A Business Stuck In Neutral Gear

"And there is only one way to get in as a new business, and that is to sell it as a loss leader," Bykerk said. "You have to buy your way back into the market through risky pricing."

Another concern is that the specter of 9/11 continues to shadow the industry. He said that the reinsurance problem created by 9/11 "has not subsided."

Reinsurance for the most part is still not available for group life industry, he said. "The group life carriers are faced with a choice of either getting out of the business or accepting full responsibility themselves."

Some reinsurance is available, but capacity is extremely limited and the cost is very high. Even in the limited quantities it is available, "the price is quite high, relative to what it was prior to 9/11."

Before 9/11, Bykerk said, companies used to purchase over-arching catastrophic coverage that would cover all claims, inclusive coverage across product lines. "For the most part, that has become mostly unavailable or exorbitantly expensive," he said.

"Some new reinsurance money has come into the market, but it has not impacted the market, and companies have made the decision to bear all the risk themselves rather than get out of the business completely," he said.

The Hobson's choice for group life carriers, he said, is that if you get out of the market, it affects other parts of your business because group life is generally sold in conjunction with other coverages, including disability, long term care, perhaps major medical of various types all packaged together.

"If you don't provide the coverage, you may not make the brokers' bid sheet, which affects your overall business," he said. "The market is extremely competitive. You can't get out and get back in; if you get out, you lose credibility in the marketplace. It takes years to gain credibility in this mature market, and withdrawal is a death sentence."

According to the data submitted to state regulators, MetLife is the market leader as of Dec. 31, 2005, with $2.097 trillion in group life insurance in-force, up from $1.857 trillion at year-end 2004.

Next was Prudential, with $1.228 trillion of group life in-force, followed by Aetna Life with $559.6 billion.

Fourth was UNUM Life, with $502 billion in-force, followed by Hartford Life & Accident, with $422.8 billion of group life in-force. In 6th place was Minnesota Life with $405.1 billion of group life in-force, followed by Reliastar Life in 7th place with $360.5 billion of group life in-force.

Rounding out the top 10 in group life in force were 8th-ranked New York Life, at $238.9 billion; 9th-ranked Standard Insurance Company, at $233.5 billion; and 10th-ranked US Branch Sunlife Assurance of Canada, with $174.4 billion.

According to LIMRA, midsized group life insurers continued to collectively outperform their peers in adding policies, a trend that started back in the first quarter of 2006.