Bonita Springs, Fla.
The recession probably will hurt group life revenue, but whether the recession will increase the ratio of claims to premium revenue is unclear, said participants at a session on group life during the disability conference here.
JHA, Portland, Maine. JHA, a disability consulting and risk management arm of General Reinsurance Corp., Stamford, Conn., set up the session to emphasize its growing group life survey data operations.
Layoffs could reduce the number of workers in the workforce, causing volume to go down, said one speaker, Bob Hardin, a group actuary at JHA.
If an employer hoard experienced employees and lay of the younger workers, that could increase the average age of its workforce and make the employer a less attractive group life risk, Hardin said.
Some group life executives in the audience agreed that the average age of group life insureds might increase, but others said they expect to see employers keep the younger employees and lay off the older employees.
Also at the group life session:
–One attendee complained that direct group life writers appear to be doing too little to track and control concentration of group life risk in specific locations or to reinsure against catastrophic losses.
–Group life executives in the audience said their companies do try to avoid excessive concentration of insureds in a single location, but they said that the current limit of about $40 million on private life reinsurance arrangements makes it difficult to reinsure large group life operations. The large group life insurers need reinsurance arrangements with maximums in the billions, not millions, the audience members said.
–The type and quality of the enrollment process can affect the nature of the products and services sold. At Unum Group Corp., Chattanooga, Tenn., for example, the non-commissioned benefits enrollers have been so successful that Unum often can offer voluntary group life without requiring a minimum participation level, said Puddy Holmes, a reinsurance consultant for Unum.
–Audience members said workers insist on a fast, smooth enrollment and underwriting process. Even something as minor as asking an applicant for voluntary benefits for a paramedical exam leads to a dramatic increase in application abandonment rates, one audience members said.
After the group life session, Paul Botkin, a senior vice president at Aon Consulting, an arm of Aon Corp., Chicago, said some carriers that complain the most about price-driven group life competition are doing the most to drive down prices. Some of those carriers may be offering low group term life prices as part of successful efforts to sell voluntary benefits. “The employer is focused on what the employer has to pay,” Botkin said.
If the employer gets a good deal on group term life, the insurer may then be able to sell dental insurance, supplemental insurance and other products to the employees, Botkin said.
But one risk of efforts to low-ball group term life is that the carrier may have to increase premiums sharply when the policy is renewed, to reflect the actual claims experience, Botkin said. Another risk is that a carrier may be unable to handle a catastrophe, Botkin said.
Benefits brokers and consultants have to make sure employers understand when group life prices appear to be unrealistic and encourage them to shop for the best value rather than the lowest initial price, he concluded.