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Life Health > Life Insurance

The Voluntary Market Keeps on Going

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It’s like the Energizer bunny; it keeps on going and going–even in a bad economy.

Voluntary sales for 2009 were up again despite the recession, according to our most recent sales study. In fact, voluntary/worksite sales increased 3.3%. We estimate total 2009 voluntary sales at $5.4 billion, up from $5.2 billion in 2008.

(Note: The terms worksite and voluntary are used interchangeably and are defined as individual or group life and health products, sold at the worksite and paid for by the employee through payroll deduction.)

This year, the industry’s top 15 companies accounted for 80% of the market share, up slightly from 79% in 2008. As a group, the average sales increase for the top 15 companies was 3.1%. Ten of the top 15 had sales increases (some as much as 34%), and five had decreases.

Inforce premium increased just under 8% in 2009, bringing the estimated total inforce premium for voluntary between $18.8 and $24.7 billion.

Life insurance had the top market share for the year at 24% of total voluntary sales. New life sales were $1.3 billion, up about 14% over 2008. Term life accounted for $940 million of that, with universal life and whole life making up the difference. Term sales were up almost 21% over 2008.

Disability sales were second in market share and accounted for $1.1 billion, down 6% compared to 2008. Short-term disability (STD) sales accounted for 73% of the disability totals. STD sales declined by 3%, and long-term disability sales fell by 15%.

Accident insurance accounted for 13% of total voluntary sales, as did the hospital indemnity/supplemental medical line. These lines were followed by cancer and critical illness, with a combined market share of 12%.

The worksite benefits industry continued to move towards a group platform. In 2009, the growth rate for group product sales was 6.7%, significantly higher than the almost flat individual sales, which were up by just 0.2%. This resulted in group products increasing their share of total voluntary sales to 49% , from 48% of the total in 2008.

When looking at voluntary sales by distribution channel, we found that benefit brokers continued to account for the largest portion of worksite/voluntary sales. According to the study, this segment generated 52% of 2009 sales–over $2.8 billion of the $5.4 billion total..

The career agent segment decreased its share of sales to 22% from 31% in 2008. This segment has seen mixed results over the past few years as more and more voluntary has been sold by benefit brokers and as more insurance companies (even those that historically sold through career agents) have looked to brokers to gain additional sales.

One of the exciting aspects of the voluntary business is that most sales are virgin sales. Takeover sales (where one carrier’s plan is replaced with a similar plan issued by a different carrier) accounted for around 38% of new voluntary premium in 2009. While this percentage is up from 29% in 2008, it is still a lot lower than for other lines in the benefits business. There is still a lot of virgin business in the market, and employers are open to adding more types of voluntary products than they offer today.

We continue to be positive about the future of voluntary benefits. The direct impact of the healthcare reform regulations on voluntary products is limited. In fact, we believe we will see more voluntary product opportunities as a result of the healthcare bill. What these opportunities will look like may not be apparent for some time, but we expect interest in products like critical illness and accident to increase. In addition, we expect to see new types of plans designed to provide funds for people to seek the medical treatment they need or to provide more financial security for their families.

Most importantly, we strongly believe the workplace will continue to be the place where most Americans get their insurance products.

The U.S. Sales Report includes detailed sales, inforce premium, distribution, and product data on the performance of 60 carriers, both group and individual. This year’s study includes data from 1997 through 2009.

Gil Lowerre is president and Bonnie Brazzell is vice president of Eastbridge Consulting Group Inc., Avon, Conn. Both can be reached at [email protected].

Who Does What.

Within the worksite and voluntary marketplace are several different segments:

Career reps–These producers work primarily for a single company and sell primarily worksite products. Aflac and Colonial reps are examples of career agents.

Classic worksite brokers–These producers focus on worksite sales. Their operations may be small or medium sized, and they offer at least one support service (Section 125 administration, billing, etc.) to their clients.

Worksite specialists–This segment consists of large marketing organizations whose primary focus is worksite sales. In addition to having a large number of agents on staff, they work with many sub-brokers. These organizations also offer a wide variety of support services (Section 125 administration, billing, customer service, and claims payment). This segment controls significant blocks of business.

Benefit brokers–These producers typically focus on employee benefits–traditional group benefits. Some are actually benefits agencies inside a commercial lines agency. For all, worksite products are generally offered as an additional line.

Occasional worksite producers–These are insurance generalists. They have a small agency that sells insurance products other than worksite–group, individual, or property/casualty. Worksite products are a small part of their operation.


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