After a year marred by layoffs, decreased revenues, reduced productivity and low morale, employers are desperate for good news to share with employees. And whether it's lower rates for employees, additional bells and whistles on coverage, or more plan options, life insurance is one of the few areas where there's good news to share.

"All those things can help counterbalance bad news in other benefits areas," says Rich Fuerstenberg, a principal with Mercer. Lower premiums, coupled with decreasing mortality costs, means it's a buyer's market for life insurance. "Current rates are often lower than existing rates so we're encouraging our clients to go to market and make sure their rates are reflective of that," says Lawrence Singer, senior vice president with Segal.

The economic events of the past year, however, have left many employees skittish. When faced with the decision between making a mortgage payment and paying a life insurance premium, most will choose to keep the roof over their heads. Making group life insurance appealing to employees is challenging at the best of times and perhaps even more so in times of economic uncertainty when discretionary spending is scarce.

But for some employees, the economic downturn has clarified the importance of the benefits they do have. "Our research shows employees are so attuned to their own financial struggles that they're paying more attention to their benefits programs and are valuing their programs even more now than they have in the past," says Graham Cox, vice president of life product management with MetLife.

Greater concern about financial security might actually be spurring employees to action. Nearly half (47%) of U.S. workers say they reevaluated their life insurance needs within the past year, compared with 39% who said the same in 2008, according to Prudential's "Study of Employee Benefits: 2009 & Beyond."

There are a number of things employers can do to help foster employees' appreciation of their group life insurance programs. With the traditional fall open enrollment season behind them, employers may be wary of organizing another one in the spring. But taking group life insurance out of open enrollment in the fall and giving it its own enrollment period at another time of year is one way employers can drive home any positive messages they want to convey.

"If you think about the relatively small amount of time employees spend on open enrollment decisions in general, the vast majority of time they do spend is on the medical side - what options do I pick? Who do I cover?" says Fuerstenberg. "The life insurance gets relegated to page 73 of the open enrollment guide and doesn't get a lot of attention."

Giving life insurance its own open enrollment means it can be the only decision employees need to focus on. "Make it the only decision they have to make," says Fuerstenberg. "If you have a special offer, whether it's a plan change or lower rates, communicate it then and partner it up with a targeted, focused, multimedia communications campaign."

And while it's a trend that's growing in popularity, "it's still a minority of companies that do it," he says. "Some may not do it every year, they may do it every two or three years."

Some companies have found that when they give life insurance a separate enrollment season it has a significant impact on participation, says Jim Gemus, vice president, life product management in Prudential's group life area.

But not everyone's in love with the idea. It takes significant commitment from the employer to run a separate enrollment period for one benefit.

"It can work but there's a challenge there. Folks don't spend a lot of time thinking about their benefits. The one time they may be pushed [to look at them], or awareness is higher, is during open enrollment season. There's an advantage to doing it during open enrollment because the heightened awareness is there," says Barry Petruzzi, head of Guardian Life Insurance Company's group life business.

Communicating the value of ancillary services such as will preparation, financial counseling, bereavement counseling and funeral preparation can also drive appreciation. "Making those legal services available rounds out the benefit to make it more of an overall financial planning and estate planning device, as opposed to just a death benefit," says Gemus.

There's been much higher interest in the past few years in voluntary benefits in general, as employers look for ways to keep benefit options available to employees while reducing the bottom line of the plans they provide.

"With some degree of increasing frequency, we're seeing employee-paid life insurance moving from that core to voluntary," says Fuerstenberg. "It's not a huge groundswell but depending on what happens with health reform and if employers reduce their responsibility for employer-provided benefits or it becomes more of a statutory requirement, I think we might see more employers saying, 'here's a supermarket of benefits you can buy and pay for, pick whatever you want' and pushing the employee-paid life coverages out there as opposed to something that is truly company-sponsored."

And even as the economy recovers, it's not expected organizations will start paying again for benefits they moved under the voluntary umbrella. "I'd be surprised if we saw a big shift back," says Petruzzi. "By and large I think a lot of employers look at that [move to voluntary] as a pretty effective way to provide pretty good benefits at a modest price."

But companies are certainly not clamoring to reduce or eliminate their core life insurance benefits, as most recognize their value. "I have seen companies pushing to reduce premium costs through aggressive negotiation with the carrier markets, consolidating ancillary lines of coverage such as life, supplemental life, LTD and STD, with the same carrier or changing plan designs," says Jeffrey L. Bolter, director, health and productivity with Buck Consultants. "I have not seen companies eliminating this coverage as part of their long-term strategy."

And while the recession has perhaps led some employers to shift the proportion of costs between what they pay and what the employee pays, "employers, for the most part, haven't been reducing group life insurance benefits at an accelerated rate. They don't really plan to cut employer-paid or employer-sponsored insurance programs," says Gemus.

As a result of tightening margins for the insurance carriers, expect them to put their best foot forward in 2010.

"The market will get more crowded but that doesn't necessarily mean we're going to see new entrants," says Fuerstenberg. "Medical carriers are looking to diversify, carriers primarily in the disability market are looking to diversify into the life space, and key players in the life space are looking to keep what they have. Increased competition will be good for employers in that it will mean more choices, lower rates and longer rate guarantees."

High unemployment means fewer employees paying premiums. A 500-life company becomes a 350-life company, leading to lower volumes and lower premiums. "The economy has created a very difficult environment to operate in as it relates to expenses," acknowledges Leonel Benoist, vice president, group insurance with Mutual of Omaha. "Those [insurance] companies that have large life blocks are seeing some serious expense issues they have to deal with."

Consulting firm Conning forecasts that net premiums for group life will shrink by 6% to $27 billion before beginning to recover, reaching $29 billion in 2011. This result is well off the record $38 billion in net premiums reported in 2007.

Benefit costs, meanwhile, are forecast to decline by 5% and 2% in 2009 and 2010, respectively, ending at $24 billion in 2011. Expense cuts taken in 2008 will be sustained during the forecast period, and net operating gains are forecast to be $1.7 billion in 2010 and $1.9 billion in 2011.

According to Life-Annuity Forecast & Analysis 2009-2011, which reviews and projects performance for the U.S. life-annuity industry and its key lines of business, "enrollment in group products will decrease due to increased unemployment, which will either reduce premiums or slow its growth."

Smart carriers will expand their voluntary portfolio of products, says Benoist. "If you have 100 employees who have just basic group life that the employer pays and all of a sudden that group is a 60-life group, the smart companies will cross-sell their own products so those folks have basic life and voluntary life on top of it."

Whether the economy is faltering or flourishing, the need for life insurance remains the same. "Americans can't afford to look at life insurance as discretionary spending," says Cox. "There needs to be a financial safety net in place to protect those who are relying on them for financial support. And for most people that means more life insurance than what an employer would provide."

When employees leave a group, they have the right to turn their term policy into a permanent insurance policy. It's known as conversion and it's built into insurance contracts because it protects individuals by giving them the right to continue their insurance. But conversion is inefficient, says Lawrence Singer, vice president with Segal, because "the converted contract is not a term insurance contract, it's a permanent insurance contract, meaning it's expensive and has to be offered to everybody regardless of their health."

A more efficient way of allowing people to continue their coverage is through a portability feature which allows employees who leave the group to continue their coverage in the same form (term coverage) at the same rates.

"In this day and age when people change jobs more frequently than ever before, it's a good way to ensure people still have access to their life insurance," he says.

But employers might want to consider their overall benefits strategy before offering portability as a feature.

"Do you really want to make your benefits easier to leave? Or are you trying to make your benefits valuable for people who stay?" asks Rich Fuerstenberg of Mercer. "Whether it's portability or conversion, those features have a cost. And that cost is absorbed by all employees."

Nevertheless, "those employers that already have portability as part of their contract for the basic and supplemental life plans are stressing its importance," says Jeffrey L. Bolter, director, health and productivity with Buck Consultants. "Groups that have not had this option are considering it as they renew or bring their plans to market."