Life insurance recently reached a tipping point that at first blush may appear promising, but key communication challenges lurk beneath the surface for benefit brokers and advisers who include this benefit in their product portfolio.

The number of Americans with life insurance coverage through the workplace has eclipsed the individual insurance market, according to LIMRA. It was the first time that occurred since the group began tracking U.S. life insurance ownership in 1960.

There are now 108 million U.S. adults and children who receive employment-based life vs. 102 million individual policyholders. That’s a 68% jump in households covered at work to 57 million from 34 million in 1976 and nearly a doubling of covered lives from 55 million during that timeframe. The LIMRA study based on a sample of 4,167 households was weighted to the U.S. household population by age, income, race and region.

It was only a matter of time before this milestone was recorded, given that the distribution channels were running about neck and neck, says Anita Potter, assistant VP for workplace benefits at LIMRA and co-author of the study.

She points to several diving factors, including a growing population and labor force that’s also aging. Another is an increase in the number of mid-to-large case size employer market, which employs more than have the nation’s workforce and tends to offer multiple benefits that include life insurance coverage.

Market penetration
But these research findings can be deceiving. For example, employment-based life insurance peaked at 54% of U.S. households in 1984 and that rate has since declined to 46%. This is a disconcerting development for the American public, 73% of whom believe employers should be required to make life insurance coverage available. “Employers underestimate how much employees value life insurance,” even though it’s not among the “new and shiny” benefits that reap much of the attention,” Potter notes.

Also, market penetration at the individual level reportedly peaked at 37% in 2004 before falling to 34%. Another cause for alarm, according to LIMRA, is that employees rarely revisit their benefits selection and 44% never change their life coverage.

What LIMRA’s findings suggest for benefit advisers is the importance of employee surveys that prioritize various types of coverages, Potter says, which will help attract and retain top talent. Included in that effort could be an examination of value-added features that elevate the level of interest in life insurance.

While an increase in the number of individuals and households covered by employer plans is certainly a positive development, industry observer Walt Podgurski is concerned about a drop in the percentage of individual person-level coverage. “LIMRA’s 2012 report estimated unmet life insurance need in the United States at $15.3 trillion,” says Podgurski, editor of Daily Insurance Report. “These trends, combined with other life insurance ‘distribution trends,’ would seem to indicate there is a huge opportunity for organizations who can figure out how to reach the individual consumer with needed traditional life insurance products and services.”

It’s also worth mentioning that “most people typically need more coverage than what is offered through the workplace,” says Jack Dolan, a spokesman for the American Council of Life Insurers. Industry producers “are playing an important role in helping financially protect people,” he says. “Coverage through the workplace is often the gateway to necessary and full life insurance protection.”

Jim Sorebo, chairman of the National Association of Independent Life Brokerage Agencies and president and CEO of Four Seasons Financial Group, Inc., believes LIMRA’s research suggests a failure “to make it simple and easy” for people to buy the life insurance they need. “

We need to fix the broken customer experience and fix it for the people selling it as well,” he says. “There's no reason why it should take four, six, or eight weeks to buy life insurance in today’s technology-focused marketplace.”

His recommendation to employee benefits brokers who sell life insurance to dig in deeper with customers and encourage additional questions to be asked during the overall financial planning process. For example, he says enrolling someone in supplemental life insurance could uncover a need for additional products such as chronic-illness or long-term care insurance.

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