The insurance industry has been looking for a product success this year. But it already has a success on its hands. A familiar old friend–worksite products–is filling that bill.
Here are some reasons why I call these products a success:
They appeal to employers, who see it as a program they can endorse, without budget strain.
They appeal to employees, due to the cost savings the products typically offer and the fact that most are written on a guaranteed or simplified issue basis.
The interactive computer enrollment, which many such products now offer, appeals to enrollers, employers and employees.
The trend is evident in the results of four surveys I conducted of major worksite carriers–in 1996, 1999, 2002 and now 2003. These surveys tell quite a story.
First, the sales story. In every survey, a majority of the responders said sales were up. In the latest 2003 survey, no less than 90% of the responders said sales are up! Considering the poor business climate the nation has been in during the past year, this is surely good news.
Next, the offerings story. The chart lists worksite offerings in rough order of prevalence in todays market, as revealed by the 2003 survey. Nearly all companies have a stable of offerings. The average number of offerings is now six–up from only four in 1996.
The most notable newcomer to the worksite products field is critical illness insurance. This product line, pays lump sums for most serious health events, is now offered by 70% of responders to my worksite products survey. Thats up from 0% of responders in 1996. CI coverage works in this market because it can supplement, or even be a proxy for "traditional medical care insurance" (which is absent in worksite offerings).
Another worksite newcomer is life coverage called "Large Amount for Executives." (The label "Voluntary Products" is often used to encompass this product. In fact, this label often competes with the label "Worksite Products" for all offerings.)
By "large amounts" these products reference face amounts such as $350,000. Some are now seen for executives, even on a guaranteed issue basis.
This brings up a significant trend that is gaining momentum in this field. The entire science of guaranteed issue and simplified issuewhich is essential to the success of voluntary or worksite products–has been refined greatly since 1996.
In the 2003 survey, for example, over 90% of the respondents said they have guaranteed issue rules of various permutations. By comparison, in 1996, a good many companies also offered guaranteed issue, but the rules for these earlier plans were fairly uniform and simple.
To illustrate: In 1996, a company might have offered guaranteed issue on worksite life policies at very small face amounts. These policies might have been available under the old fashioned, "actively at work" rules that are nearly 100 years old.
But in 2003, some worksite insurers will offer guaranteed issue life insurance in face amounts up to $300,000, or even more in certain cases. These new rules sometimes apply to workers who have not been in the hospital during the past six months. Most worksite companies also use the "actively at work" rule.
As indicated above, many large face amount, guaranteed issue policies are offered to executives. In these products, insurers base the design decisions on information they have indicating that "executive" mortality is far better than mortality generally. (The reasons cited for this are socio-economic–a sign that socio-economic underwriting is coming back in style.)
What is the largest selling worksite product line? In the 2003 survey, life insurance products of various kinds topped the sales list. The products mentioned include universal life, variable universal life, optional term life, group term life with accidental death and dismemberment, and whole life. (The traditional whole life product seems to be having a comeback of sorts.)
In the above list of reasons for the success of worksite products, the appeal to employers and employees is evident. The third reason–interactive computer enrollment–is a real sleeper. In 1996, only a minority of respondents used it. In 2003, they all use it. This approach may not be magic, but apparently it does work.
To sum up: The growth in the worksite product field shows the insurance industry is finally getting out of its "do-nothing mode."
John M. Bragg, FSA, ACAS, MAAA, is actuarial consultant at John M. Bragg and Associates, Atlanta; past president of Society of Actuaries; and past CEO of Life Insurance Company of Georgia. You can e-mail him at nbk@mindspring.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, September 1, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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