In the business world, headwinds are obstacles that prevent or slow down growth: rising costs, supply-chain malfunctions, and yes, pandemics. Tailwinds, on the other hand, are events or conditions that make progress easier and speed up growth: think favorable interest rates, higher employment and vaccines.
But headwinds aren't necessarily negative. In fact, they're sometimes necessary for success. Take the last time you had to fly somewhere for business, for example. As your plane rolled down the runway, your pilot was likely hoping for a headwind, because it creates greater flow of air over the wings and reduces the ground speed needed for takeoff.
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It's an apt metaphor for the effects of the pandemic on the voluntary industry in recent years. The health and economic woes certainly created challenges for the ways brokers and voluntary carriers normally interact with their clients and employees' wallet share. But those headwinds eventually helped the industry take off, as more employees discovered the physical and financial value of voluntary protection, while brokers in some distribution channels found new opportunities to expand their business.
Those are two of the key findings based on Eastbridge's recent "U.S. Voluntary/Worksite Sales Report," which compiles data on the largest number of group and individual carriers in the voluntary industry. Only carriers participating in the report get a copy of the complete findings, but we'll share some of the data behind these conclusions.
Supplemental health coverage is driving voluntary sales growth.
The report shows the voluntary industry continued its post-pandemic recovery last year, following 2021's double-digit surge with another 5.4% increase in 2022. That pushed total new business premium to $8.75 billion, the second-highest level ever for the industry, while in-force premium hit a record high $50.5 billion. Term life still accounts for a dominant share of the market, but the mainstays of life and disability insurance are no longer the primary drivers of voluntary sales growth. Instead, supplemental health products such as accident, critical illness, cancer and hospital indemnity insurance are creating the industry's tailwinds. Double-digit sales increases for critical illness (15%), hospital indemnity (13%), accident (12%) and cancer (10%) appear to indicate employees are moving beyond the basics of life and disability coverage and discovering how these health products can help protect them against unexpected expenses.
Benefit brokers are expanding their share of the voluntary market.
Benefit brokers — those who primarily sell core or employer-funded products but also sell voluntary benefits — beat the industry average growth with a 7% jump in their sales. With total sales exceeding $5.9 billion, this distribution segment continues to far outpace the rest of the field with a 68% market share.
Career agents, who primarily work for a single company selling its products, also saw significant sales growth last year of 7%. The segment's increase to $1.1 billion in total sales, while trailing far behind benefit brokers, was a strong bounce-back from a 4% decline the previous year. Career agents continue to hold the second-highest share of the market at 12%.
The voluntary industry appears to be flying at cruising altitude once again — and signs indicate we'll see continued favorable tailwinds in the coming years.
The annual "U.S. Voluntary/Worksite Sales Report" is the industry's most comprehensive, reliable and current source of data on voluntary/worksite sales and in-force premium. This year's study includes data from 1997 through 2022 and detailed results for 63 carriers. The report is available only to carriers participating in the survey. For more information about participating in next year's survey, contact Eastbridge at [email protected].
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