Insurers are working harder to sell dental plans and other benefits to small and midsize U.S. employers.
Amy Friedrich, president of Principal Financial’s benefits and protection business, talked about the shift last week.
Friedrich said competition intensified for all of the products Principal offers through its specialty benefits division, including group life, group vision and group disability coverage, as well as group dental.
“Especially in the second half of 2024, we saw the market get a little more aggressive,” Friedrich said during a conference call with securities analysts. “We think that will continue in 2025. And the product where we’ve probably seen the most competitive pressure is dental.”
Meanwhile, Friedrich said, the plan participants’ are making more use of their dental benefits.
Principal responded by increasing dental coverage prices and getting tougher on dental plan underwriting.
“This has impacted some of the new sales in the back half of 2024, and it will impact, we think, at least the front half of 2025,” Friedrich said.
Principal’s dental plan sales fell to $31 million in the fourth quarter of 2024, from $35 million in the fourth quarter of 2023.
Friedrich warned that weaker dental benefits sales could hurt sales of some other types of benefits products, because dental insurance is usually sold as an important part of a specialty benefits product bundle.
Friedrich said accepting a temporary dip in sales is better than underpricing the coverage.
“Over the long term, disciplined underwriting for all of our products is really critical to building and maintaining profitable growth,” she said. “It’s critical to maintaining stable, predictable renewals, too.”
The earnings: Principal held the conference call to go over results for the fourth quarter with the analysts. The company reported in $902 million net income for the quarter on $4.1 billion in operating revenue, compared with an $839 million net loss on $4.2 billion in operating revenue for the fourth quarter of 2023.
Operating earnings, which exclude the effects of fluctuations in the value of investments and benefits, increased 2%, to $448 million.
The specialty benefits unit, which includes the dental insurance business, generated $147 million in pre-tax operating earnings on $824 million in revenue, up from $119 million in operating earnings on $791 million in revenue in the year-earlier quarter, in spite of a higher level of competition in the dental plan market.
The backdrop: Principal is the second insurer to mention lower dental benefits sales during its latest quarterly earnings call.
Executives from Aflac said their dental benefits sales were 33% lower in the latest quarter than in the fourth quarter of 2023. Aflac attributed its drop in dental benefits sales to problems with a system rollout.