5 Things To Know About the Medicare Supplement Market – And Why the Future Looks Bright

July 17, 2014| Von Marcy Updike | Medicare Supplement | English

Region: U.S.

Once again, Gen Re has captured the highlights of the Medicare Supplement insurance marketplace through our U.S. Medicare Supplement Market Survey. This exclusive report gives participating Medicare Supplement insurance companies valuable insights into market trends by examining sales and in-force results, claims trend, underwriting practices, lapse rates and application metrics.

Recently we published the 2013/2014 survey. While the full report is available only to the 72 companies represented in the survey, we do provide a high-level summary for the entire market. What’s obvious when looking at the following five takeaways is that these are interesting times for the Medicare Supplement market - and there is plenty of reason to expect future growth in both the amount of business written and the number of potential customers.

  1. Sales premium growth for participants was nearly flat at 1.1% from 2012 to 2013, taking total sales close to $2 billion. While that may seem low, the 2013 increase is actually building on a 17% growth in 2012, so it’s a result that would be considered strong no matter what the industry.
  2. Plan F was the most dominant plan in 2013 - it represented 63% of premium and 60% of lives sold (see below for premium and lives results for all plan types).

  3. 2013 Sales Premium and Lives by Plan Type

  4. In-force results were more consistent. On an aggregate basis, companies reported just over $15.7 billion of in-force premium for 2013, a 6.1% increase over 2012. The growth rate improves to 7.3% when you exclude the 11 companies that were not actively selling in 2013.
  5. When it comes to claims trend, Select Plans averaged the lowest at 2.1%; the highest average claims trend came from 1992 Standardized Plans at 4.4%. The claims trend in 2014 is expected to be between 5.2% and 5.7%.
  6. Policies lapsed at an average rate of 11.8% in 2013. Meanwhile participating companies’ profit margins have proven strong, claims trend has been stable and, consequently, the average rate increase filed has declined.

The overall positive results, as indicated in our survey, have created a lot of interest for new entrants to this market. However, success for newcomers isn’t necessarily guaranteed.

Medicare Supplement insurance has quickly become a commodity product with price driving some buying behavior. The difference between number one in the market and number ten is extremely small, so companies must work harder to differentiate themselves.

There is also some concern regarding healthcare reform and how this may impact the Medicare system, and more importantly Medicare Supplement insurance. Not surprisingly, participants in our survey were rather negative on the healthcare issue since this unknown factor could upset the business on many different levels.

While there are certainly challenges, profits are up and rate increases are manageable - positive signs for any insurance market. As we look to the future, insurance companies appear to be excited about the coming demographic shift in the population. According to a 2010 report by the Pew Research Center, roughly 10,000 Baby Boomers will turn 65 every day for the next 19 years. The senior market is set to grow significantly, making the Medicare Supplement market attractive to current participants as well as new entrants.

As a leader in Medicare Supplement reinsurance, Gen Re remains committed to this business. If you have questions about our survey or want to learn more about our research offerings, get in touch.

For more, read our 2013/2014 U.S. Medicare Supplement Market Survey Summary.


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