The Outlook For Voluntary Benefits

Companies selling individual products were slightly more likely to say they will not be introducing new products in 2008 than were companies with group products.
These new products may not be completely new. In fact, in many cases, the carriers are planning to revise and enhance existing products. (We’re already seeing carriers shoring up their life products due to the new CSO table requirement.) We have heard from some of our clients that these new products will include some interesting innovations.
New term life or critical illness plans are the products most likely to be added to voluntary portfolios in the next 2 years, according to the survey. Universal life-whole life products came in third overall, followed by new cancer plans and new vision products. Chart 4 summarizes these findings.
We believe that in terms of sales growth, health-related products will lead the way. We don’t necessarily see one single health-related product driving this growth (at least not until we have a clearer view of what’s going to happen in Washington with health insurance and health care), but the category as a whole will see growth.
In terms of employee reaction, respondents to the survey believe that employee enthusiasm for voluntary worksite benefits will increase. In fact, more of the respondents in the most recent survey said that employee enthusiasm will increase as compared to the year-end 2007 survey (67% compared to 63%). However, 14% expect less enthusiasm.
Both the product trends and the confidence index surveys were completed before the most recent financial market crisis, so we’re not certain if the positive outlook continues. But regardless of whether sales increase or decline, we know that individual employee dollars will be stretched. This means that carriers and brokers will need to make sure they are allowing employees greater choice in choosing coverage amounts. This will enable employees who may not be able to afford “full” coverage to buy at least some level of protection. Allowing employees to cover, say, 40% of their income instead of 60% may make the difference between making a sale or not. Those carriers or brokers who present employees with a decision to buy a single level of coverage or none at all may find their sales declining.
Overall, we are cautiously optimistic that the voluntary industry will weather the economic decline. We expect that for 2008, we will see increases, although perhaps at a slightly lower level than last year. For 2009, we think that we still will have a positive sales year, with rising unemployment posing the greatest challenge to sales growth. Only time will tell if our optimism and that of others in the market is warranted.
Gil Lowerre is president and Bonnie Brazzell is vice president of Eastbridge Consulting Group Inc., Avon, Conn. They both can be reached at [email protected]