Cigna 2013 Annual Report Download - page 42

PART I
ITEM 1. Business
and groups in the National, Middle Market and Select segments. In
Other Products and Services
marketing these products, we primarily sell through insurance brokers
We also offer personal accident insurance coverage, consisting and consultants and employ a direct sales force. As of December 31,
primarily of accidental death and dismemberment and travel accident 2013, the field sales force for the products and services of this segment
insurance to employers. Group accident insurance may be consisted of approximately 230 sales professionals in 27 office
employer-paid or employee-paid. In addition, we offer specialty locations.
insurance services that consist primarily of disability and life, accident,
and hospital indemnity products to professional or trade associations
Competition
and financial institutions.
The principal competitive factors that affect the Group Disability and
We also provide a number of voluntary products that are typically paid
Life segment are underwriting and pricing, the quality and
by the employee and offered at the employer’s worksite. Our plans
effectiveness of claims management, relative operating efficiency,
provide employers with flexible enrollment options, list billing,
investment and risk management, distribution methodologies and
medical underwriting, and individual record keeping. These offerings
producer relations, the breadth and variety of products and services
are designed so that employers will have a complete and simple way to
offered, and the quality of customer service. For certain products with
manage their benefits, including personalized enrollment
longer-term liabilities, such as group long-term disability insurance,
communication and administration of the benefits program. In the
the financial strength of the insurer, as indicated by ratings issued by
last year, we have brought to market two new voluntary offerings –
nationally recognized rating agencies, also is a competitive factor.
accidental injury insurance and critical illness coverage. Both these
offerings provide additional dollar payouts to employees for accidental The principal competitors of our group disability, life and accident
issues or more serious illnesses. businesses are other large and regional insurance companies that
market and distribute these or similar types of products. As of
December 31, 2013, we are one of the top five providers of group
Pricing and Reinsurance
disability, life and accident insurance in the United States, based on
Premiums and fees charged for disability and term life insurance premiums.
products are usually established in advance of the policy period and
are generally guaranteed for one to three years and selectively
Industry Developments
guaranteed for up to five years; policies are generally subject to
termination by the policyholder or by the insurance company Employers are expressing a growing interest in employee wellness,
annually. Premium rates reflect assumptions about future claims, absence management and productivity and likewise are recognizing a
expenses, credit risk, investment returns and profit margins. These strong link between employee health, productivity and their
assumptions may be based in whole or in part on prior experience of profitability. As this interest grows, we believe our healthy lifestyle and
the account or on a pool of accounts, depending on the group size and return-to-work programs and integrated family medical leave,
the statistical credibility of the experience that varies by product. disability and health care programs position us to deliver integrated
solutions for employers and employees. We also believe that our
Premiums for group universal life insurance products consist of
strong disability management portfolio and fully integrated programs
mortality and administrative charges assessed against the
provide employers and employees tools to improve health status. This
policyholder’s fund balance. Interest credited and mortality charges
focus on managing the employee’s total absence enables us to increase
for group universal life may be adjusted prospectively to reflect
the number and likelihood of interventions and minimize disabling
expected interest and mortality experience. Mortality charges are
events.
subject to guaranteed maximum rates stated in the policy.
The group insurance market remains highly competitive as the rising
The effectiveness of return to work programs and morbidity levels will
cost of providing medical coverage to employees has forced companies
impact the profitability of disability insurance products. Our previous
to re-evaluate their overall employee benefit spending, resulting in
claim experience and industry data indicate a correlation between
lower volumes of group disability and life insurance business and
disability claim incidence levels and economic conditions, with
more competitive pricing. Demographic shifts have further driven
submitted claims rising under adverse economic conditions, although
demand for products and services that are sufficiently flexible to meet
this impact is not clear. For life insurance products, the degree to
the evolving needs of employers and employees who want innovative,
which future experience deviates from mortality and expense
cost-effective solutions to their insurance needs. Employers continue
assumptions also affects profitability.
to shift towards greater employee participatory coverage and voluntary
To reduce our exposure to large individual and catastrophic losses purchases. With our broad suite of voluntary offerings and continued
under group life, disability and accidental death policies, we purchase focus on developing additional voluntary products and service
reinsurance from unaffiliated reinsurers. capabilities, we believe we are well positioned to meet the needs of
both employers and employees as the market shifts to become more
retail-focused.
Markets and Distribution
We market our group disability and life insurance products and
services to employers, employees, professional and other associations
10 CIGNA CORPORATION - 2013 Form 10-K