Insurers, particularly those offering dental and other specialty benefits, are facing increased competition when selling plans to small and mid-sized U.S. employers. Amy Friedrich, president of Principal Financial’s benefits and protection business, discussed these market shifts, highlighting how dental coverage has become the focal point of growing competitive pressures.
According to Friedrich, the competition for specialty benefits—such as group life, vision, disability, and dental coverage—intensified significantly in the latter half of 2024. She anticipates this trend will continue into 2025, with dental benefits seeing the most competitive pressure. In response, Principal Financial has raised prices on dental plans and become stricter with underwriting, aiming to adjust to rising utilization of dental benefits.
While this approach is intended to maintain long-term profitability, it has affected new dental sales. Principal reported a drop in dental plan sales, falling from $35 million in the fourth quarter of 2023 to $31 million in the same period of 2024. Friedrich acknowledged that these weaker sales could also hurt other specialty benefits sales, as dental coverage is often bundled with other benefits like life and vision insurance.
However, she stressed that maintaining disciplined underwriting, despite the short-term sales dip, is key to ensuring stable and profitable growth. “It’s better to accept a temporary dip in sales than to underprice coverage,” she said, emphasizing the importance of predictable renewals for long-term success.
Principal’s overall earnings showed improvements, with net income for Q4 2024 reaching $902 million on $4.1 billion in revenue, compared to a net loss of $839 million in the same quarter of 2023. The company’s specialty benefits unit, which includes dental plans, posted a 2% rise in operating earnings to $448 million.
Principal is not alone in facing challenges in the dental benefits market. Aflac also reported a 33% drop in dental benefits sales for the latest quarter, attributing the decline to issues with a system rollout. Both companies are navigating the balance between competitive pricing and sustainable profitability in the specialty benefits sector.
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