In the voluntary market, conservation takes many forms. We thinkabout keeping our current accounts, protecting them by sellingmultiple lines of business in each, and even reclaiming accountsthat have gone dormant. But one of the least appreciated forms isconversion: the percentage of employee-customers who come off oflist bill who successfully keep their coverage by moving to anotherpayment mechanism.

Five percent (with 10 percent being unusually good) is a commonconversion rate among voluntary carriers. Yet one carrier hasreached a peak of 28 percent and routinely reached 25 percent.Carriers already conserve many of the worst risks on theirbooks—those are the 5 percent most likely to initiate porting,converting, or simply keeping their individual voluntary product ona direct bill or ACH, or credit card payment basis.

Raising the conversion rate improves the converted pool and someanalyses have shown the pool normalizing as soon as 15 percent.While strong conversion rates are good for the carrier, they'reimportant for you, too. Imagine a 500-life account with 50 percentparticipation across all employee groups and 20 percent annualturnover. One hundred employees leave each year, 50 of whom areowners of voluntary coverage.

If 5 percent convert or port, we conserve three customers andlose 47 per year. Every year. If we enroll 50 percent of the newhires, we have spent all of that time and effort on enrolling justto stay even. If we think of the new hires as our growth, anddecide we need to replace the back door loss through new accountsales, we need to write a new 94-life voluntary account every year(at 50 percent participation) just to replace the back door loss onthat first account.

Now, multiply that by your entire book of business and you findthat many brokers spend most (or all) of the year just working tostay even. And this assumes that we get 50 percent participation ofnew hires the first year and every year thereafter. Or seen anotherway, at a 5 percent conversion rate, if the above was true for you,10 percent of your entire voluntary book would be at risk eachyear, with only .5 percent converting.

If you increased your rate to 25 percent, you'd have 2.5 percentconverting. Preventing the loss of 2 percent of your entire book ofbusiness every year is a worthy goal. This running to stay evenisn't shocking. What astounding is we tend to do so little aboutthe attrition. Brokers place a value on the ability of employees toretain coverage after separation, products that offer portability,etc. But most of us do very little to encourage conversion.

Rather than retain the business, we put all of our efforts intothe next new sale. “I didn't know I could continue the coverage”and “I didn't think about it at the time” are not acceptableresponses when customers are asked why they didn't keep theirvoluntary coverage.

We accept that customer-employees needed, wanted, and valued thecoverage when they purchased it. Then don't we have an obligationto help them understand their conversion rights? High conversionrates are good for the carrier, good for the customer, and good forus. Let's look at the conversion programs our carriers offer anddemand better.

Gil Lowerre can be reached at (860) 676-9633 or [email protected].Bonnie Brazzell can be reached at (803) 738-1236 or [email protected].