Based on industry trends, Eastbridge coined the term “groupification” more than 15 years ago to describe the underlying direction of the voluntary industry. We wrote about two general concerns with the otherwise positive implications of groupification.
First, it seemed to imply an increasing commoditization of product forms, suggesting increasing price competition and margin pressures. Secondly, we discussed the possibility of increased takeovers.
Back then, individual platform sales were the dominant product. Today, excluding one major carrier, 72 percent of new premium in 2012 came from group products.
But takeovers have grown dramatically, too. Before 2005, takeovers were at such a low level that their impact was negligible. By 2012, they represented 45 percent of all new sales. Many of these cases increase value through improvements in product design and more aggressive pricing. But many others represent the fact that some brokers are using “shopping” as their primary value proposition to their employer clients and may add little or no value. And looking at their individual business patterns, it appears that some of them don’t know how to sell any other way.
On the one hand, takeovers that don’t add value may look like a potential problem (reducing margins) as more carriers work to accommodate and encourage takeovers. On the other, it may represent an opportunity for those brokers to become more adept at needs-based selling and build their book by meeting new needs rather than simply replacing existing plans. This is worth further discussion.