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Spring 2001
Group Life Committee Review
By Joe Malone
Munich American ReThe Group Life Committee presented three workshops and a "Let's Talk Shop" discussion group at the GUAA Fall Conference in Chicago.
The Impact of E-Commerce on Employee Benefits & Group Insurance
Kathy K. Laws of CIGNA Group Insurance and Robert J. Patience, Director of Interactive Services at Prudential, provided insights into the strategic and tactical impact of E-Commerce at their companies, two of the largest U.S. Group Insurers.
Kathy Laws noted that opportunities for electronic interfaces with Group Policyholders are increasing every day, from Marketing and Benefit & Premium Administration, to Claims and Underwriting. While E-Commerce promises to reduce administrative costs, there will be a technological cost and maybe unexpected business risks. Group Underwriters need to take an active role in risk assessment and risk minimization as their companies implement new technologies and new processes.
Bob Patience shared his perspective on "The Battle for the Employer: Who Plays, Who Wins and How?" Much dot com activity is focused on making things cheap and easy for producers and employers. Recent trends we see in the Employee Benefits Marketplace are the commoditization of Employer Paid Benefits, a shrinking of Employer Paid Benefits, and pressure to cut administrative costs and duties. The implications of these trends are reduced margins on Employer Paid Benefits, more reliance on Voluntary and Portable Group Benefits, and pressure on producers to cut costs and improve value. There are many dot com models that harness Internet technology and traditional outsource capabilities in "the Battle for the Employer." Several dot coms focus on the producer battleground, providing new technology to traditional distribution channels or developing new distributors. Others offer Carrier Solutions and Employer/Human Resource Solutions to improve record keeping and reduce paperwork. We are moving toward a marketplace with Individual/Voluntary Products being sold on group paper. This will impact both Group Underwriters and Group Sales Reps, who will be less involved in sales, and become more of a relationship manager or account executive. Bob noted that there is a new foe on the battleground - payroll companies who look like brokers!
Group Life - "Let's Talk Shop"
Kathy Laws from CIGNA and Joe Malone from Munich American Reassurance Company led an open discussion about current issues in Group Life Insurance. In response to GUAA member requests, two "Let's Talk Shop" sessions were held in Chicago. As in previous workshops, most Group Life Underwriters continue to have concerns about the adequacy of current Group Life and AD&D premium rates, especially when two, three, and even five-year rate guarantees are being requested.
Voluntary Life Insurance for spouses appears to be a growing problem, with poor experience resulting from low premium rates, high Guarantee Issue Limits and no participation requirements. As the Voluntary Group Life Insurance market grows, it is important that we monitor the participation percentage of our employer groups on an ongoing basis. While we may achieve a good participation percentage on the effective date, the enrollment and participation percentage will often decline as the months and years go by. Unless the employer, broker or the insurer make an active and concerted effort to enroll new employees, the employee participation can become a problem. A Group Life Underwriter could consider reducing the length of the Premium Rate Guarantee, increasing the Basic Group Life premium rate, reducing the Guarantee Issue Limit for future new hires or even reducing commissions.
Portability of Voluntary Group Life Insurance continues to be a hot topic of discussion. No two insurers seem to offer Portability on the same basis. The termination date for Ported Policies varies from ages 65 or 70 up to age 85. Some insurers terminate Ported Policies when the employer terminates the underlying Group Life Insurance Policy. When this happens, the new insurer is frequently asked to assume and match the prior carrier's Ported Policies, pricing and administration. Portability of Basic Group Life Insurance is now available through some carriers.
Despite technology improvements and faster communication, Group Sales Representatives, Brokers and Consultants do not seem to be doing a better job of screening and presenting New Business Prospects these days. New "green" brokers seem to be a common complaint. We still have problems obtaining census data and experience information. With the number of startup firms, company mergers and divestitures, the quality of data is actually getting worse, rather than better.
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