Workers expect their defined contribution plans to play a greater role in their retirement income than annuities.
By Cyril Tuohy
MetLife said it wants to increase its penetration into the middle market and become “a player” in the group voluntary benefits marketplace.
Expansion into the middle market represents an important change for MetLife, which has traditionally been the go-to supplier of insurance and benefits products for many of the nation’s largest companies.
“MetLife retail is going through a lot of change and we’re on the road to growing this business in the future,” William J. Wheeler, president of MetLife’s Americas segment, said during the company’s annual presentation to investors and analysts.
Wheeler called the numbers of uninsured and underinsured households a “huge white space.”
Company and industry statistics reveal as many as 44 million U.S. households without life insurance, and another 35 million insured households that don’t have enough insurance or are underinsured, Wheeler added.
The estimated U.S. life insurance gap — the difference between the amount of life insurance people have and the amount people say they need to cover their expenses for several months — amounts to as much as $15 trillion, according to MetLife.
To be successful, though, carriers need to offer a portfolio of protection products, not simply one or two life insurance products.
“We think this is a huge opportunity for MetLife,” Wheeler said. “We have the capabilities and we're building more capabilities to be successful in this segment of the market, not just selling life insurance but a whole portfolio of protection products.”
MetLife’s retail segment delivered operating earnings of $2.52 billion in 2013, an increase from $2 billion in 2012, the company said. Compound annual growth in operating earnings was 37.5 percent in a three-year period from 2011 to 2013.
With life insurance sales flat and interest rates low, carriers are doing anything they can to find new pockets of growth. Analysts and market experts say that carriers that are serious about growth need to reach deeper into the middle market instead of chasing finer and finer slivers of the high-net-worth segment.
Carriers that offer products beyond basic term and whole life — products like accident, supplemental health, auto and home, disability, dental, vision, identity theft coverage, and even prepaid legal services — are more likely to record higher sales.
One of the reasons the middle market has remained fallow is that commission-based agents gravitate toward wealthier, more profitable clients who require complex solutions in the areas of retirement and estate planning.
But for young families with annual household incomes around $50,000, the direct channel makes more sense through which to sell products anchored in a simple design, issued with limited underwriting and geared toward protection.
Marketing efforts to the middle market include direct mail, direct response TV, digital advertising, call centers, retail stores and sponsors, MetLife said.
MetLife’s direct-to-consumer sales in the Americas are forecast to reach $130 million in 2014, even if the segment expects an after-tax loss of $40 million this year due to building the technology necessary for a direct-sales infrastructure and new product launches, Wheeler said.
The Americas segment is expected to turn in a growth rate “comfortably in the mid-single digit” growth range, Wheeler said.
MetLife said its other major initiative to reach the middle market lies with ramping up sales of group voluntary benefits, which are paid for 100 percent by the employee.
Employees like the coverage because it supplements their basic employer-sponsored medical coverage, a cost shared between employee and employer. Employers like offering voluntary benefits because they don’t have to pay for it and it helps as an employee-retention tool.
The “ongoing shift from employer-paid to employee-paid voluntary benefits,” means the voluntary benefits market is particularly fertile market through which to reach middle market consumers, said Todd Katz, MetLife’s executive vice president of group, voluntary benefits.
MetLife estimates the size of the voluntary benefits market at nearly $120 billion.
MetLife has a robust presence with a 15 percent market share in the voluntary life, dental and disability market, which is a $100 billion market opportunity. However, the carrier lags – with only 1.4 percent market share – in offering other benefits available on a voluntary basis, which the company said is a $14.7 billion opportunity.
Last year, 57 percent of group voluntary workplace benefits sales came from nonmedical health benefits, 25 percent from life products and 18 percent from property-casualty, the company said.
The bulk of fees and premiums, however, come from large companies with over 5,000 employees.
Nonmedical health benefits include dental, disability, long-term care, accidental death and disability, critical illness, cancer, personal accident, and hospital indemnity.
Private health care exchanges will offer “incremental growth” opportunities for voluntary benefits in the coming years. MetLife has signed with 11 private exchanges and expects to add another five this year, Katz said.
“The thinking here is as employers focus on their medical plans, either on an exchange or off an exchange, they are going to want to surround that opportunity with a wide array of voluntary products to go with that medical program,” he added.
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 email@example.com.
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