The volume may be down, but the song is still playing. The number of voluntary benefits carriers reporting an increase in takeover business has dropped a bit in the past few years, according to Eastbridge's recent "Takeovers and the Voluntary Market" Spotlight™ report. But significantly more carriers say the volume of takeovers is holding steady. And the number citing a decrease? One.
More evidence this tune still carries a strong beat: 90% of carriers in our survey expect takeovers to increase or significantly increase in the next 3 to 5 years — and none think it'll decrease.
Whether or not takeovers are part of your business strategy for voluntary benefits, you're going to encounter them. Here are five things you should know to succeed in the takeover environment.
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1. Some products are much more vulnerable to — and suitable for — takeovers.
Term life, long-term disability and AD&D insurance have some of the industry's highest takeover rates, according to our study, averaging 85% to 87% this year. Hospital indemnity/supplemental medical insurance is near the other end of the spectrum at 46%. It's important to know the portfolio strengths of your carrier partners and how they match your clients' needs. Takeover rates are lower for supplemental health products, but they're increasing as more group carriers add these products to their portfolios and market demand grows.
2. Takeovers are far, more prevalent in large groups than in smaller firms.
Takeovers are typically more common in larger cases because they usually offer more voluntary benefits and get more broker attention. Smaller employers are more numerous, but fewer have an existing voluntary benefit offering. But don't be surprised if the numbers begin to rise for smaller employers as broker influence continues to move down-market.
3. Most carriers are willing to offer concessions for takeovers.
Nearly all carriers offer guaranteed issue coverage in a takeover to employees not already covered or who are newly eligible, and most also allow employees already enrolled to buy additional coverage up to the guaranteed issue maximum. It's also common for carriers to waive pre-existing condition requirements for employees covered under the previous plan, and most are open to waiving pre-ex for the entire case, although that often comes with higher premiums, a rate load or lower commissions. Understand the practices of your carrier partners to ensure they align with your clients' preferences.
4. Your voluntary carrier partners may have challenges matching benefits and rates with a previous carrier's plan.
Virtually all carriers we surveyed try to match or enhance the benefits in a takeover, but there can be stumbling blocks. Some products — critical illness, hospital indemnity and accident in particular — tend to have a wide range of contracts, plan provisions and benefits that can be difficult to match exactly. Client requests to grandfather issue-age coverage from the prior carrier can cause administrative issues, and requests to enhance benefits without raising rates are problematic from a financial perspective. You can help create a viable match by ensuring the plan design is similar, with corresponding rates.
5. You can make takeovers smoother by understanding the capabilities of your carrier partners and your clients.
Your carrier partners will want as much data as you can provide about your clients' prior coverage, including a census with enrollment details, a prior bill, a certificate of coverage and a copy of the policy. It's also important to understand the administrative limitations of both clients and carriers. In addition, takeover cases often have other considerations from the carrier perspective and it may take longer to quote the business.
Take time to understand the nuances of each takeover opportunity to ensure everyone involved is singing from the same sheet music. That will help create a smooth business transition that sounds sweet to you, your clients and your carrier partners.
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