Will the recession and continued economic woe simply contribute to the decades-long erosion of life coverage? Or will a return to basics, remind employers and employees alike of the need for traditional financial planning - in which the coverage will always plays a central role?Experts everywhere are gazing into their crystal balls trying to divine exactly when and how severely the economic malaise will impact their business. If you or someone you rely on hasn't lost a job and you weren't planning on taking retirement in the next decade, then you may even feel a bit better now than you did just a few months ago. Gas prices are half what they were. But more and more folks are holding their crouched positioning, knowing their bit of terra firm could soon come loose, forcing them to jump without any confidence about where and how they will land.
Some industry brains say that the voluntary market, which has experienced significant annual growth over the last few years, will continue to grow just at a slower pace. Others add that it is precisely the current economic turmoil that will fuel some of that growth.
The bulls amongst us
Going product by product the board of advisors of the Workplace Benefits Association recently outlined the rationale for continued voluntary benefit sales success despite increasing economic insecurity. First up for them is life, which they say may get more attention as people who have suffered significant estate losses realize there won't be time to let the market make up that money. They will need to increase life coverage to help cover the loss. What they may have been able to self fund in the event of a breadwinner's death is much less now than when the Dow Jones Industrial Average was north of 10,000.
Other market watchers are decidedly more bearish.
LIMRA is paying careful attention to the life insurance markets as the recession takes hold, deepens and widens. In the Spring of 2008 their membership started agitating for good intelligence on how consumers were looking at the industry. And the group set about finding out, albeit well before the economic catastrophe of Q4 '09.
"During the last recession the number of groups declined significantly," LIMRA's Jennifer Douglas says.
Her colleague, Anita Potter, says it's liable to be worse this time around.
"It's going to be different during this one. You didn't have as many layoffs as we're seeing now," Potter says.
Some group life programs are portable - no job doesn't have to mean no policy. But LIMRA's experts say that fact won't do much to mitigate the impact on brokers and advisers who sell these programs for two reasons.
"A lot of contracts do have a portability feature ... [but] even if it's on the contract the HR staff may not know about it, a lot of the employees may not know about it," Potter says.
And that's just the half of it. Both Potter and Douglas wonder how well life insurance competes for dwindling household dollars in the broader benefits equation as American families struggle with income losses and wage freezes.
Times have changed
Potter suggests taking two looks at life insurance to get a sense of how its relevance has potentially diminished. First view the product with a 1950s mindset. Back then the family usually had one breadwinner. Medical technology wasn't anywhere near the level it is today. You had a heart attack or got cancer you likely died, she says. That's not today's mindset, Potter continues.
"People probably feel more like that maybe they will become disabled or retire before they die. So do they need term life insurance if they have their partner also working and bringing in income?" Potter says.
LIMRA's own research shows that consumers still admit to a need for the product, but their consumption patterns show they don't buy it like they have in the past.
The group's research shows that since the 1980s individual life coverage has declined.
What has not declined though is the individual's willingness to say life insurance is important. Douglas says when LIMRA surveys consumers on financial security they still say life insurance is an important concern. "That's still very important. They still realize it. The flipside is that they are not doing anything about it," she says.
Marc Warrington, senior VP of sales for Assurant Employee Benefits, wholeheartedly agrees.
"I do agree with them that as households have changed and demographics have changed, their needs have changed. It's just a matter of access," Warrington says.
He understands why the number of life insurance policies has dropped significantly over the past two decades, yet aggregate premiums have grown considerably. Everyone in the industry is whale hunting, which he says is a problem.
"Who is accessing those people that aren't making the $250,000 and above?" Warrington wonders.
And while he's quick to point out that his industry may not be doing a great job of serving America's ranks of working Joes and Janes, Assurant has posted strong growth in its worksite life business.
The number of companies signing on grew 33% last year, jumping to 1200 engagements. And almost all of that was new business, on top of whatever existing base-formula offering the employer had in place, according to Warrington.
More generally, however, Warrington is disappointed with the approach his industry takes to life sales. There is a lot of talk about stats and statistics and other actuarial data, but there is little talk of value.
"Why would you buy it in the first place? We get away from that," he says.
He also chafes at the commoditization of the products and incremental pricing wars - "We run right to the price category and say, 'Hey, mine is two cents cheaper than theirs.'"
He also says that the small premium numbers may work in the benefit's favor as families continue to struggle to pay bills.
Greystone Benefits' Joe Vogt says the small-dollar defense doesn't hold up in areas experiencing the most economic pain.
The medical renewals have been merciless on companies for a long time and much of that burden has been shifted to the worker. Those workers aren't reaching deeper into their pocket for voluntary life or other worksite offerings like they used to, even if they only cost a few dollars a month.
"Where they would say, 'Well, you know, $7 a week that's not bad. I can afford $350 a year' - they're not doing that anymore," according to Vogt.
He's been hit pretty hard by the economy, harder than some others. He says with layoffs and outright bankruptcies his business is down 20% or more.
People are prioritizing and that means major medical. Life insurance usually follows, then comes dental and on down the list. Vogt has long questioned the vaunted place life insurance holds, given the aforementioned demographic - dual earners, survivor rates for cancer, heart ailments - changes as well as the stats and figures pointing to the need for better disability coverage.
"Life insurance takes a higher position than the statistics and reality say that it should," he says.
He also - echoing LIMRA's Potter - questions whether portability will really help stall business erosion for benefit brokers.
"People really aren't acting on their portability and they are not coming to us to say, 'Listen, I've lost all of my benefits. I used to have a couple hundred thousand at the company, let's get underwritten. I'm healthy. Let's get underwritten.' People don't know where they are going to be a year or two from now, and they are not committing to that," he says.
However, Vogt's quick to admit he's got no more talent at predicting the future than those individual workers. While he says he's hanging on, he also admits that the business loss has been very significant for his firm.
As some of his clients shed workers or shutter entirely, he finds himself doing more one-on-one planning with those left behind. Heretofore, individual planning wasn't an area he wanted to pursue. But the need is there and given the foundation of trust he's not only developed with his clients' leadership, but also with individual workers, it just might be an opportunity he can no longer ignore.
Hear the rest of what Vogt, Warrington and Potter have to say online at eba.benefitnews.com/podcasts.
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