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  • September 2021
  • 5 minutes

Closing the Deal: A Mystery for Group Insurance Close Ratios in Two Graphs

  • Christina (Tina) Haertzen
  • Nick Morison
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economy roller coaster
In Brief

A new RGA survey of 15 major group life and health insurers suggests quote volumes have been defying expectations for at least a year before the outbreak of COVID-19. Explore the reasons for this rollercoaster with RGA. 

It’s a counterintuitive finding at a time when so many missed targets have been pinned to pandemic-linked disruptions. So, what is driving the mismatch?

First fielded in 2016, the RGA Group Insurance Close Ratio Survey asks group insurers to share volume and sales expectations and results across traditional and voluntary product lines. Group sales leave plenty of room for optimism: Close ratios measure the effectiveness of sales activities, and this all-important metric met or exceeded expectations between 2018 and 2020. Ranging between 9% and 13%, close ratios rose overall from the first survey results in 2016.

Smaller carriers with Group Life premiums lower than $500 million had the best performance, with the largest proportion of insurers reporting close ratios performed “above expectations” across all group products. Voluntary, or add-on group coverages, also showed strength across all product lines, including higher persistency in 2020 than previous years.

And yet even as reality still appeared sunny, expectations grew clouded. Insurers' advance estimates for quote volumes for traditional group products fell precipitously in 2020. The numbers of carriers reporting that traditional group life quote volumes met or exceeded expectations tumbled 45 percentage points in the space of a single year, and group long-term and short-term disability carriers reported underperformance that began in early 2019 – long before the outbreak of COVID-19 – and bottomed out in 2020. Even more surprisingly, expectations began a modest rebound in 2021 even as the pandemic ground on through the year.

The story in two graphs

Traditional Group Products
Percentage of respondents who estimated they "Met" or were "Above" Expectations for Quote Volumes

Voluntary Group Products
Percentage of respondents who estimated they "Met" or were "Above" Expectations for Quote Volumes 

While the 2016 survey addressed only traditional group products, the 2021 survey added voluntary group products. Volumes for these voluntary elections proved more resilient than traditional group coverages.  These products also underperformed expectations, but the effect was much more modest, and the rebound in expectations was sharper.

So, what can account for this roller coaster? Potential explanations include:

  • Rate guarantees lengthening. Quote volume expectations may be declining simply because, with longer rate guarantees, fewer cases are nearing the end of a rate-guarantee period and going on the market in any given year.
  • Natural cycles. Groups tend to reach the end of their rate guarantee periods in cycles, and there are some years when quote volumes are abnormally high and others when proposals are lower than average.
  • Broker consolidation. A spate of merger and acquisition activity has reduced the number of brokerage firms, and this reduced competition may have consequences. Fewer brokers may be leading to fewer attempts to take Broker of Record (BoR) status from another player. In fact, BoR competition is often responsible for “off-cycle” quotes during which a group goes to market in the middle of a rate guarantee period. A decline in broker competition, in turn, could be fuelling reduced quote volume expectations.

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Meet the Authors & Experts

Tina Haertzen
Christina (Tina) Haertzen
Executive Director, Underwriting, U.S. Group Reinsurance
Nick Morison
Nick Morison
Senior Marketing Underwriter Consultant, Life, Accident and Disability Reinsurance, U.S. Group Reinsurance