Fall 2008 / No. 77
Two Steps Forward or One Step Back?
By Bonnie Brazzell
This time of year, we often get asked about the trends for the upcoming year. This article gives us one opportunity to address this question by sharing our views on what we see impacting the voluntary market in 2009.
Clearly, the economy is on everyone’s mind. We are often asked (both during and without an economic crisis) how important the current economy is to voluntary sales. To our knowledge, there has never been an answer to the question. In 2009, however, we are likely to find our answer.
Regardless of whether sales actually decline or not, we know that employee dollars will be stretched and that allowing employees to choose their benefits will become even more important than ever. If you are a voluntary carrier that does not allow employees choice of plans, you may want to rethink your strategy. Employees may not be able to afford “full” coverage, but they may want to cover some of their needs. Allowing employees to cover, say, 40 percent of their income instead of 60 percent may make the difference of a sale or not. We also think employees will want to focus on both affordability and needs (what needs does a product they are offered cover).
During 2009, we also believe that enrollment will continue to move center stage. More carriers will develop an educational/needs-based approach to enrollment. This is a result of more carriers (and employers) recognizing that employees are overwhelmed by the sheer volume of decisions that must be made during an annual enrollment. More organizations are recognizing that we need to help employees sort through all their choices and make informed decisions that fit their unique situation. As we have written in many articles, we believe that enrollment is becoming a main competitive battleground.
At the same time, however, carriers are also going to need to develop “distance” methods like Internet and call center. These capabilities may be contrary to the needs and educational-based direction just mentioned; however, we are getting to the point where having these capabilities is a requirement to be a player in all but the smallest markets.
Another trend to watch for in 2009 is increased new product introductions. Our Product Trends Frontline Report and survey found that 2008 and 2009 are going to have significant product development activity. These may not be completely new lines but revised and enhanced products. We’re already seeing carriers shoring up their life products in anticipation of the new requirements. Will we also see innovation in life products? We have certainly heard from our clients on some interesting innovations.
We believe that, despite new products, life sales are not going to increase dramatically. We believe that the strongest sales growth will continue to be in health-related products. We don’t necessarily see one single health-related product standing out as driving this growth (at least not until we have a clearer view of what’s going to happen in Washington related to health insurance and health care), but the category as a whole will see growth.
From a distribution standpoint look, for the Benefits Brokers to continue to get more sophisticated with voluntary. As these key producers sell more voluntary, they get more comfortable and more sophisticated. We expect them to become more demanding of carriers, particularly group carriers, and to begin challenging enrollment orthodoxy (especially traditional group company enrollment orthodoxy).
Finally, in the area of administration, we see continued movement towards both high touch and high tech. Carriers can’t eliminate their human support of the plan administrator, but we see ongoing focus on using web capabilities to make administration as easy as possible.
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