Small employers dropping life insurance
Nearly one in four small employers are no longer offering life insurance — often considered the bedrock of the benefits package, along with major medical — to their employees, according to new LIMRA research.
The drop in coverage is particularly pronounced for employers with 10 to 19 employees (37%) and employers with 20 to 99 employees (30%). Nearly one in five (19%) employers with 100 to 999 employees no longer offer life insurance as well, according to LIMRA.
There are a number of reasons for the decline, experts say, including lack of product awareness and shifting priorities among younger employees.
“The old adage goes: Life insurance has to be sold, it’s not bought,” says Tom Wamberg, CEO of Wamberg Genomic Advisors and former president of the Association for Advanced Life Underwriting. “As the world [and benefits enrollment] becomes digital, the internet can’t reach out.”
Life insurance that’s voluntary and not employer paid is a hard sell to the generations entering the workforce, especially when they have student loans and credit card debt to attend to first.
“Nobody thinks they’re going to die,” Wamberg says. “How do you get to the millennials? What product really appeals to them? Nobody has figured it out.”
Additionally, employers that don’t offer life insurance tend not to do so because they’re unaware that the cost is modest, says Bob Patience, vice president of New York Life.
“Oftentimes it comes down to a financial decision,” he says. “You can’t offer everything that you would want.”
Though life insurance companies are seeing the dip in employer-paid coverage in the small markets, some are trying to reverse the decline by taking a more personalized approach to selling the benefit.
New York Life, which sells individual insurance in all 50 states, along with group insurance and short- and long-term disability, says it has a unique distribution system to reach out to what it calls “the great unadvised.”
“Our model is very different. We believe there is significant value in that one-on-one discussion with the agent and the individual,” Patience says.
The company has about 12,000 agents to talk to employers and employees about broader financial issues and explain the importance of life insurance.
Among American households without benefit of group or individual life insurance, three-quarters say they would have immediate or near-immediate trouble paying for basic living expenses if the primary wage earner died, according to LIMRA’s research. The number drops to about half for those households with group life insurance coverage.
LIMRA also found that despite a tightened labor market and improved economy, most employers are sticking to a lean strategy when it comes to benefits.
LIMRA found that, on average, employers offered seven benefits to their employees in 2017, down from eight benefits in 2014. In addition, the research found, only one in 10 employers who currently offer insurance benefits plan to add a benefit in the next 18 months.