Take care, life insurers: US health insurers are
using years of experience in the employee benefits arena to carve
out quite a niche for themselves in group life. Health insurers’
deep relationships with a wide variety of employers give them a
huge advantage over life-only entrants, so life insurers are trying
to catch up by combining a variety of packages around a group
As benefit managers seek lower employee medical
costs and administrative simplicity, combined insurance offerings
have enabled several larger health insurers to climb the ranks in
recent months, in large part due to group benefits, including life
Rating agency A.M. Best data on the US group life business for 2006
showed that the group life business of five of the ten largest US
insurers was down from the previous year, while several of the
larger providers known mainly for their health insurers posted
impressive gains in group life. For example, market leader MetLife
dropped 8.1 percent to $138.6 billion in policy value,
second-ranked Prudential of America Group dropped 12.1 percent and
third-ranked Hartford Life Group saw a 13 percent drop in business
from 2005 to 2006.
In contrast, UnitedHealthcare, a leader in the employee benefits
market, enjoyed a 34.5 percent increase in its group life business,
to $46.1 billion. Fourth-ranked Aetna, another health insurer, saw
its group life business grow by 17.1 percent from 2005 to $61.3
billion. WellPoint, which ranked 18th, saw a 24.4 percent increase
in its group life portfolio from 2005 to $14.7 billion.
The reason for such growth is relatively straightforward: if a
health insurer already has a stake in an employer’s health
business, it faces that client base regularly, whether through
health claims, billing or peripheral communications. It’s a short
leap from such day-to-day contact to adding group life, as well as
short- and long-term disability insurance through wellness and
disease-management programmes. The increasingly self-directed US
health care market makes such multi-product offerings inevitable,
as employers seek ways to manage costs and employees seek
one-size-fits-all coverage plans.
Opportunities lower down the market
The top-heavy nature of the market, in which a handful of major
group life players chase Fortune 500 businesses, means that growth
opportunities exist in the middle to small market. While several
large competitors jockey for position, the top 15 players still
represent about 80 percent of the total in-force business written
in the group life market.
With companies seeking to improve employee health and control
rising health care costs, open enrolment – the annual period during
which US employees can make changes to their coverage levels –
plays a more important role than ever. Large insurers are getting
increasingly proactive about group life marketing during open
Consultancy Watson Wyatt Worldwide, which works with larger
employers on insurance offerings, said that group life and health
products are converging as major cost reduction tools while their
distribution is becoming increasingly internet-driven.
Watson Wyatt’s report added that group life would increasingly be
tied to financial incentives for employees who have healthy
lifestyle habits or who participate in wellness and fitness
programmes. A forthcoming survey by Watson Wyatt and the National
Business Group on Health, an alliance of large corporations, shows
that 46 percent of employers currently offer economic incentives
and another 26 percent plan to do so in 2008.
The report said that employer interest in consumer-directed health
plans (CDHP) with health savings accounts (HSA) continues to grow.
Watson Wyatt research shows that 40 percent of companies will offer
workers an HSA next year. At the same time, to reduce
administrative costs, employers are cutting back on the number of
health plan options they will offer workers. More employers plan to
offer a CDHP as their only option. The survey found that 5 percent
of employers now offer a CDHP on a total replacement basis and
another 4 percent plan to do so in 2008.
Market consolidation, product improvements, better service and
product bundling are driving companies’ group life sales. In
addition, some carriers are pricing more competitively to gain
market share. The combination of group life with ancillary products
such as disability insurance will continue to attract smaller to
mid-sized employers, as will growth down-market as insurers reach
out to smaller employers.