It's not that people don't want to save for retirement, it's because they can't afford to.
By Cyril Tuohy
Voluntary benefits are not yet a household name but they are catching on among households. So it’s worth asking whether the workplace one day might become the main channel through which to sell voluntary benefits into the middle market.
With life insurance sales generally flat, selling life through the voluntary benefits channel is an idea worth mulling over.
“Voluntary benefits — protection products bought by employees through the workplace at their expense — might not (yet) be a household term, but they are catching on among U.S. households,” Brian DeMaster, senior executive for Accenture Insurance, wrote in a blog post.
Voluntary benefits - which include critical illness coverage, long-term care, accident, long-term disability (LTD), short-term disability (STD), dental, life, vision, and accidental death and disability - have been very popular of late.
Voluntary sales for all products last year reached $6.6 billion, up 10 percent from $6.0 billion in 2012, according to Eastbridge Consulting.
The most popular voluntary benefit in 2013 was life insurance, which recorded sales of $1.88 billion, up 22 percent compared to 2012, according to Eastbridge.
Life insurance also extended its market share to 28 percent of all voluntary benefits sales, up 3 percentage points from a year earlier, Eastbridge reported.
It is the fifth consecutive year during which life insurance led voluntary benefits sales.
Life insurance sales through the voluntary benefits channel still represents a fraction of the $2.9 trillion in new life insurance bought by Americans in 2012, according to the American Council of Life Insurers, so voluntary benefits won’t displace other sales channels for the moment.
Eastbridge research director Ginger Bates said growth of voluntary benefits is taking place because voluntary products “meet the employees’ particular needs, are easy to purchase at work through payroll deduction and they are affordable.”
Any benefit that hopes to gain traction in the middle market has to be affordable, Bates said.
Paid for 100 percent by the employee through a payroll deduction, voluntary benefits are offered in addition to the shared benefits for which the employer and the employee contribute toward the premium.
Employers find offering voluntary benefits attractive since they don’t contribute to premiums and elect to make voluntary benefits available to workers at the discretion of the employer.
Employees like the benefits as they allow workers to supplement coverage they already have, and are eligible to buy the coverage through group rates.
Although the bulk of life insurance is sold through agents and financial advisors, there’s no doubt that voluntary benefits received a big boost from the Affordable Care Act, voluntary benefit market analysts said.
Questions and the uncertainty surrounding health reform steered people into the voluntary benefit market, DeMaster wrote.
“The Affordable Care Act (ACA) will undoubtedly stimulate the voluntary benefits marketplace, as employees add options besides healthcare coverage as part of a thoughtfully designed and tightly integrated program of employee benefits,” he wrote.
In the life insurance category, term insurance accounted for 76 percent of new business annualized premium (NBAP) in 2013, up 4 percentage points from 2012, Eastbridge said. Sales growth of term life in 2013 outpaced sales growth of universal life and whole life.
Total sales of voluntary disability insurance were $1.36 billion last year, up 8 percent over 2012, with short-term disability (STD) accounting for 68 percent of total disability sales and long-term disability (LTD) accounting for the rest.
In 2013, life insurance made up 28 percent of all voluntary sales, disability 21 percent, accident 12 percent, and hospital indemnity/supplemental medical 8 percent.
The remaining 31 percent share of the voluntary market is divided among dental, cancer, critical illness, vision, and accidental death and disability lines, Bates also said.
Eastbridge, which tracks sales of insurance and benefit in the voluntary market for more than 60 carriers active in the voluntary market, releases the numbers every year in its “U.S. Worksite/Voluntary Sales Report.”
A separate report published earlier this year by LIMRA found that new annualized premium of voluntary benefits bought at the worksite reached $4.3 billion in 2013, a 9 percent increase over 2012.
Carriers and brokers report future sales of voluntary benefits are projected to increase despite all the changes brought on by health care reform and private health care exchanges, according to Bonnie Brazzell, Eastbridge vice president.
An index measuring the confidence of insurance carriers, brokers and advisors serving the voluntary benefits industry hit a record of 102.9 at the end of last year, up 3.9 points from year-end 2012, Eastbridge said.
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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