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Your bucket is leaking!

Confidence in the voluntary industry rebounds...is the index predictive?

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Fall 2009/ No. 81

Confidence in the voluntary industry rebounds . . . is the index predictive?

The latest results of Eastbridge Consulting Group’s Voluntary Industry Confidence Index survey show that confidence in the future of the voluntary industry has rebounded. The overall Confidence Index increased to 92.9, up from 88.8 at the end of 2008. That’s good news for the industry. But even more interesting, is looking at the potential of the index in predicting trends.

The index, to some degree, has been following the overall economy. The biggest dip in the index was at year-end 2007, which was in line with the “official” start of the recession. However, the index actually started showing signs that the outlook for voluntary was slowing even earlier. In July of 2007, we saw the first decline over the prior survey. At the time, the number went back to something that was in line with the “historical” norms, so we didn’t think too much about it. But, the index continued to trend downward in 2008, reaching a low at the end of the year. In this most recent survey, we see an improving voluntary confidence index. Shortly after this survey, we started hearing the feds say that the recession is easing. The following graph shows the historical patterns and the recession.

So, we wonder, is the Voluntary Industry Confidence Index a predictor of overall trends in the industry and economy?

The index is calculated using three key expectation measures about the voluntary industry:

• Sales growth
• Profitability
• Employee enthusiasm about voluntary products

Clearly, these measures are impacted by what is happening in the economy and inside businesses. Brokers, key participants in the index survey, tend to be on the frontlines. We won’t know if the index is a predictor or a “leading indicator” of future trends for a while, but we are certainly going to watch it carefully.