benefit sales, according to Eastbridge.

It was the second straight year of strong growth for hospital and supplemental medical policies, which grew 33% in 2002.

Brazzell attributes much of that growth to widespread cutbacks in employer-paid medical benefits. “As employers raised deductibles, we have seen a growth of supplemental medical plans,” she says.

Cancer/critical illness and dental showed slight decreases over 2002, while long term care insurance fell by 6%, to around 2% of worksite sales.

Eastbridges study is based on data from 55 worksite marketing carriers, which it estimates account for almost 90% of total worksite sales.

Of these, 15 companies account for over 75% of total worksite sales, up from 72% in 2002. For this group alone, sales increased an average of 8% in 2003, sharply lower than the 17% rise they sowed in 2002 and the 30% increase in 2001.

Group products sales grew 17% in 2003, while individual benefits grew about 6%, Eastbridge says. Individual products still dominate the market, however, accounting for 56% of new sales last year.

Premiums for worksite products already in-force (as opposed to new sales) also grew more slowly in 2003, but the amount was more in line with historical averages, Eastbridge says. In-force policy premiums totaled between $11.3 billion and $15 billion. This would be at least 13% over the $10 billion to $13 billion estimated for 2002, which, in turn, was up about 17% rise over 2001.

Despite last years slowdown, total worksite sales of voluntary benefits rose over 6 years by 120%, from $2 billion in 1997, Eastbridge says.

Employee benefits brokers were the dominant distribution channel in worksite sales, accounting for 34% of sales last year, while career agents accounted for about 26% and classic worksite brokers 16%.


Reproduced from National Underwriter Edition, July 22, 2004. Copyright 2004 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.