The study, entitled Voluntary Lapse Rates, found that of the 22 carriers surveyed, all but one can measure and track lapse rates for their voluntary business, either at the account or employee level or both. However, the methods and basis for measuring vary greatly, making an exact comparison difficult.
The carriers that currently track at the account level reported average lapse rates ranging from 2-35 percent for their voluntary line. For most, these percentages have stayed about the same or increased over the last two years. Carriers that track the percentage at the employee level reported an average lapse rate between 12-32 percent. Again, most indicated that the rate has remained level or increased over the past one to two years.
Regarding key concerns and areas of focus, the majority of carriers are most concerned with the potential for increasing lapse rates in the near future, citing several reasons for the upsurge—rising numbers of takeovers, changes in distribution and the use of enrollment technology/methods. They also mentioned the movement of all business due to rate increases and changes associated with health and/or employer-paid products, basic customer service and billing issues, and lack of employee understanding about the value of voluntary products as reasons.
To help improve lapse rates and reduce some or all of these increase, the carriers mentioned adding more lapse-tracking capabilities (both at the employee and account levels), improving reporting, and adding account management and other customer service staffing to improve conservation efforts. Another action mentioned included developing better overall analysis and prediction capabilities by identifying factors that increase lapse rates.
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Eastbridge Consulting Group, Inc. is a marketing advisory firm serving insurance and financial services organizations in the United States and Canada.