New Eastbridge Frontline Report Investigates Increased Takeover Cases in the Voluntary Market

AVON, CONNECTICUT, USA (August 15, 2006)-Carriers agree that takeover business is on the rise in the voluntary market, especially with the influx of group products and group brokers. And as more employers look for the �best� benefits at the �best� price, brokers will need to shop around for benefits-or be replaced by someone who will.

These are just a few of the opinions shared by worksite carriers that participated in Eastbridge�s newest Frontline report, Takeover Business in the Worksite/Voluntary Market (2006). The report gathered data from 20 carriers that accept takeover business on voluntary products. Carriers were asked for their opinions on the current status of the voluntary takeover environment. This new report updates a similar Eastbridge report conducted in 2004.

�Not surprisingly, we found that dealing with takeover business is just a �fact of life� in today�s world,� says Gil Lowerre, president of Eastbridge. �While many carriers don�t track the percentage of new business that is takeover business, those that do report as much as 85 percent of their new business is takeover,� adds Lowerre. �We found that the amount of takeover business varies widely by carrier; however, group carriers seem to be more impacted than individual carriers,� says Bonnie Brazzell, Eastbridge vice president. �The average percentage of new business that group carriers believe is takeover business was around 40-50 percent, but for individual carriers it varied more from a low of one-half a percent to 30 percent,� explains Brazzell. The study found that employee benefit brokers and cases with over 200 lives are most likely to involve takeovers.

�Carriers feel that the percentage of takeover business is going to increase in the future,� says Lowerre. Because of this carriers are trying to make sure that their guidelines for handling takeovers are well thought out and help them control the potential risk of too many takeovers. �We have seen carriers doing more to ensure that insureds and brokers are not able to take advantage of a takeover situation,� adds Brazzell. Some of the safeguards that are common include:

  • Home office approval of the case before it can be written, at least for some case sizes.

  • Matching the prior plan design and only allowing coverage changes with evidence of insurability.

  • Requiring evidence of the prior plan.

  • Requiring loss ratio and premium history on takeover cases of 200 or more lives.

�Carriers are also beginning to reduce commissions on takeover cases,� say Lowerre. �We did not see as much of this when we conducted our 2004 study on takeovers,� adds Brazzell. The type and amount of reduction varied significantly from carrier to carrier but, according to Lowerre, this is a trend that is expected to continue.

The report, Takeover Business in the Worksite/Voluntary Market (2006), also explores carrier underwriting guidelines on takeovers, the enrollment methodologies used, and company experience with this business. Eastbridge�s Insight and Information Partner companies receive the report free of charge. For more information, contact Eastbridge at [email protected] or call (860) 676-9633.

About Eastbridge Consulting Group, Inc.

Eastbridge Consulting Group, Inc. is a marketing advisory firm serving insurance and financial services organizations in the United States and Canada.