The voluntary benefit field is one of the few industries able to sustain persistent growth over a significant period of time, and these days its group employee benefit brokers who are reaping those benefits more than any other distribution method. As a result, they have assumed a position of power in the industry, but if they want to maintain growth, benefit brokers must remember to put employee interests first, Eastbridge Consulting Groups Bonnie Brazzell and Gil Lowerre said Tuesday at EBAs Workplace Benefits Renaissance in Atlantic City.
Numbers for 2014 are still coming in, but Eastbridge estimates there was around $6,780 million in new business annualized premium in 2014, representing approximately 2% to 4% growth over 2013, said Brazzell, vice president.
In the last five years, sales on a group platform have grown dramatically compared to individual sales, Brazzell said, noting we have become a group industry. And employee benefit advisers are driving that growth, she added. Eight years ago, benefit brokers were responsible for 25% of sales, Brazzell said, today that number is 57%. They are the growth engine for the marketplace, she added.
This is magnified when sales are broken down by distribution segment, said Lowerre, president of the consulting group. Of the five main channels benefit brokers, classics, specialists, occasional and carrier agents all are relatively flat, except for brokers. Its not because more brokers are selling the benefits, that percentage plateaued around 95% about five years ago, Lowerre said. Sales are still skyrocketing for brokers, he said, because of a sudden burst on the productivity side. Brokers are using voluntary as an aggressive weapon, not just as a defensive weapon, he said.
Its a very positive development, Lowerre said, but it also means the competition is getting much stronger. He advised the audience to expect a great increase in local competition in the next couple of years. Competitive pressure is building, he said. We as individual producers need to up our game.
In the process, the power has shifted from the carrier to the broker. Carriers used to lay down the rules and those days are gone, said Lowerre. But, now that advisers can use their power to make their own lives easier, they must make sure they dont put their own interests ahead of the ultimate customer the employee, he said. If we are in the power position, how are we using that power? he added.
The danger of using it improperly, such as assuming all employees are alike in an effort to streamline the process, is that participation rates are starting to fall, Lowerre said. Preliminary Eastbridge data show such a trend, and Lowerre said the consulting firm will be spending a lot of time researching what is driving that change.
Meanwhile, now that brokers are the primary distributor of voluntary benefits, takeover business is soaring, Lowerre pointed out. Takeovers represented 12% of new business achieved profit in 2006, by 2013 it was 50%. It makes sense, he said, because as brokers, most of us were brought up on takeovers.
Takeovers are fine where appropriate, Lowerre said, but not focusing on new business is a major window of opportunity that will close over time.
There are a number of voluntary products with high sales potential, said Brazzell, based on the percent of employees surveyed by Eastbridge who are interested in them compared to the percent of employers not currently offering them. The products at the top of the list include employee purchasing programs, auto/home insurance, cancer, annuity, legal, critical illness and pet insurance.
