For the first time ever, more Americans are covered by employment-based life insurance than by individual life insurance, according to the LIMRA study, “Employment-Based Life Insurance Ownership Trends (2017).”
Currently, 108 million Americans have life insurance coverage through their workplace, compared with 102 million covered by individual life insurance, LIMRA reports. Over the past 50 years, the number of households covered by employment-based life has increased by 68 percent, to 57 million, while the number of people covered has nearly doubled, from 55 million to 108 million.
The number of Americans covered by employment-based life insurance will continue to grow gradually, as life insurance remains one of most important workplace benefits, Anita Potter, the study’s co-author and LIMRA’s assistant vice president, workplace benefits, tells Benefits Pro. Indeed, 73 percent of the 4,167 households surveyed by LIMRA believe employers should be offering life insurance to employees.
“Convenience is one of the major reasons people like buying coverage in the workplace,” Potter says. “They have guaranteed issue with no underwriting, and it’s just something they’ve become accustomed to — especially if they started out in the workforce being able to get it at the workplace.”
However, growth in market penetration will be limited by population and labor force dynamics, she says.
“There are more baby boomers retiring, and so there will be fewer people in the labor force overall,” Potter says. “We’re also seeing an increase in contingent and 1099 workers, who historically have not been offered benefits.”
The rate for employment-based life insurance peaked at 54 percent of American households back in 1984, according to the study. Since that time, household market penetration has gradually declined, and now equals 46 percent. At the “person-level” — adults and children — market penetration increased steadily through 2004, when it peaked at 37 percent. The person-level ownership rate dropped by 5 percent in 2010, but has since rebounded slightly to 34 percent.
While Americans overwhelmingly believe employers should be required to make life insurance coverage available, the percentage of employers offering coverage is gradually declining, according to the study. On top of that, once employees make a benefit selection, the majority rarely revisit their decision, while almost half (44 percent) never change their life coverage.
However, Potter is encouraged by the increased use of technology to aid employees in coverage matters, especially during the enrollment process.
“More brokers and employers are using electronic formats to enroll, and we see that as helping employees get life insurance coverage — especially for smaller employers,” she says.
Emerging decision-support tools should further help educate both employers and employees about the benefits being offered to them, Potter says.