Trends in Employee-Paid Group Term Life Business
Employee-paid business currently makes up over half of new annual sales for the Group Term Life insurance market.1 Given insurers’ continued focus on this business, it is important to keep a close eye on developments in such areas as underwriting practices and participation requirements.
Recently, we produced our biennial U.S. Group Term Life Rate & Risk Management Survey that reports on Group Life underwriting practices influencing this business. We heard from many of the 24 participating companies about certain key trends for this business since we last conducted our survey.
Although a number of participants have modified their guaranteed issue limits since the 2013 survey, the average guaranteed issue limit among companies participating in both years was up only slightly across all case sizes. Most companies have remained true to their limits as reflected in the average percentage of cases sold outside of standard guaranteed issue limits in the 2015 survey, which was roughly 12%. In fact, since the 2013 survey, 60% of the participating companies sold less than 5% of cases outside of their standard guaranteed issue limits.
Participation levels are another area of focus for insurers offering Employee-paid Group Term Life insurance. According to the survey, companies met their participation requirements on an average of 85% of their 2014 sold cases. The actual average participation on these 2014 sold cases was 31%. In addition, 95% of companies test to see if their employee-paid participation levels are being met.
Promotion of employee-paid ancillary products in the private exchanges has increased over the past few years. In fact, two-thirds of 2015 survey participants are involved with insurance exchanges at some level.
With increased enrollment in health insurance benefits on private exchanges, it’s not surprising additional products, such as employee-paid Group Life, have made their way onto the scene. One reason a product like this may be well positioned for inclusion on exchanges is the perceived pressure employers are feeling to offer one-stop shopping and flexibility when it comes to benefit selection.
Participating companies reported they are not differentiating between their private insurance exchange and traditional business when it comes to their employee-paid underwriting limits (i.e., guaranteed issue limits and maximum issue limits). Furthermore, when it comes to open enrollment practices, the majority of carriers use the same open enrollment practices on the exchanges as they do on their traditional business.
About 20% of carriers, however, have taken a more liberal stance regarding exchange enrollment than on their traditional business by allowing multiple level elections and increases without evidence of insurability at enrollment.
Given the projected level of enrollment on the insurance exchanges that is forecasted by industry analysts, the potential growth opportunity for employee-paid Group Term Life business on the exchanges is significant. Nevertheless, there is much to be done to keep track of changing trends with regard to employee-paid offerings, not only from the carrier perspective, but also at the employee level.
As such, Gen Re is committed to focusing on the employee-paid benefits market through our upcoming research studies. For example, our Voluntary Employee Pulse, conducted with Spring Group, uses concepts from behavioral economics to test how sponsors can improve employee education and enrollment by adjusting their messaging.
Gen Re is also using behavioral economics to uncover how companies can improve the accuracy of the information obtained from insurance applications. With this expertise, we strive to expand both awareness and understanding of the evolving employee-paid market.
1. Gen Re's 2014 U.S. Group Life Survey.
*2015 survey based on 2014 data; 2013 survey based on 2012 data.