Also in this issue:
Product Trends in the Voluntary Market
What Differentiates Us?
Voluntary Sales Grew In
2009
OneAmerica: 2009 Growth Company
Managing in the Dark
Coming Soon: An Update to Our MarketVision™ –Employee
Viewpoint
2020: an Update
Have Critical Illness Sales Finally started to Gain Ground on
Cancer Sales?
Conservation, Part I
More Employers Offer Voluntary Products
The New Enrollers
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Summer 2010, No. 84
Conservation, Part I
It’s time to begin talking seriously about conservation.
We allow billions of dollars of business to flow off our collective
books every year while ignoring this back-door loss. Our focus
on new sales is understandable, but our willingness to let that
same business walk out the door over the following years is not.
Many of those customers leave us simply because they didn’t
know they had an option. And you can do something about it.
But the reality is that most companies do nothing about this
issue. Our goal is to change that and this is the first part of
a discussion on the topic. This discussion applies to group, as
well as individual companies. The trend towards convertibility/portability
is now clear, and the use of “port pools” by group
companies is becoming more common. Let’s begin with a review
of the subtopics involved.
Individual Retention. For our purposes, individual
retention can be measured as the percentage of (people, products,
or premium) that come off of a list bill that are successfully
moved to another form of premium payment. The average voluntary/worksite
company retains about five percent, by this measure, with a range
from almost nothing to about 10 percent. The five percent that
initiates the process is probably a less than balanced population,
inviting adverse selection, causing you to retain the worst risks.
During a two-year project for one of the largest companies in
the industry, we were able to improve retention to a peak of 28%.
You don’t need to check with your CFO to understand what
an impact that improvement had on company results. And with every
percent improvement in your retention, the pool of converted business
moves closer to the risk profile you priced this business for
in the beginning.
This type of improvement is available to you now. And it is not
the ceiling. Subject to economic issues, only 50 percent of those
who came off list bill were unemployed at the time of lapse. These
are people who sought your coverage, need your coverage, and probably
don’t know they can keep your coverage.
In the next issue, we’ll discuss account-level lapsation
and move on to the issues involved in developing an effective
conservation program. Call us if you’d like more details.
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