Based on the number of individuals working for businesses that currently do not offer benefits, there is an estimated $213 billion of total unrealized market premium in group benefits, according to a new study by LIMRA International, Windsor, Conn.
Altogether, the group insurance market is probably worth around $624 billion a year, including $410 billion of premiums accounted for by currently enrolled workers, says the new LIMRA report, “Group Insurance Market Potential.”
LIMRA’s study estimates the total market, in both current and potential premiums, at around $513 billion for medical insurance, $43 billion for dental, $26 billion for long-term disability, $22 billion for short-term disability and $19 billion for life insurance.
Based on U.S. census data, the study found employee benefits in private industry in the U.S. represent a huge market, with around 5.1 million businesses having a total of 115 million employees.
Although parts of the benefits market are thoroughly penetrated by many insurance products, firms employing fewer than 500 workers represent a largely untapped market, the study found. For instance, among businesses with 1 to 9 workers, only 45% offer dental coverage, and a similar number offer life insurance in their benefits packages. Yet these firms employ close to 3.8 million individuals.
In contrast, 97% of firms with 500 or more workers offer medical, dental and life insurance.
Half of all employees work for companies with fewer than 500 workers, whose benefits tend to be thinner than among bigger companies.
Sean Flynn, a LIMRA researcher who authored the study report, estimates that it would be reasonable to expect annual premium growth rates of 2.5% if producers and carriers could break through to more of the smaller employers and increase employee take-up rates.
With a 2.5% growth, the industry could pull in an additional $10.3 billion in premiums. In addition to an extra $9.2 billion in medical insurance premiums, that would add $496 million in dental premiums, $245.7 million in life insurance, $209.9 million in STD and $191.7 million in LTD, according to the study’s estimates.
By the same token, if the industry could achieve a 5% growth, it would earn more than $20 billion of additional premium, Flynn notes. Although he acknowledges that such growth would be a stretch, he says it would be achievable if more producers and carriers went after the small group market, which LIMRA defines as companies with fewer than 100 workers.
“With the exception of add-on and takeover business, there are fewer opportunities in the large employer segment,” Flynn says.
Producers and carriers could also be more aggressive in selling to employees rather than just to the employer’s executive staff, he suggests.
“Often, employees don’t see the inherent value of their benefits program and focus simply on the amount of money coming out of their paycheck,” he says.
Stronger benefits communications during enrollment, including meeting with employees directly, either in groups or individually, could be especially helpful with smaller employers, who don’t have the human resources and benefits staff of larger firms, he points out.
“We also suggest carriers push nontraditional, voluntary benefits and high-deductible and mini-med health plans,” Flynn says. “As more companies cut budgets and newer employers hold off on establishing benefits programs, there are fewer dollars for benefits. The nontraditional benefits are especially helpful among smaller employers with limited benefits dollars. It’s also a way for the industry to bring uninsured individuals in.”