In the 2000s, insurers, advisors and planners seem to have increased their use of the "value-addeds" in offerings to current and potential customers.
Now, the Iowa Department has come out with Bulletin 08-15, advising that it will disapprove personal lines product filings with added items that "do not appear to be related to the insurance products."
The difference between related and not related value-addeds is important. The industry needs to listen up.
First, an overview of the add-on trend. In my opening sentence, I said industry professionals "seem" to have increased their use of value-addeds. I used the word "seem" because the comment is based on my observations, not on empiric research.
Specifically, I have a huge file on such offerings. It was built up over the years but especially after the mid-2000s economic recovery took hold.
From 2003 to 2007, it seemed the insurance developers and practitioners could not get enough of value-addeds.
These are not insurance products, mind you. They are cost-free "go-withs." They're designed to enhance the product or advisory experience but not to indemnify for financial loss. Think of condiments offered with food products–"some ketchup to go with your fries, sir?"
The Iowa Department apparently noticed this growth of add-ons too. As it says in its new bulletin, "the Division has observed a trend whereby companies are including items other than insurance in new filings of insurance contracts."
Iowa limited its comments to personal lines–because the department said "certain reductions of premium or commission are allowed in the sale of commercial insurance." But my own files show that the add-on trend occurred in both group and individual product lines. It also occurred in insurance practices of various types.
Examples:
o Individual and group life and health products often come with wellness programs. (A new MetLife survey confirms this; it says about 57% of larger employers are providing wellness programs, up from 49% in 2006.)
o Some health products offer discounts on gym memberships, and many vision plans offer discounts on new eyeglasses or contacts purchased from selected vendors.
o Some life products include access to free or low-cost medical screenings. Some offer vital record storage services or referrals to same.
