Steep declines have been attributed to lack of product awareness and changing employee priorities
Traditionally considered a mainstay feature in employee benefits packages, life insurance is losing its appeal as nearly one in four small employers have stopped offering it to their workers.
That’s according to new LIMRA research, which found particularly steep declines in coverage among employers with 10 to 19 employees (37%) and those with 20 to 99 employees (30%). The study also found 19% of employers with 100 to 999 employees are no longer offering life insurance, reported Employee Benefit News.
The falling coverage rates have been chalked up to a variety of factors, including lack of product awareness and a shift in attitudes among younger members of the workforce.
“The old adage goes: Life insurance has to be sold, it’s not bought,” said Tom Wamberg, CEO of Wamberg Genomic Advisors and former president of the Association for Advanced Life Underwriting in the US. “As the world [and benefits enrollment] becomes digital, the internet can’t reach out.”
Wamberg noted that insurance that isn’t employer-paid or provided automatically is a harder sell to incoming members of the workforce, among whom student loans and credit card debt take precedence over what they perceive as a remote risk of death.
LIMRA also found that a tightened labour market and improved economy in the US have not swayed most employers from adopting a lean benefits strategy. Employers offered their employers seven benefits on average in 2017, down from eight in 2014. Other research from the organization indicates only one in 10 employers currently offering insurance benefits plan to add one in the next 18 months.
According to Bob Patience, vice president of New York Life, employers who don’t offer life insurance tend to be unaware of the product’s modest cost. “Oftentimes it comes down to a financial decision,” he said. “You can’t offer everything that you would want.”
New York Life is one of several life insurance providers in the US that, upon seeing the drop in employer-paid coverage in the small markets, have adopted a more personalized selling approach. The bank employs around 12,000 agents to speak with employers and employees — a group the company calls “the great unadvised” — about broader financial issues as well as the importance of life insurance.
“We believe there is significant value in that one-on-one discussion with the agent and the individual,” Patience told Employee Benefit News.
LIMRA’s research suggests an urgent need for the service: three quarters of American households without the benefit of group or individual life insurance said they would have immediate or near-immediate trouble paying for basic living expenses if the primary wage earner died. That’s compared to around half of those households that have group life insurance coverage to fall back on.