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Also in this issue:

• Cover
• Voluntary strategy and the largets U.S. brokers
• The distributor of the future
• Don’t ruin your client’s HSA
• 2006 – A very good year for voluntary sales
• 2007 voluntary sales growth leaders
• Eastbridge has a new, improved website!
• Predictions by Eastbridge Consulting Group echoed in recent ERISA Industry Committee proposal
• Too many choices or too little advice—the dawning of the Age of Confusion
• Takeovers in the voluntary market
• Critical Illness—what’s taking so long?
• Can technology drive the bus?

• Too many group companies don’t “get” enrollment

Past Issues

• 2007
• 2006

Summer 2007 / No. 72

Takeovers in the voluntary market

We have written on many occasions about the changes that have occurred in the voluntary/ worksite market. We’ve called this change "groupification." One of the characteristics of groupification is the increase of takeover business.

Historically, there has been little “takeover” business in the worksite market. While a new carrier might come into a case, often the older coverages (because they were individual, guaranteed renewable contracts) were not disturbed, and the new carrier simply began writing coverage on those who were not already insured. Today, however, there is a significant amount of true takeovers—both among group and individual platform products. Instead of leaving another carrier’s product on the payroll deduction billing, the new carrier re-writes the case, including those already insured. (In the case of individual products, an existing insured may continue coverage on an individual billing basis but often does not.)

The prevalence of takeovers has led us to question how much of the new business annualized premium (NBAP) reported as sales each year is actually premium that was reported by another carrier in a previous year. For the first time, our 2006 sales study attempted to estimate this. In our survey, we asked carriers: “What percentage of your new sales do you estimate comes from takeovers (i.e., you are replacing or taking over voluntary business from another carrier)?” Many carriers said they do not track this number and, therefore, did not know. However, 21 companies (just over one-third) reported a number. The average percentage reported was 20 percent, but many responses were significantly higher. We applied the percentage for each of the reporting companies against their NBAP and then divided the overall result by the total NBAP represented by these companies. We then analyzed the rest of the carriers by the type of company and their target market as well as product portfolio and estimated their percent of takeover premium using the results from the reporting group. On this basis, we estimate that roughly 12 percent of the NBAP for 2006 or $566 million was takeover premium.

We will continue to track this number in future studies and will report the results as well as any trends we see.