Leading with fear is not the way to greatness.
By Cyril Tuohy
Chalk it up to another way to spur growth in the life insurance industry. After tacking on living benefits riders to life insurance policies, here comes a new option. This time, though, it’s available to the group voluntary benefits market.
Courtesy of MetLife, advisors with clients about to leave their employer for good may want to ask if the employer offers voluntary retiree life (VRL) coverage.
Stephen Pontecorvo, vice president at MetLife, said that with millions of baby boomers expected to retire over the next 15 years, demand from people looking for ways to extend term life coverage into retirement will grow.
VRL, therefore, makes sense
“In response to this need, MetLife has developed a plan specifically for retirees that provides convenient life insurance plan options as well as valuable benefits retirees are likely to appreciate,” Pontecorvo said in a news release.
Retirees with access to MetLife’s VRL product have access to three plan options, the company said: $25,000, $75,000 or $150,000 worth of coverage. Only those employees opting for $25,000 in coverage don’t have to submit medical data, MetLife said.
MetLife’s VRL includes three features: will preparation, estate resolution services and a life settlement option, the company said.
Settlement options are invoked when policyholders want to sell the policy for more than the policy’s cash surrender value but less than its net death benefit, according to the Life Insurance Settlement Association.
Policyholders sell when life insurance policies no longer meet their needs.
VRLs, designed for employees close to retirement, “stand apart” from employer-paid group term life for workers with many years to go before retiring. As a result, rates for current employees are not affected, MetLife also said.
MetLife’s announcement represents the carrier’s latest push into the employee-paid voluntary market – though in this case perhaps it’s more appropriate to call it the retiree-paid voluntary market.
According to MetLife’s 12th Annual U.S. Employees Benefit Trends Survey, more than three of four employees say they want more variety in the voluntary benefits they choose, and more than one in two are willing to bear more of the cost to secure those choices to meet their needs.
By offering employers VRL, employees about to enter retirement have more choices, Pontecorvo said.
Employers find voluntary benefits attractive because they don’t contribute to premiums, yet offering the benefits helps retain employees.
Employees like the benefits because they allow workers to supplement coverage they already have, and can buy the coverage at a lower price through group rates.
Voluntary benefits are paid for 100 percent by the employee through a payroll deduction. The benefits are offered in addition to shared benefits, benefits for which the employer and the employee contribute to premiums.
An index measuring the confidence of insurance carriers, brokers and advisors serving the voluntary benefits industry hit a record 102.9 points at the end of last year, up 3.9 points from year-end 2012, Eastbridge Consulting Group found.
In addition, 94 percent of survey respondents in Eastbridge Consulting Group’s year-end 2013 Voluntary Industry Confidence Index survey expect sales to increase over the next 12 months, up from 89 percent in the midyear 2013 survey and from 90 percent in the year-end 2012 survey.
“Respondents remain confident about the voluntary/worksite industry’s ability to maintain sales growth amidst health care reform and private exchanges,” Gil Lowerre, president of Eastbridge, said in a news release.
MetLife’s competitor Prudential also offers retiree life insurance.
Retiree life insurance is typically offered by large employers. Recently, though, employers have found it more expensive.
Cost increases due to an aging workforce, higher liabilities in conformance with accounting standards, and more complex administration and record-keeping, have led employers to cut back on retiree life insurance, according to a Prudential product brief.
The answer, in the eyes of MetLife, is to offer VRL as a voluntary employee-paid benefit. It doesn’t cost employers anything, there’s no liability to the employer, and the insurance carrier handles the record-keeping.
About 64 percent of Fortune 1,000 companies maintain post-retirement life insurance benefits for retirees, according to a 2012 report published by Towers Watson, but only 23 percent of companies offer retiree life insurance benefits to new hires.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at firstname.lastname@example.org.
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