With persistently low interest rates continuing to dampen profitability, group life/annuity/voluntary benefit insurers are investing in benefit and policy administration systems, customer and agent portals, and easy enrollment capabilities to increase profits, according to “Business and Technology Trends: Group Life/Annuities/Voluntary Benefits,” a report from Novarica.
"Interest in core systems replacement among group writers is at an all-time high," said Chad Hersh, a managing director with Novarica and a co-author of the report. "With a number of suitable vendor packages now available and maturing, we expect to see interest remain high for some time."
According to the report, those insurance sectors in 2012 showed a “narrowing of the decline” in group life sales compared to 2011, though premium growth may be attributed to higher benefits on existing policies.
“Group annuity inflows declined 15.6 percent from 2011 to 2012 according to the DTCC, but firms exchanging their pension liabilities for group annuity contracts may result in a healthier outlook for this line of business. A.M. Best estimates less than 1-percent growth in group annuity direct premiums written between 2011 and 2012,” Novarica said.
In the market overview of the group life/annuity/benefits marketplace, Novarica said sales for voluntary benefits are trending up, as group and voluntary benefits become more attractive and more effort is made in worksite marketing. “A growing number of systems are starting to support everything from enrollment to policy processing for the worksite model,” Novarica said.
According to the report, the group life/annuity/benefits insurance market is characterized by:
The voluntary products market is characterized by:
"In a relatively slow economic growth environment, where employers across many industries continue to face significant expense pressure, carriers are mindful of the investments they should be making now in order to improve their own competitive positioning for the future,” said Rob McIsaac, a principal with Novarica and report co-author.
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