Brokers Most Optimistic On Near-Term Future Of Voluntary Market

The 2013 Voluntary Industry Confidence Index survey from Eastbridge Consulting Group measured 102.0, according to the consulting group’s latest midyear survey. That’s up from 99.0 at the end of 2012 and 100.9 at midyear 2012.

The index tracks voluntary benefits sales growth, industry profitability and employee enthusiasm about voluntary products.

In addition to the higher confidence measured by the index, nearly 90 percent of the respondents expect sales of voluntary benefits products to rise in the next 12 months, the survey of carriers, brokers and vendors to the voluntary market found.

“Respondents continue to be optimistic about the voluntary/worksite industry’s capacity to grow their voluntary business,” Gil Lowerre, president of Eastbridge, said in a statement.

Of the three categories of respondents – carriers, brokers and vendors – brokers are the most optimistic about future voluntary sales, with nearly one in two brokers expecting sales to increase “a lot,” Lowerre said.

As many as 70 percent of all respondents expect health reform to have a “major positive impact” on voluntary benefit sales, said Bonnie Brazzell, vice president of Eastbridge.

Voluntary benefits are insurance products that employees choose to buy through their companies at rates that are lower than they could get on their own. Examples of voluntary benefits are dental, life, vision, disability, supplemental health and critical illness coverage.

High-deductible medical plans offered by employers mean higher out-of-pocket costs for employees. Voluntary benefits obtained at group rates can help employees fill the gaps in their primary medical coverage.

In 2012, life insurance (26 percent) was the top voluntary benefit product sold, followed by disability insurance (21 percent), accident coverage (14 percent), cancer/critical illness insurance (12 percent), hospital indemnity/supplemental medical coverage (10 percent), dental insurance (10 percent) and all other forms of voluntary benefits coverage (7 percent).

Employers like offering voluntary benefits because employees often pay 100 percent of the premium, and it costs employers little or nothing to make the benefits available. Employees, meanwhile, have an incentive to stay with the company and can take advantage of lower prices obtained through a group rate.

Rosy projections for the industry over the next 12 months are shaping up to be a mirror image of the industry’s past 12 months.

Voluntary new business annualized premium reached $6.03 billion in 2012, an increase of 6.6 percent over 2011 sales, Eastbridge said. Other than a dip from 2009 to 2010, voluntary new business premium has increased every year since 1998.

Takeover sales, in which one insurance carrier’s plan is replaced with a similar plan issued by a different insurance carrier, accounted for 45 percent of new voluntary sales premium in 2012, up from 42 percent in 2011, Eastbridge also reported.

Takeover sales have risen by double-digit percentages every year since 2006, according to Eastbridge.

Group voluntary benefits sales, which surpassed individual voluntary benefits sales for the first time in 2011, continued to pull ahead in 2012. Group sales represented 56 percent of all voluntary benefit sales last year.

The group line grew at a rate of about 9 percent in 2012 from the previous year, compared with a growth rate for the individual line of about 4 percent over the same period, according to Eastbridge.

In the past few months, several big insurance carriers have introduced critical illness and supplemental medical coverage as they seek to capture a sliver of the voluntary benefits industry’s premium growth.

Critical illness insurance alone saw estimated sales of $294 million in 2012, a jump of 17 percent over 2011, Eastbridge said.

In July, Prudential announced it would offer critical illness coverage to employers with 1,000 workers or more. Earlier this year, Aflac introduced a cancer care plan for policyholders living in New Jersey and New York.

The Prudential policy’s standard coverage includes major illness like heart attack, cancer, organ transplant, renal failure, stroke and coronary artery bypass surgery, the company said.

“The inclusion of critical illness insurance in a group insurance plan enables employees to help protect their financial wellness as well as their physical wellness,” said Robert Patience, vice president of voluntary benefits with Prudential Group Insurance.

In the voluntary benefits market, employers with more than 2,500 employees represent the employer segment with the largest volume – 33 percent or nearly $2 billion – of voluntary sales in 2012, Eastbridge said.

Despite higher sales volume, the large employer market remains underpenetrated. The most penetrated market segment for voluntary benefits last year was the 500-to-999 employee segment and the 1,000-to-2,500 employee segment, 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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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].