Voluntary Worksite Benefits Seen Resuming Double-Digit Growth
Despite slower growth last year, worksite sales are expected to resume double-digit percentage growth in the years ahead, analysts agree.
A new study by Eastbridge Consulting Group Inc., Avon, Conn., finds worksite voluntary product sales grew at 7% in 2003, to $4.3 billion, down from historical growth of 12% to 16%.
As a result of the reduced growth rate, executives in voluntary worksite benefits interviewed for the study were slightly more conservative in their sales projections than last year. Still, they predicted sales increases averaging 10% annually for the next 5 years, according to Gil Lowerre, president of Eastbridge.
Most worksite product executives thought their own company sales would grow well above what they projected for the industry as a wholeanywhere from 15% to 20%, according to Eastbridge.
Another study of voluntary worksite benefits by LIMRA International, Windsor, Conn., reports new annualized premiums for voluntary life and health insurance products in the first half of 2004 totaled $744 million. That was up only 4% over the same period a year earlier. In contrast, LIMRAs study in 2003 found a 15% sales rise over the year before.
The reduced pace for worksite products can be attributed to a number of factors, experts from Eastbridge and LIMRA say.
For one thing, many employers are not pushing voluntary benefits because increasing co-pays and deductibles on employer-paid medical plans already have shifted costs to employees. This made many employers reluctant to add benefits that employees would have to pay for out of their own pockets, observes Anita Potter, assistant vice president of group research for LIMRA.
Market saturation for certain product lines also could have slowed down sales, adds Patrick Leary, manager of worksite research for LIMRA.
“A high percentage of employers already offer supplemental life, for example,” says Leary.
Part of the slowdown could be attributed to the lackluster sales by the industry leader, AFLAC Inc., Columbus, Ga.
“They sneeze, and we all catch cold,” one expert says of AFLAC.
The company posted sales increases of less than 3% in the first 9 months of this year, which company officials acknowledge was disappointing.
“We believe the overall weak sales growth primarily resulted from the sweeping changes we made to our sales management team last year,” said Daniel P. Amos, AFLAC chairman and CEO, in a recent statement. “Those changes are continuing to impact recruiting, productivity and, consequently, sales.”
Lowerre expects sales growth for all types of voluntary benefits of as much as 10% for this year. Although this would be better than the 7% growth Eastbridge found in 2003, it still would be down from historical growth of 12% to 16%.
There still are some fast-growing segments, including medical supplements such as hospital plans and mini-med plans, Lowerre reports. And life and disability products continue to lead in worksite sales, he points out.
The big news in worksite benefits has been the rise of the role of the employee benefits broker as the major distributor of voluntary products, replacing agents that specialize in these products. This is a sure sign worksite benefits have gone mainstream, Lowerre says.
Hand in hand with that development has been a surge of interest in the market by traditional insurers such as CIGNA, Aetna and Hartford.
“You might say they are following their brokers into the business,” Lowerre says.
Worksite executives surveyed by Eastbridge see much of the industrys growth coming from new producers entering the market, including brokers of traditional employer-paid health care insurance.
Executives in the industry also anticipate seeing large group product vendors and medical insurance carriers begin to dominate the middle and large voluntary markets, says Lowerre.
LIMRA executives believe the biggest sales opportunities in the market lie with smaller employers. “Carriers might need to change their target market to smaller firms, where they dont have much penetration,” says Leary.
There could be a strong market for supplemental medical, critical illness and accident insurance among smaller employers, particularly those that only can offer a bare-bones employer-paid plan, Leary says.
“Dental also remains very popular, and I dont see that dropping, even if employers are pushing more of the premiums onto employees,” he says.
To penetrate the small group market, brokers will need to be prepared to quote more bids to clients, Potter adds. “Money is tight, and they want to make sure they are getting the best deal.”
Reproduced from National Underwriter Edition, December 16, 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.