Spring 2007 / No. 71
Groupification and core benefit
carriers
For quite a few years, we’ve been discussing
and reporting on groupification—“the tendency of
the traditional voluntary and worksite segments to merge into
a single line of business, forcing each to change. The resulting
business has an increased number of group insurance industry
characteristics.” (© 2007
Eastbridge Consulting Group, Inc.)
And during that period, we’ve watched the traditional
group brokers (“Benefit Brokers”) and traditional
group companies (“Core Benefit Carriers”) enter and
begin to dominate the business. In 2005, Benefit Brokers sold
42 percent of the business and Core Benefit Carriers held ten
out of the top fifteen spots in the Eastbridge U.S. Worksite
Sales Report.
Today, many observers wonder how far the trend will go. Where
will it end? Will all others eventually be driven out of the
business? And isn’t the growth just a fluke—simply
a result of offering voluntary to group brokers who already were
positioned to make the sale? So isn’t this just picking
the low hanging fruit? Once that is done, the Core Benefit Carriers
will find that the going gets much tougher out in the truly competitive
marketplace.
There are two problems with these conclusions.
First, Benefit Brokers are already in the voluntary business.
Granted that some, especially the Small Group Broker sub-segment,
are not major producers yet, but the fact is that 90 percent
of Benefit Brokers now offer voluntary products, at least some
of the time. And they are selling a wide variety of carriers'
products. One survey of a group of sophisticated Benefit Brokers
listed Aflac and Unum as their top two voluntary carriers. Competition
for their attention is already intense and getting tougher all
the time.
And yet, these Core Benefit Carriers are increasing their voluntary
sales rapidly. Looking at the 2006 voluntary sales results for
the top ten Core Benefit Carriers, their sales results grew seven
percent over 2005. And dropping out the highest and lowest growth
companies, the average for these companies jumps to 10.3 percent.
These companies are growing more rapidly than others in a highly
competitive market where winning over brokers is increasingly
a zero sum game. Something is working for these companies and “groupification”
accounts for a lot of their success. |
