Industry pros weigh in on what’s happening in the life insurance market
Complied by Thora Madden
Indexed UL? Fixed UL? Variable? We asked a few of our favorite pros to weigh in on what’s hot—and what’s not —in the life insurance market.
Cal Broker: Given all the dramatic forces at play in the world right now, do you see growth in particular niche markets in response?
Wendy Herndon, second vice president of Product Solutions, Aflac:
First off, we continue to see supplemental insurance benefits surge in popularity across all sectors. More potential customers are exposed to the advantages of supplemental coverage each year, and the business continues to grow. One trend we have seen during this past year has been the rise of rates and benefits being tied back into wellness initiatives. More companies are rewarding healthy behavior with higher face amounts or better premium offers. This seems reflective of the growing social conscience regarding healthy eating and exercise habits, and it is a win-win for both parties—policyholders have significant incentives to be their best selves, while companies are eager to reward those who commit themselves to a positive lifestyle.
Pam Jenkins, assistant vice president, product and market development, Colonial Life & Accident Insurance Company:
Life insurance is needed across all markets as America’s workers in general are uninsured or underinsured. Recent studies suggest that half of U.S. households are living paycheck to paycheck. Obviously, if a primary wage-earner died, this would cause tremendous hardship. Even those with life insurance say they probably do not have enough.
This represents a good opportunity to educate employees about their needs and help them match those needs with the right type and affordable amount of coverage.
Greg Faux, second vice president, product management, individual markets, Guardian:
Small business owners continue to be a focus. These clients often need assistance with a range of challenges from employee retention and benefits, capital preservation and exit planning, which all create opportunities for financial advisors to provide individual, tailored solutions.
Cal Broker: Has there been a significant change in product mix for life insurance over the past 12 months in terms of guarantees, variable or term?
We are once again seeing considerable growth in our group whole life and group term life insurance policies. These products continue to increase in popularity as customers prioritize flexibility in their policy decisions, acknowledging the reality of how quickly situations can change in the modern world. For our part, Aflac has continued to expand on our guarantee-issue options to ensure that coverage is available and as affordable as it should be.
According to the 2018 Eastbridge Worksite/Voluntary Sales Report, life sales again captured the largest share (27%) of total voluntary sales by line of business. We continue to see a major focus on the term life market, with additional opportunities to customize with riders and other options so customers can meet their financial needs.
The product mix at Guardian is relatively steady, with our continued protection-first focus on whole life and term products. The big shift in the industry is in the universal life (UL) market, where indexed UL products have seen significant growth at the expense of fixed UL. While there is still not much appetite for variable life insurance, the strong market performance of the past few years, coupled with increasingly complex product designs, leads to strong illustrated performance on indexed universal life products without the full risk of the market.
Cal Broker: What is happening with your distribution systems? If you have an agency force, is it growing? Are you hiring? Is there more attrition than usual?
Independent agents licensed to sell Aflac products and brokers are in many ways the life—pun intended—of our business. They are invaluable in helping us connected with the far reaches of the United States, even including island territories like Guam and Puerto Rico. With their help and feedback, we are constantly churning through new ideas and innovations on the distribution side in the hopes of further expansion and efficiency.
At Colonial Life, our strong agency distribution has kept us among the leaders of the voluntary industry. There is tremendous opportunity in the worksite industry for people who genuinely care about protecting America’s workers. Colonial Life provides the chance to be in business for yourself but not by yourself, and control your own schedule and income. Our agency sales organization members build their business by working both directly with employers as well as partnering with brokers.
Our agency force continues to grow and we’ve introduced new programs to attract non-traditional pools of talent. We have emphasized learning opportunities across agencies to attract young talent and showcase possible career paths such as working with clients, managing teams and leading an agency. Guardian, for example, offers a protégé contract so new hires can test drive different positions within the company before committing, as well as an internship program to train younger recruits. Many professionals yearn for the type of purpose that our work affords. Now is the time to ensure the pipeline of talent to serve the next generation is being developed to their full potential. Instilling intention and diversity into recruitment efforts will identify future leaders who can build on a firm’s progress and continue to keep the promises we make to our clients.
Cal Broker: In terms of life insurance customers, are there certain niches or age groups that brokers should place more of a focus on?
Frankly, our recommendation to agents is to consider everyone a candidate for coverage. We know that there are still far too many Americans out there without sufficient life insurance, and our hope is to educate all of them on the importance of securing such coverage. Additionally, recent evidence suggests that millennials could be a strong demographic to target in the coming years. In fact, a recent study found that nearly half of millennials (44%) overestimate the cost of life insurance coverage by five times the actual amount. There is ample opportunity for better education among millennials as to how much life coverage costs, how easy it can be to secure and how much it can benefit them in the long term.
According to new research from Colonial Life, just half of U.S. employees have access to life insurance from their employer. That trails healthcare coverage, paid time off and dental insurance. This highlights a huge opportunity for brokers to work with clients to offer life insurance in the workplace.
Young people—Gen Y and Gen Z employees between ages 18 and 37—are less likely to report life insurance has an option at their employer. Just 40% of young employees say life insurance is available, while nearly 60% of older employees—Gen X and Baby Boomers between 38 and 70—report the same. This indicates there may be an opportunity for better benefits education and communication to younger employees who may be considering life events that increase the need for life insurance (marriage, children, buying homes).
It’s critical for the industry to create products that work for consumers in all stages of life. Two groups that get a lot of focus today are millennials and pre-retirees. Millennials are reaching the point where they are starting families, buying homes, and entering their prime earning years. This creates plenty of opportunities for traditional insurance planning, while at the same time challenging the industry to modernize the way we interact with our customers, for the benefit of all. At the same time, their parents are getting close to retirement and focusing on a different set of challenges, such as chronic care, retirement income, and legacy planning. Financial advisors play an important role in all of these discussions, so it is important to maintain regular contact with clients and their families as their needs evolve.
Cal Broker: What kind of growth do you see in life insurance sales as an employee-paid or employer-paid benefit?
Aflac has seen encouraging growth in the demand for more valuable and accessible life insurance packages, which continue to be among our most desirable offerings. We have responded to the ever-growing demand by bolstering our guarantee-issue options, which helps employers maximize their benefits spending with a variety of coverage options. There have been significant increases in the amount of guaranteed-issue coverage offered, and Aflac has lowered the requisite participation levels enough to where more employees than ever have access to quality coverage through their employers. This side of the business seems to be the most prominent growth area, at least for now.
Term insurance growth is stimulated by employer-paid benefits, which does create additional growth as employees “buy-up” for more coverage. For cash value plans that are intended to cover a person for their lifetime, employee-paid and owned coverage is the best solution.
The workplace is a logical point of engagement with consumers. Advisors often start by building a relationship with business owners and addressing their needs, which naturally includes conversations about the needs of employees. This is often a great platform for advisors to meet new clients. At the same time, it also challenges insurers to rethink the customer experience of the new business and underwriting process, which is often slow and highly labor-intensive. We expect to see growth in this area, and we are currently piloting different methods for underwriting and marketing our products and services to employers and employees to meet this opportunity.
Cal Broker: What, if any, state or federal legislative issues are you concerned about?
Our policies are not major medical health insurance; therefore, health care legislation has not directly impacted our business. Because of the uncertainty surrounding the healthcare industry, we continue to educate consumers about their healthcare options and the benefits of supplemental coverage. We believe that regardless of how an individual or family acquires their major medical coverage, there is always a tremendous need for our products, since no policy covers everything.
Many companies are offering high-deductible plans due to rising healthcare costs, which means many employees are shouldering the burden of higher costs. Unforeseeable out-of-pocket healthcare expenses along with the added costs associated with accidents and illnesses—which includes everything from childcare expenses, travel costs and taking time off of work—are overwhelming to American workers. Aflac coverage pays cash benefits that can help with costs and help provide financial stability.
Low interest rates are the single greatest challenge facing the industry. These low rates will continue to put pressure on financial services companies and the interest-sensitive financial products they issue, including life insurance. All life insurance products are affected to varying degrees, but long-term contracts that rely heavily on earned interest, such as whole life and universal life, are especially impacted. All life insurers will be challenged to make product adjustments in order to manage lower investment income and profitability in the current environment.
Cal Broker: What are some of the common characteristics of your most successful life insurance producers?
Our top producers always ask every account and every employee/applicant they meet with about that individual’s circumstances to better understand their needs. Rather than just trying to sell products, they operate as benefits counselors. They help clients and employees understand the importance of life insurance and show how Aflac coverage can serve as a valuable component to a comprehensive benefits plan. Supplemental coverage is increasingly becoming a must-have in the workplace. It is our belief that workers are feeling the effects of higher health costs and need options to help offset expenses.
Based on industry statistics from LIMRA, a significant portion (43%) of the population does not have life insurance or needs more coverage. Through a deep understanding of products and the establishment of great relationships, our strongest producers help each employer tailor a life insurance solution that delivers on their objectives and caters to their unique benefits strategy. They ensure all employees receive comprehensive benefits packages and adequate coverage. These producers provide a range of coverage options—variations of employer-paid, supplemental buy-up and other supplemental options—to create comprehensive and attractive offerings for every benefits package.
Finally, effective producers help educate policyholders on the ever-changing need to evaluate their coverage. Life changes daily, and our producers help policyholders understand how to adapt to ensure they have adequate protection through every stage of life. Employees are less likely to seek individual coverage through other vendors when they have a better insurance offering through their workplace.
Our most successful life insurance producers balance the preferences of both clients and brokers, while striving for the great opportunity to educate employees on their full benefits portfolio. We believe in the value of one-to-one, personal benefits counseling sessions. This helps employees understand their needs and options to create an effective financial safety net for themselves and their families. So our most successful life insurance producers are those who are not only experts in product knowledge but who also excel at this customized counseling approach. They create trust and credibility, as well as long-term relationships. They’ll work with the same account next year and the year after, talking to the same employees, whose needs likely will change. We’ve developed a certification process so brokers, employers and employees can be assured they’re working with the best in the business when it comes to individual benefits counseling.
Traits like dedication to practice, problem-solving, life-long learners and a collaborative approach are some skills that our most successful producers exhibit. It’s our responsibility to foster a community of inclusion and go beyond traditional “finance” check marks when recruiting future agency leaders. Often the best in the industry are not former finance majors. They’re from diverse backgrounds with strong interpersonal skills and an innate curiosity. Insurance is a great industry in which to grow a meaningful career.
Cal Broker: With the health insurance turmoil, are you seeing more health insurance brokers getting into life insurance sales? If so, do you have any advice for them?
The uncertainty surrounding health care laws impacts how we think about health insurance and other benefits. This presents an opportunity for brokers to help educate customers on the value of supplemental benefits as a comprehensive health care plan. Like the healthcare industry, the broker market is changing as well, and brokers are looking to diversify and adapt to the changing landscape. By adding life coverage and other supplemental benefits to their repertoire, brokers are better able to grow their client base and meet the needs in their markets.
Aflac’s current life coverage was recently expanded to offer more flexibility, more choice and more value to customers. With this policy, brokers can merge their clients’ existing coverage with a combination of whole life insurance or term life insurance policies. This, in turn, can help increase the broker’s sales, provide a conversation-starter with existing clients and open new opportunities with new employers.
Health insurance brokers have made the shift to voluntary benefits over the last several years because of healthcare reform. With life insurance, it’s important to select a carrier you know will be in it for the long term.
Voluntary sales totaled $8.5 billion in 2017, according to Eastbridge’s annual U.S. Voluntary/Worksite Sales Report, up more than 4% over 2017. Voluntary benefits include any financial protection that employees can choose at the workplace, including life insurance, disability insurance, dental insurance, accident insurance, critical illness insurance and cancer insurance.
Colonial Life’s voluntary sales grew 8% in 2018, totaling $561 million. Colonial Life is the only company with more than $150 million in annual sales to exceed the industry average each of the past four years, according to Eastbridge. The performance earned Colonial Life the 2018 Voluntary Sales Growth Leader recognition.
As health care costs have climbed, and many employers have shared the growing costs of benefits with employees, millions are realizing they can affordably protect their finances, their families and their futures with voluntary benefits.