The group life insurance industry continues to face a number of challenges, according to LIMRA International and an industry consultant.
According to LIMRA’s Group Life Insurance’s Industry Highlights, the group life insurance industry appears to be stuck in neutral gear.
Specifically, says the LIMRA report, the industry has suffered 2 consecutive quarters of declines in new annualized premiums compared to last year.
So far this year, group life carriers have collectively taken in $1.5 billion in new premium, a decline of 5% compared with the first 6 months of last year.
A similarly moderate decline was also recorded in face amount, LIMRA said.
But the industry remains huge, with $26.95 trillion in face amount outstanding as of Dec. 31, 2005, according to data based on reports to state regulators compiled by Highline Data. This represents an increase of 6.14% in face amount outstanding on $25.4 trillion as of the end of 2004.
Another bright spot is that the number of companies adding to premiums in force in 2006 outnumbered the companies posting a decline by a ratio of 2 to 1.
At the same time, the product retains its role as critical for Americans, according to Cecil Bykerk, president of CDBykerk Consulting LLC, in Omaha, Neb.
“A large percentage of U.S. citizens only have group life insurance, not personal insurance,” said Bykerk, a former chief actuary of Mutual of Omaha for 13 years. “It serves as an important backstop for a significant portion of the American people.”
At the same time, this issue is a concern “because, if the group life market begins to unravel and go away, it would leave a number of people without life insurance,” Bykerk said.
“And replacing it would be expensive,” he added. “That’s because life insurance is one of those products people have to be sold; it doesn’t create its own demand because people don’t want to talk about it.”
This issue is a major concern for Americans going forward. “Group life is a critical product for Americans and the economy,” Bykerk said.
In general, fleshing out the findings of the quarterly LIMRA survey, Bykerk explained that group life is a mature business. “There is not a lot of new business out there to pick up,” he said.
“Most employers who are going to offer group life are already doing it,” he said. “So, to get new business you have to take it away from another carrier. It is extremely competitive business, with very few entrants.