Also in this issue:
Speed vs. Innovation
Lost Ground in 2010
Winter Quiz Winner
Will Employer-Sponsored Benefits Survive?
Enrollment Methodology and Participation
Field Structures for Voluntary Carriers
Can You PASS the Broker Test?
Lost Ground in 2010
Voluntary new business annualized premium declined by several percentage points in 2010, the first time we’ve recorded a decline (see the 2010 U.S. Worksite Sales Report). Even though we had more sales gainers than losers, the rest of the industry could not overcome the slippage by the largest player in the market. The economy certainly played a part.
Also in 2010, employee penetration continued to slide. Fewer Americans owned at least one voluntary product than in the 2006 Worksite MarketVisionTM–The Employee Viewpoint Revisited survey. Again, the economy played a part. But, with the exception of 2010, overall industry sales have increased each year. So, is lapsation the culprit? It probably is, to a degree. But another major factor is the skyrocketing increase in takeover sales. Takeovers have always been a small part of the equation, but starting about five years ago, they have grown into a major part, soaring to over 30 percent of new business in 2009. The 2010 numbers are about to be released, and we expect the trend to continue.
Some observers have linked the rise in takeovers to the surge in the number of Employee Benefit Brokers (EBBs) selling voluntary. They say that the EBBs are simply bringing their selling process over from the employer-paid side of the benefits world. And while true, it’s only part of the story. Takeovers are becoming more common for all brokers.
As account penetration increases, virgin account opportunities must necessarily decline. While we argue that the opportunity is still tremendous, locally, takeovers may also seem to hold tremendous opportunity. In 2009, 66 percent of employers offered at least one voluntary product. While that means there are still a lot of accounts without voluntary, the opportunity is beginning to be concentrated at the small account end of the employer spectrum. In some larger account segments, penetration rates approach 87 percent.
There are two conclusions here. First, producers must be on guard to not bypass virgin territory and the activities needed to grow existing accounts in favor of takeover activity. But second, we need to understand that this is a natural sign of an industry maturing before our eyes.
The 2010 U.S. Worksite Sales Report will be released soon and includes takeover and new business data (among other items). And for release later this year, we are working on a new structure for industry performance data, one that will rationalize sales, takeovers, lapses, and penetration data. Stay tuned!