By Cyril Tuohy
Takeover sales, where one insurance carrier’s voluntary benefits plan is replaced with a similar plan by another carrier, accounted for 45 percent of new voluntary benefit sales premiums last year, up from 42 percent in 2011, according to the U.S. Worksite/Voluntary Sales Report.
The reason for the increase is because more insurance companies are moving to a group platform, benefits brokers are selling a higher portion of voluntary benefits coverage products, and more competition exists in the marketplace, according to the report published by Eastbridge Consulting Group.
Moving to group platforms lowers the cost of the coverage for participants, but increases competition among carriers.
“As more companies move to a group platform product and benefits brokers sell a higher portion of voluntary, we know that competition will increase and more takeovers will occur,” Bonnie Brazzell, vice president of Eastbridge, said in a statement.
Employers add voluntary benefits, sometimes referred to as worksite marketing products, to enhance their benefits options and attract employees. Worksite products often consist of insurance like long-term and short-term disability income coverage, term life coverage, universal life, whole life, and extra medical insurance like cancer or accident insurance.
These benefits, once offered on a stand-alone voluntary basis, are now being offered on a “group chassis,” paid for through a payroll deduction. Employees find it more convenient and less expensive to buy that coverage instead of trolling for coverage in the individual market.
Eastbridge president Gil Lowerre said that the latest takeover sales data showed the voluntary benefits marketplace is underpenetrated. There are a lot of new opportunities – “virgin sales,” he said, for brokers and advisors willing to pursue that market.
In 2012, there were 36 million employees – 32 percent of all employees – with at least one voluntary product, leaving 78 million employees who don’t already own a voluntary product, according to the Eastbridge statistics. Employees often need more than one voluntary product and employers are open to adding more voluntary products, Lowerre also said, “so brokers do not have to be content with just takeover plans.”
In first quarter conference calls with analysts, several insurance executives also noted healthy growth among their voluntary benefits products lines.
Takeover sales have grown from 12 percent of new voluntary sales premium in 2006 to 45 percent in 2012, Eastbridge also said.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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