Spring 2007 / No. 71
The new Eastbridge Worksite MarketVision™—The
Employer Viewpoint Revisited study showed some interesting
shifts in market penetration.
First, employer penetration (defined as the percentage of businesses
offering at least one voluntary product) has changed. Specifically,
it has declined among the smallest U.S. businesses. Fifty (50)
percent of the smallest businesses now offer a product as compared
with 61.7 percent in 2002.
Second, employer penetration in most other segments increased.
For example, employer penetration at U.S. businesses with 101-500
employees increased from 62 percent to 79 percent in the five-year
period, and the largest segment reached 80 percent employer penetration
in the latest survey.
Third, employee access has increased with 70 percent of U.S.
workers now having at least one voluntary product available to
them. Additionally, the number of employees who have purchased
at least one voluntary product has reached an all time high of
65 percent.
In looking at these three facts, I can’t help but remember
the elephant story—what you perceive depends entirely on
where you come into contact with the beast. An uninformed reaction,
based on only the first fact, might report that voluntary sales
have peaked and are slowing down. But as the second and third
facts show, that is not the case. Sales are increasing. But they
are changing as they increase.
We have several issues at work here, including the old stand
bys: a broker’s case size creep (the tendency of a broker’s
case sizes to increase over time); account churn (the high turnover
of business in the smallest cases); economics (the increasingly
common attitude that it’s difficult to serve the smallest
cases profitably). These forces doubtlessly propel some of the
case size creep.
But the impact of benefit brokers, especially the small group
brokers (SGB sub-segment), should not be ignored. These brokers
are the last folks on board the voluntary ship—they wrote
the smallest cases and the fewest cases and are only just beginning
to get comfortable with the voluntary business. Total benefit
broker voluntary sales increased by 21 percent and their market
share reached 42 percent. That’s a lot of new people coming
on board, testing the waters as they enter. And as they become
more comfortable, we expect them to begin introducing voluntary
to their larger and better cases, accelerating the account size
creep we are now seeing.
We expect employer penetration, in terms of average account
size, to continue to drift up for several years until all brokers
have brought voluntary sales into the mainstream of their business
activities. |
