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Worksite Benefits Executives Look At Next 5 Years

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The worksite-voluntary market is alive and well, according to recent research conducted by our company.

Top worksite executives expect voluntary-worksite sales for the industry to grow at an average of 10% per year for the next 5 years, according to the study, “Worksite Marketing: An Executive Perspective 2007.” The executives are even more upbeat about their own companies’ prospects for growth–17% per year over the next 5 years.

But the positive outlook for the industry doesn’t mean the road ahead will be easy. They see a variety of challenges.

Top Concerns

Attracting quality brokers is the most formidable obstacle facing the worksite industry, according to the 31 executives surveyed. This makes sense, given that the pool of worksite-focused producers is growing slowly today. Although benefit brokers are the fastest-growing segment of voluntary producers, fully engaging them is a slow process and competition for their business is keen. Clearly, all voluntary benefits companies must look for new sources of distribution.

Product competition is also a concern (ranked second by nearly three-fourths of those surveyed). With more and more players in the market, executives realize that it takes constant attention to keep a product portfolio up to date and competitive.

(Note: Writing profitable business and enrollment both tied for third place among the executives’ top concerns.)

The Next 5 Years

With these as their top concerns, it’s no surprise that most executives expect to see at least some changes in their product mix and distribution. They also predict pressure on the way worksite business is conducted, given likely regulatory and legislative changes. Specifically, most executives plan to develop medical-related products that integrate with an employer’s core offering and to focus less on disability and accident coverages. Executives also foresee changes in product platform, not so much for the industry as a whole, but for their own companies. For example, some who have traditionally sold individual worksite products are planning to move more to group products, while others (often group companies) are looking to add individual worksite, individually underwritten products or hybrid products. But overall, most executives believe that group product sales will increase more rapidly. In fact, they believe that group products are likely to exceed individual sales in the near future. (See charts.)

Executives also expect some changes to their companies’ distribution over the next 5 years. Most anticipate expanding distribution to brokers or producers beyond their traditional voluntary product distributors. Some even expect these new distributors eventually to replace their old types of distributors.

Over the next 5 years, about 70% of those surveyed imagine they’ll have to adjust the way they do business due to regulatory or legislative issues. However, they expect the impact to be minor. Changes will be caused by adjustments to Social Security and a push at the federal level to provide government-supported healthcare to the uninsured.

Additionally, the worksite executives believe that there will be changes in how voluntary products are enrolled in the future. Sixty-one percent believe that online or telephone enrollments are likely to be used as frequently as face-to-face or group meetings.

Competition and Competitive Advantage

Executives expect the voluntary market to become more concentrated. Of those surveyed:

58% expect the top 20 worksite carriers to control a greater share of the market in the next 3 to 5 years.

23% of them expect these companies to account for a “significantly higher” share.

26% think the share will stay about the same.

Only 16% expect the top 20 to account for a smaller share.

When asked about the basis of competitive advantage in this market, most carriers agreed that service to the customer and service to the broker-producer will divide the winners from the losers. All respondents agreed that having the right combination of products, services and tools that match the needs of their company’s targeted distribution and markets will determine excellence.

Eastbridge Consulting Group Inc., Avon, Conn., is a consulting firm serving the financial services industry. Gil Lowerre is the company president and Bonnie Brazzell is vice president. Both can be reached at .


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