In 2016, we saw articles from several publications, including the Wall Street Journal and the New York Times, highlighting a trend we are seeing in the life insurance market of increasing premiums. While it was the individual insurance market that often received national media headlines, similar increases are being felt in the employer sponsored group marketplace for both life insurance and disability insurance.
For roughly the past five years, there had been a trend in the life and disability market of downward pressure put on insurance rates paid by group benefit plans. No matter which carrier an employer partnered with on their ancillary benefit plans, and often regardless of the plan design being offered, an employer had the option of evaluating the market and likely finding multiple insurance carriers willing to meet or beat their current life and disability rates.
However, this trend is coming to an end as carriers are facing the reality of interest rates continuing to remain at historically low levels and actuaries attempting to deal with dwindling reserves. As explained in a NY Times article, “companies that sell policies that run for decades… face a twofold challenge: how to fund policies that were sold back when their actuaries couldn’t envision a world of interest rates below 8 percent, and what to sell now, when those same actuaries can’t envision an appreciable rise in rates anytime soon.” Now employers – and individuals – are no longer experiencing a race to the bottom when it comes to their premiums, but are actually seeing increases in their rates as many of the top carriers look to stabilize their finances.
Furthermore, when an employer conducts an RFP in the market, they are not met with multiple carriers looking to buy their business with lower rates, but rather are finding carriers offering pricing that they believe is fair and sustainable. If there are premiums savings being offered, employers should be wary the savings are not due to a tradeoff around poor service or inferior contract provisions.
In this current market environment, employers are encouraged to partner with their benefits consultant to evaluate their carrier on more than just price. They should take into account contract provisions, service, financial stability and claims payment processes or procedures. Saving $.01 on a life or disability rate may not be worth the hassle of not having access to a dedicated service representative, or leaning up the provisions of your disability contract. If you have questions about the current ancillary benefit marketplace or need assistance in evaluating the right plan for your organization, please contact your HCW consultant.