The study, entitled Voluntary Lapse Rates, found that of the 35 carriers surveyed, 70 percent can measure and track lapse rates for their voluntary business, either at the account or employee level or both. While most carriers measure lapse rates at 12 or 13 months, the methods and basis for measuring varied.
The carriers that currently track at the account level reported average first-year lapse rates ranging from 0 to 32 percent for their voluntary line. For most, these percentages have stayed about the same over the last few years. Carriers that track the percentage at the employee level reported average lapse rates of between 6 and 45 percent. As was the case in our 2015 survey, most indicated that the rate has remained level or increased over the past one to two years.
Some of the key areas of concern affecting lapse rates are turnover and broker churn. Other concerns mentioned were the pricing impact of heaped commissions, driving optimal enrollment conditions and needing more focus on conservation efforts.
To combat lapses, carriers noted plans to add lapse-tracking capabilities, improve employee- level conservation and improve administration/service. Others are evaluating their underwriting practices to de-emphasize high turnover industries and potentially increasing the time an employee must be with an employer before they are eligible to enroll.
Voluntary Lapse Rates, an Eastbridge Frontline™ Report
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Eastbridge Consulting Group, Inc. is a marketing advisory firm serving insurance and financial services organizations in the United States and Canada.