Benefit Brokers See Share Gains In Voluntary Market

Among the five distribution channels through which voluntary benefits are sold, the employee benefit broker channel saw the largest market share gain in 2015.

Last year, the channel accounted for 60 percent of all voluntary sales, an increase of three percentage points compared with 2014, an Eastbridge report found.

Sales of voluntary benefits rose 3.6 percent to $7.1 billion last year compared with 2014. In addition, sales through employee benefit brokers rose at more than twice that rate from 2014 to 2015, the research showed.

The employee benefits broker segment, whose primary business lines are employer-funded benefits with medical coverage high on the list, generated just under $4.3 billion in new voluntary sales in 2015, an increase of 7.8 percent compared to 2014, according to Eastbridge.

The research by Eastbridge Consulting Group is released every spring as part of the company’s “U.S. Voluntary/Worksite Sales Report.” The report is compiled from data from more than 60 carriers in the group and individual voluntary benefits market.

Career segment brokers, with a second-place 2015 market share of 16 percent, lost ground last year, the research found. Sales delivered through that channel dropped 5.8 percent last year compared with 2014, Eastbridge said.

Brokers in the “classic” segment - brokers who focus on voluntary products as a primary line of business - saw their market share in 2015 rise less than 1 percent to  make up 12 percent of voluntary benefit sales, the researchers reported.

Specialist brokers, - brokers who also focus on voluntary benefits product sales mostly as wholesalers - saw their market share rise by 1.8 percent at the end of last year over 2014. Specialists commanded 10 percent of voluntary sales market share last year.

The “occasional” benefit broker segment - a property/casualty broker with the occasional voluntary benefit sale - saw its share drop 3.6 percent last year. In 2015, the segment represented only 3 percent of voluntary benefits sales, the research found.

Voluntary benefits are paid for 100 percent by the employee through a payroll deduction. The benefits are offered in addition to shared benefits for which the employer and the employee contribute toward the premium.

Employers, who make voluntary benefits available at their discretion, don’t contribute to premiums and simply elect to make voluntary benefits available to workers.

Employees like the benefits as they allow workers to supplement coverage they already have, and are eligible to buy the coverage through group rates.

Workers find these voluntary benefits valuable as insurance companies shift more of the cost of coverage onto employees.

Product Category Sales Leaders

Of the $7.1 billion in voluntary benefit sales in 2015, life insurance accounted for the largest share in terms of product sales, Eastbridge said.

The research found that 27 percent of voluntary sales went to life insurance products, with term life leading the way.

Term life sales, at more than $1.5 billion, rose 9 percent in 2015 compared with 2014. Universal life and whole life dropped by almost 10 percent last year compared with 2014, the Eastbridge report found.

Critical illness insurance saw the highest year-over-year product line growth rate, with sales rising to $491 million in 2015, a 25 percent increase from 2014.

Many industry analysts have attributed the year-over-year increase in sales of critical illness coverage to insurance companies narrowing primary health coverage and shifting the cost of primary medical onto employees.

As primary coverage becomes more expensive and demand for extra coverage for catastrophic illness grows, the voluntary benefits market pie continues to expand, said Gil Lowerre, president of Eastbridge Consulting.

“The (voluntary benefits) market continues to grow and produce positive results,” Lowerre said in a news release. “Breaking the $7 billion mark in new sales is a milestone.”

Accident insurance sales rose 11 percent last year to $943 million. But hospital indemnity/supplemental medical sales dropped 12 percent last year to $535 million from the previous year as some insurers choose to eliminate limited benefit medical plans.

Disability insurance sales rose 3 percent to $1.4 billion in 2015 compared with 2014. Sales of short- and long-term disability insurance rose in 2015 by 2 and 3 percent respectively compared with 2014, the Eastbridge report also found.

Cancer insurance sales, however, were flat at about $346 million, Eastbridge said.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].