Some dental insurance issuers might be attracting employer customers with first-year prices that are too low to last.
Amy Friedrich, president of the Benefits & Protection business at Principal Financial Group, talked about dental plan competition earlier this week during a conference call with securities analysts.
“We are definitely seeing new-sales rates that are competitive,” Friedrich said.
But Friedrich said she is starting to see some “easing begin to happen on the renewals.”
In the dental insurance market, “if you didn’t get the pricing quite right, and you hadn’t built in trend or inflation at the levels that you needed to, you see that pop up in your results pretty quickly,” Friedrich said.
Mispricing translates into big renewal rate increases 12 to 18 months after the initial sale, Friedrich said.
What it means: Employers that are feeling great about the rates they’re paying for dental plans today may need to prepare for the arrival of big rate increases in 2026 or 2027.
The dental plan strategy: Dental insurance is important to the companies that write it because it’s often part of a bundle of products that also includes life insurance, disability insurance and their benefits products, Friedrich said
“Our perspective on dental has been that, because our renewal and persistency strategy is so important, we want to deliver manageable, predictable renewals for that small- to medium-sized customer base that has really sharp focus on cash flow,” Friedrich said. “The best way to deliver that renewal rate at a rate that they can withstand is to price it right upfront.”
The earnings: Principal held the conference call to go over earnings for the second quarter, which ended June 30.
The company is reporting $433 million in net income for the latest quarter on $3.7 billion in revenue, compared with $357 million in net income on $4.3 billion in revenue for the second quarter of 2024.
New sales of dental insurance and other specialty benefits fell to $73 million, from $78 million, but overall specialty benefits revenue increased to $840 million, from $813 million.