Since about 1974, I have sold both individual and group voluntary products and think I can present a reasonably unbiased view of the pros and cons of both.
Assuming the basic benefits of the group and the individual product are the same, the key factor in differentiating selling individual vs. group voluntary products is flexibility.
Below is a quick reference chart to show what the differences are in flexibility between group and individual products.
For purposes of this article, an individual voluntary benefit product is typically guaranteed renewable. Group products are generally more flexible from a sales standpoint than guaranteed renewable products.
Let’s examine each item on which the flexibility advantages are most apparent.
Pricing. Group products generally are filed with the state in a manner that will allow the underwriting company to quote a variable rate at its discretion, based on whether the risk is substandard or better.
Individual guaranteed renewable product rates and premiums often are filed and fixed with each state and cannot be changed easily to meet a special type of risk. Changing a premium on a guaranteed renewable individual product often means the carrier will have to refile the product with the adjusted rates. This limits a carrier’s and producer’s flexibility. This is important for products that often are spreadsheeted and price-sensitive, such as short-term disability, long-term disability, critical illness, vision, dental, accident, term life and hospital-medical supplements.
Since price sensitivity could mean the difference in closing a case or not, this is likely a group product’s biggest advantage over an identical guaranteed renewable product.
Benefits. Often, an employer-HR manager is looking for a special feature or a slight variation in a product for employees. A good example would be where the HR manager wants an STD product with a 10-day elimination period and a four-month benefit to align with the company’s paid time off and sick leave plan. This can be accommodated and priced easily with the group product, whereas the individual product may require refiling.
Underwriting. We all have run into prospective groups that are borderline risks. Underwriters are generally more aggressive in rating these risks if the product is a group rather than an individual product. The reason is that if an underwriter is too aggressive in pricing a guaranteed renewable-type product and the loss ratios are worse than expected, the only options available to the carrier may be to cancel the payroll deduction, accept the losses, or appeal to the states involved for rate increase approval for all of these type policies.
Guaranteed issue or conditional guaranteed issue is more frequently offered with a group product than with an individual product for these same reasons. With a group product, the carrier simply can increase that group’s rates without increasing any other similar groups or insureds’ coverages if the losses are unacceptable.
Takeover. I often have seen cases taken over using a single group application for a group product, whereas an individual product likely may require each insured employee to complete a new application.
Generally, takeover business is simpler using a group vs. an individual product. In addition to the one-app advantage, all the other areas of flexibility can make a takeover possible with group, whereas it might be difficult to impossible with an individual-type product.
General Commissions. Often, large employer group competition can be fierce. Having the ability to reduce premiums via reduced commissions can mean the difference between closing and losing the case.