Employers Pull Back on Popular Life Insurance Benefits, Surveys Find

By Cyril Tuohy

One of the cruel little ironies of life insurance is that more people than ever obtain coverage through a group life contract, but fewer employers than ever are offering the benefit.

That represents an obvious opportunity for agents and benefits brokers.

As many as 108 million Americans have life insurance coverage through the workplace, compared with 102 million covered by individual life insurance, according to a new survey published Aug. 30 by LIMRA.

It is the first time that more people are covered by workplace life insurance than by individual policies since LIMRA began tracking data in 1960, LIMRA researchers said.

The number of Americans covered by employment-based life insurance will continue to grow, but only slowly, said Anita Potter, LIMRA's assistant vice president, workplace benefits.

Life insurance coverage ratios will continue to depend on population and labor force dynamics, Potter said.

But even if more individual Americans own life insurance in 20 years than they do today, the number of insured per 1,000 covered lives could still drop.

That would leave still more uninsured and underinsured people for life insurance than are insured now.

If you want to read stories about families who were saved by life insurance, and those who suffered without it, take a gander at this month’s cover story in InsuranceNewsNet magazine.

Issues Around Access

Meanwhile, companies are cutting back on group life as rising health care costs erode budget allocations for other benefits, Potter said. Another reason for the retreat is that employers do not think their employees value this benefit, which analysts say is a misread.

"So, if employers do not think their employees value something, they are not likely to offer it," Potter said in an email.

Less than half of employed Americans even have access to workplace group life insurance, according to a March survey conducted online by Harris Poll for OneAmerica, an Indianapolis-based provider of life insurance, annuities, long-term care and retirement products.

In the survey, only 45 percent of employed Americans claimed to have voluntary group life insurance provided by their employer.

The survey covered 2,167 U.S. adults ages 18 or older, among whom 1,100 were employed.

“Many employers may not be offering voluntary life and disability insurance to their employees because they don’t understand how valuable those benefits are and how easy they are to administer," said Steven Lynch, vice president of national sales & service, employee benefits, for OneAmerica.

Too many employers think that group life “isn’t something that would attract the type of workers they’re looking for, but as our survey shows, that’s widely untrue,” said Jim McGovern, senior vice president of employee benefits at OneAmerica, in a news release.

“Even among younger people, the survey shows that there is notable interest in being covered under group life insurance,” McGovern said. “We need to do more to educate companies and workers on this valuable and cost-effective core foundational benefit.”

OneAmerica has worked to make sure its products, client "onboarding," after-sales support and claims are "in step with what brokers and employers find most useful and most helpful," Lynch said.

"Our goal is to help people understand how life and disability insurance are affordable ways to help create financial security," he said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may 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.