Takeover Sales Reach Seven Year High

By Cyril Tuohy

InsuranceNewsNet

Takeover sales reached 50 percent of new business achieved profit (NBAP) last year in the voluntary market, an increase of five percentage points compared to 2012, according to the latest statistics on trends in the voluntary market.

It is the highest percentage of NBAP since 2006 when Eastbridge Consulting Group began tracking takeover business.

“After slowing some several years ago, takeovers have increased again, and the level of increase in 2013 was even more than in 2012,” Gil Lowerre, president of Eastbridge, said in a news release.

Takeover sales were only 12 percent of NBAP in 2006, but have risen consistently ever since. Takeover sales recorded big jumps in 2008 and 2010. Takeover sales made up 45 percent of NBAP in 2012, an increase of 7 percentage points over 2011, Eastbridge data show.

Eastbridge said the increase in takeover sales was due to more group insurance carriers selling voluntary products and benefit brokers being responsible for a higher percentage of voluntary product sales. The fact that brokers represent such a high percentage of voluntary sales means too many of them “do not recognize all the opportunities for virgin sales in the voluntary market,” Lowerre said.

Another reason for the increase is that voluntary benefits, once offered on a stand-alone basis, are now offered on a group chassis paid for through a payroll deduction. Moving to a group platform lowers the costs to workers but increases the competition among carriers and brokers.

Carriers report that sales of nonmedical voluntary insurance coverage – dental, life, long-term care, accidental death and dismemberment – are now “nearly equal” to sales of nonmedical insurance in the traditional group market, said Bonnie Brazzell, vice president of Eastbridge.

In the voluntary market, the employee pays 100 percent of the premium compared with the traditional group market in which the cost of benefits are shared between the employee and the employer.

Employees like voluntary benefits because they help fill in the gaps in a high-deductible health plan or when employers cut back on other benefits. Employers like voluntary benefits because they are less expensive than traditional group benefits but help companies retain workers.

The latest statistics on takeover sales were derived from data published in the most recent edition of the U.S. Worksite/Voluntary Sales Report issued by Eastbridge.

Voluntary benefit sales are on the rise as health reform injects change and uncertainty into the purchase of benefits. Last year, voluntary and worksite sales were estimated at $6.64 billion, up 10.1 percent from $6.03 billion in 2012, according to Eastbridge.

The total amount of premium available in the voluntary market in the U.S. is estimated at nearly $120 billion, according to separate figures by LIMRA and MetLife.

Eastbridge estimates that 43 million workers already own at least one voluntary benefit product but that 71 million employees have no voluntary benefit product.

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 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].