The U.S. market for voluntary and worksite benefits is like gravity: It's all around us, and it's as obvious as an apple falling on your head, but it's not especially well understood.
Deep Banerjee, an insurance sector rating specialist at S&P Global Ratings, talked about the voluntary and worksite market information gap last week, in New York, at S&P's annual insurance conference.
Banerjee said S&P thinks that the voluntary market is one of the fastest growing parts of the life and health market, and that participating in that market is good for insurers.
"It's a less capital-intensive product," Banerjee said.
What S&P thinks about a product is important, because ratings from S&P and its competitors help determine how much insurers have to pay when they seek capital from Wall Street.
Banerjee said, however, that, even for S&P, getting detailed information about the voluntary market is difficult.
Here are a few glimpses of what's happening in the combined voluntary and worksite products market now, based on reports from Avon, Connecticut-based Eastbridge Consulting Group Inc. and Charleston, South Carolina-based Benefitfocus Inc.
(Image: Bram Janssens/Hemera)
One challenge for supplemental benefits market watchers is that even the terms used to describe the products are confusing.
Some people who create and sell those products hate to call them "ancillary benefits" or "supplemental benefits," because, they argue, products like employee-paid life insurance or employee-paid disability insurance may be critical to protecting employees against financial disaster.
Traditionally, a "voluntary insurance plan" was a group insurance plan set up in such a way that the employees could decide whether or not to pay to participate.
A "worksite marketing product" was an effort to sell individual products to workers at the worksite.
Today, even insurers and the enrollers are somewhat vague about which products are voluntary insurance products and which are individual products sold at the worksite. One thing that's clear is that the combined market for those two types of products is hot.
Workers are more interested in buying the products because increases in group major medical plan deductibles and co-payments amount are increasing their out-of-pocket costs.
Health insurers are interested in selling the products because, today, the rules for the supplemental benefits market are much more clear than the rules for the major medical market.
Insurers that focus on the life and disability markets are interested because supplemental benefits products tend to be much more resistant to low interest rates than traditional life insurance, disability insurance and annuity markets.
Here are what Eastbridge and Benefitfocus are saying about the combined voluntary and worksite products market now.
1. There are opportunities for life and disability issuers as well as for issuers of health insurance gap-fillers.
All of the commotion surrounding the Affordable Care Act and the major medical insurance market has drawn attention to supplemental health insurance products in recent years.
