Carriers Get Creative With Term Life

By Cyril Tuohy InsuranceNewsNet

By Cyril Tuohy

Life insurance carriers are providing more choices for buyers of voluntary term life products as the industry seeks to deepen their penetration of the most popular product bought at the worksite, according to a new report by Eastbridge Consulting Group.

Carriers have added seat belt, helmet and air bag riders allowing employees to get benefits under the accidental death and dismemberment (AD&D) portion of the group life contract policy, said Ginger Bates, director of research for Eastbridge.

Some other carriers have added child care, education and professional retraining to their term life policies, which also are very profitable. “There’s some creativity out there,” Bates said in an interview with InsuranceNewsNet.

Term life coverage, with an 18 percent penetration, has the highest penetration rate of any of the voluntary products offered in the marketplace and carriers want to differentiate themselves through add-on options, she said.

The results were published in Eastbridge’s Voluntary Term Life Products 2013 Spotlight Report of 22 carriers active in the voluntary benefits market. The last time the study was conducted was in 2009.

While carriers are looking for differentiation for their AD&D and term life staples, few carriers provide critical illness or long-term care riders atop a term-life policy, she said. That type of insurance coverage, which is growing, is offered on a stand-alone voluntary basis.

Bates said she also has noticed that as voluntary coverage moves to the group platform, more of the term life underwriting portion is being done on a guaranteed-issue basis for which employees answer very simple health questions, or even none at all, before they are granted coverage.

By moving to a group platform, employers spread risk and there’s less onus on a single employee to be in top-notch health, allowing employees access to a minimum amount of term insurance with no questions asked.

Employers said the most common minimum face amount for term life was for $10,000, and the “most frequently mentioned maximum” face amount was $500,000, Bates said. The higher the face amount, the more age and health considerations affect the premium.

Premiums for a 25-year-old employee can be as low as $3 a month. For a 55-year-old, premiums are a “good bit more but it’s still inexpensive compared with health-related voluntary coverage,” Bates also said.

Typical commissions range from between 10 percent and 25 percent or more for group term life, she 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 Cyril.Tuohy@innfeedback.com.

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 cyril.tuohy@innfeedback.com.