Spring 2008 / No. 75
Voluntary Sales and the “R” Word
What impact will slower economic growth (or recession) have on voluntary sales? That’s a hot topic in boardrooms and on convention floors. No one knows, but we’ve often said that voluntary products are a safe haven for employees: products they need, can “own,” and can tailor to their situations. And if rough economic times restrict spending on core coverages, voluntary products become even more important. We believe that voluntary growth is impacted by, and correlates with, other factors entirely.
The chart below shows three columns for the years 1999 through 2007. The first shows Gross Domestic Product (GDP) growth in current dollars, the second in constant 2000 dollars, and the third shows the percentage growth in voluntary sales in nominal dollars.
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GDP Growth in Current $s
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GDP Growth in 2000 $s
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Voluntary
Growth |
1999 |
6.0 |
4.5 |
19.0 |
2000 |
5.9 |
4.2 |
19.0 |
2001 |
3.2 |
0.8 |
13.0 |
2002 |
3.4 |
1.6 |
15.0 |
2003 |
4.7 |
2.5 |
7.0 |
2004 |
6.6 |
3.6 |
3.0 |
2005 |
6.4 |
3.1 |
3.4 |
2006 |
6.1 |
2.9 |
8.0 |
2007 |
4.9 |
2.2 |
7.5* |
* Preliminary estimate
The GDP dip in the early part of the decade was matched by explosive growth in voluntary sales. Sales cooled off as the economy entered a strong run in the middle of the decade.
We believe that, thus far, voluntary sales are more a function of distribution breadth than they are of general economic trends. While this will change at some point, voluntary sales have been most influenced by the entry of traditional employee benefit brokers and by the rapid career building efforts of Aflac and others.
No one can predict tomorrow’s results, and we remember an officer of a major industry trade association predicting a few years ago that voluntary’s growth days were behind it. If you want to look at the future (at least for the near term), you’re better off studying the expansion of our distribution capability, both through new converts and those who are still coming up the learning curve. We are fortunate to be in an industry with high, sustained consumer demand. Our greatest limitation is our ability to reach them.
Call an Eastbridge consultant for further discussion on voluntary distribution and your company’s distribution strategy.
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