Voluntary Market Twinkles With Growth

By Cyril Tuohy

InsuranceNewsNet

With annuity sales down in the first quarter, low interest rates and health care reform injecting more than its fair share of uncertainty into the marketplace, the industry is looking to those niches in which to eke out consistent sales growth and steady profits. For the moment, the voluntary market -- that diverse, fractured segment -- is twinkling with growth.

Sales of voluntary products for 2012 were up 6.6 percent over 2011, with total new business premium exceeding $6 billion, according to Eastbridge Consulting’s annual U.S. Worksite/Voluntary Sales Report.

In-force worksite premium, estimated at between $21.8 billion and $28.5 billion based on tracked premiums, increased by more than 9 percent in 2012 over the previous year, the Eastbridge survey of 65 carriers also found.

“These numbers exceeded our expectations of a 3 or 4 percent sales increase, thus proving that voluntary is a growth market and one that is not negatively impacted by health care reform,” Gil Lowerre, president of Eastbridge, said.

Strong sales of voluntary benefits are a boon to insurers struggling in an era of low interest rates. Every new sale counts, particularly into a market that is underpenetrated. Selling voluntary benefits — which typically include dental, vision, life, disability, supplemental health and critical illness — has its advantages.

For employers, the more voluntary benefits products sold through the workplace, the lower the taxable payroll and the easier it is to offer incentives for employees to stay with the company. Employees gain because they have access to lower rates through group underwriting, and those who purchase coverage of one form or another get the convenience of automatic payroll deductions.

All the employer has to do is make the product available. “It’s a great deal for the employee and the employer,” Scott Maker, senior vice president of government affairs with Unum, said in an interview with InsuranceNewsNet.

The business model also is changing. Employers, who long ago abandoned paying for benefits in favor of sharing the costs with employees, are starting to back away from the shared payment model, as well.

Lincoln Financial Group, which introduced critical illness insurance as a “flexible employee-paid benefit” in 2011, allows employers to configure benefits around categories including heart, cancer, organ, quality of life and child. Note the fine print: “employee-paid.”

First quarter sales of group protection at Lincoln increased 6 percent to $71 million, over the year-ago period, and that nonmedical net earned premiums increased 10 percent to $475 million from the year ago period, the company reported.

Higher deductibles are helping to create more demand for voluntary benefits like group critical illness coverage, according to HM Insurance Group, which underwrites accident, critical illness, disability income and term life coverage. HM’s supplemental critical illness insurance covers heart attacks, cancer, organ transplant, kidney failure, coma, paralysis bypass and skin cancer.

Voluntary accident coverage increased 12 percent in 2012, and that was on top of a 14 percent increase in 2011, Eastbridge reported. Voluntary critical illness coverage jumped 17 percent to $294 million last year over the previous year, and cancer protection coverage rose 3 percent to $437 million in 2012, Eastbridge also said.

Voluntary disability sales — long- and short-term disability — increased almost 14 percent last year to $1.26 billion compared with 2011, and voluntary vision plans are growing at a faster rate than employer-paid vision plans, Eastbridge reported in January.

Employers see voluntary benefits as a way of helping employees defray out-of-pocket costs, and the competition among insurers to offer employers a new plan — a strategy known as takeover sales — is stiff.

The group line grew at a rate of 9 percent in 2012, compared with the individual line, which grew at a rate of about 4 percent, Eastbridge also said.

Market demographics, as well as more robust information technology infrastructures, are helping employers transition to platforms capable of handling both group and individual products, which makes the marketing of voluntary worksite benefits more efficient to distribute through the workplace, said Mark Courtepatte, vice president of product management with SunGard iWorks, a vendor to the insurance industry.

Particularly among small to midsize companies, there’s ample room for growth, according to Eastbridge, and a lot of growth has come from employees in the lower to middle income segment, which has been underserved by the insurance industry and insurance brokers, Courtepatte 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].