Life insurance products continue to be popular, particularly ascarriers introduce new types of riders and other product featuresto attract more customers.

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Experts describe some of the latest trends in life insurance—andwhat's driving its growth—including the expansion of value-addedservices and the evolving distribution of coverages on theexchanges.

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Term, indexed universal life

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Term insurance has been a fairly stable product, as it's stillthe cheapest form of life insurance, says Carl Friedrich,principal, consulting actuary at Milliman Inc. in Chicago.

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According to LIMRA, term life new annualized premiums fell 4percent in the first quarter of 2014, and two-thirds of termwriters reported negative growth for the quarter compared to prioryear. However, this is in relation to significant growth in 2013after several carriers reintroduced traditional term products toreplace term universal life products.

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Indexed universal life products are increasing, as applicantsseek to secure a portion of equity market returns, but with somefloors to protect against adverse performance, Friedrich says.

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“The illustrated rates tend to be 6 percent to 8 percent, whichare pretty attractive compared to rates on universal life productsand dividends on whole life products,” he says.

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Total indexed universal life sales, as a percent of totaluniversal life and IUL sales combined, increased from 14 percent in2010 to 31 percent during the first nine months of 2013, accordingto Milliman's study, “Universal Life and Indexed Universal LifeIssues.”

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Many carriers have discounted and placed less emphasis onuniversal life secondary guarantee products in the last year or so,mostly driven by recent reserve requirements, adds Milliman's SusanSaip, consulting actuary. In the survey, five of the 26participants reported discontinued sales of ULSG products.

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Within the voluntary market, life insurance sales rose 22percent in 2013, to $1.9 billion, according to EastbridgeConsulting Group. It was the fifth consecutive year that lifeinsurance led voluntary benefits sales, comprising 28 percent ofall voluntary benefits.

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Profitability on term, universal life and whole life productshas been impacted by continued low interest rates, says Joe Kenny,product performance director at Mutual of Omaha Insurance Co. inOmaha, Nebraska.

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“There has been a renewed interest from customers in guarantees,especially for those who lived through the really high interestrates in the 1980s and early 1990s, and are now being asked to putmore money into their universal life policy to keep it fromlapsing,” Kenny says.

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Universal life with secondary guarantees is still an importantproduct, as the guarantee is there regardless of what happens withinterest rates, “which works well for customers who just want toknow what they need to pay so they don't have to worry about theirfuture premiums,” Kenny says.

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New offerings

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In April, MetLife Inc. launched “Voluntary Retiree Life” in partto help large employers save money in their retiree benefitspackages, says Stephen Pontecorvo, vice president, group lifeproducts at MetLife Inc. in New York. For a $25,000 benefit,policyholders get a guaranteed issue, but for larger amounts of$75,000 and $150,000, Cigna requires medical evidence.

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Employees can get this product generally within 60 days ofretirement, and the death benefit reduces annually until theemployee reaches 80, at which point the coverage remains level andin force until age 100.

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“Many people in their 60s might still have a dependent or arestill paying their mortgage, but by the age of 80, most do not havethose types of expenses,” Pontecorvo says.

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In 2015, Guardian expects to launch a worksite permanent lifeproduct that acts as a savings vehicle for college or retirement inaddition to a death benefit, a product common in the individualmarket, says the company's Andrew Hutchison, assistant vicepresident, group products.

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For policyholders whose group basic and voluntary term policiesare expiring, Guardian also offers conversion privileges to wholelife plans, without having to go through underwriting again.

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At Cigna Corp., for customers who have access to both Cigna'sterm life insurance and health plans, the carrier can refer termlife customers with chronic conditions to the carrier's “conditionsmanagement” programs, says Richard Kappers, director of marketing,Cigna term life and AD&D insurance in Philadelphia.

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As part of the regular underwriting process, insurers collectmedical information of those who apply for coverage above theguaranteed issue level, Kappers says. Cigna then analyzes theinformation to identify individuals with existing or potentialhealth risks, where a suitable conditions management program canhelp.

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Riders

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Carriers are looking for ways to differentiate products in acompetitive market, including providing a range of living benefitson their life products in the form of riders, Milliman's Friedrichsays.

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Particularly popular are chronic illness riders and long-termcare riders, which accelerate the payment of death benefits as aliving benefit when certain triggers in the policy are met, hesays. Chronic illness is typically defined as when an individual isnot able to perform two of six activities of daily living or hascognitive impairment, and many of these riders require that thecondition be permanent. Triggers for long-term care riders are lessrestrictive in that they do not contain the expectation ofpermanence clause.

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Colonial Life & Accident Insurance Co. offers a long-termcare rider on its permanent cash-value whole life and universallife policies, says Steven Johnson, vice president of products inColumbia, South Carolina.

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“This is becoming increasingly important, as the average cost tohome health care is $75,000 a year, and is expected to increase,”Johnson says.

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These riders are also popular because carriers are moving awayfrom costly stand-alone long-term care insurance, he says. Therestoration of the benefits rider is often packaged with long-termcare, which restores the full face amount of the policy. Otherriders include spouse term riders and children's term riders.

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Long-term care riders typically are available for an extra cost,whereas chronic illness riders typically are no cost to thecustomer at issue, says Mutual of Omaha's Kenny. If the personbecomes chronically ill, he is allowed to accelerate a portion ofthe face amount, with a charge taken out on the back end, reducingthe amount the insured will receive.

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Moreover, long-term care riders typically act as areimbursement, Kenny says. If a person's monthly benefit is $5,000but she only spends $4,000 on long-term care expenses, then theremaining $1,000 will roll over to the next month.

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“One of the advantages of chronic illness riders is that theperson is not usually required to use the proceeds to coverlong-term care expenses, so the person has the flexibility to coverother expenses,” he says.

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Critical illness riders are a variation that is not quite aspopular, Kenny says. A person has to contract one of several listedconditions, such as stroke or cancer, for the rider benefit to betriggered.

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Two popular riders at Guardian Life Insurance Co. of America arewaivers of premiums if policyholders become disabled, and theaccelerated death rider if policyholders become terminally ill andwill not live more than 12 to 18 months, Hutchison says. Guardian's“Life Assist” rider can be activated if policyholders are unable toperform two or more activities of daily living, in which they willreceive 1 percent of life insurance benefits, up to $2,000 a monthfor up to 100 months.

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“This is an unique feature that Guardian offers in themarketplace, and it's really getting some traction,” Hutchisonsays.

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The most popular term life rider at Cigna is the accelerateddeath benefit rider, Kappers says. Customers can use funds from aterminal illness claim to cover the cost of medical treatment, seekalternative treatment, or use it for other personal reasons such asa last vacation with family members.

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Riders are more popular in Metlife's retail business, but thecarrier does offer some riders on the group side for permanentgroup universal and universal variable life insurance, including anadded accidental death and dismemberment to its GVUL coverage forexecutives within the employer's group, as part of a package ofbenefits, Pontecorvo says.

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MassMutual Financial Group offers just waiver of premium,accidental death and dismemberment, spouse and child term riders,with all but spouse and child being elected by plan sponsors, saysJoe Micoletti, sales consultant in Enfield, Conn.

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“We've made the decision not to offer more complicated riderssuch as long-term care for group and worksite plans in the nearfuture,” Micoletti says. “It can be difficult to build morecomplicated riders on systems and other technology. Those riderscan also be confusing when presenting them to plan sponsors and/orparticipants enrolling for coverage.”

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Exchanges

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Growth of voluntary life products in the group market space hasbeen expedited by the use of exchanges, an outgrowth of employersdriving more decisions into the hands of their employees,Guardian's Hutchison says.

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“Historically, employers selected the types of coverage, but nowthey are pushing more options out to employees, giving them acertain subsidy for dental, disability and life, and letting themdecide how they want to allocate their dollars,” he says.

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MetLife offers voluntary benefits on certain exchanges, but forgroup life, the employer chooses one carrier, Pontecorvo says. Themenu of coverage is comparable to traditional voluntary menus thatare offered at worksites, but the difference for employers is thatthe exchange handles much of the administration of the benefitsthat would ordinarily fall to the employer.

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Cigna has a private exchange that also distributes life,accident and disability, Kappers says. While employers in groupplans choose which riders to extend to their employees, theincreasing use of exchanges will likely result in more individualchoice on coverage, including riders.

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Right now, MassMutual does not offer its products on anexchange, “but it is something to keep an eye on as those evolve,”Micoletti says.

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Value-added services

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Many of the carriers offer value-added services to lifepolicyholders, including will preparation and estate resolutionservices, grief counseling, identity theft consulting and access toemployee assistance programs.

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“As individuals make more insurance purchasing decisions,value-added services become more important,” Cigna's Kapperssays.

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Katie Kuehner-Hebert

Katie Kuehner-Hebert is a freelance writer based in Running Springs, Calif. She has more than three decades of journalism experience, with particular expertise in employee benefits and other human resource topics.