Dental Insurance Market Sees Unsustainable First-Year Pricing and Renewal Rate Pressures

The dental insurance sector is experiencing competitive pricing strategies, with some issuers offering first-year rates that may be unsustainable in the long term, according to Amy Friedrich, president of the Benefits & Protection business at Principal Financial Group. This dynamic is causing a shift toward higher renewal rates 12 to 18 months after initial sales as some insurers adjust pricing to reflect inflation and trend cost accurately.

Employers benefiting from low premiums today could face significant increases in dental plan costs in the upcoming years, particularly around 2026 and 2027. Dental insurance remains a critical component of bundled employee benefits packages, including life and disability coverage, influencing insurer strategies focused on renewal and persistency.

Principal emphasizes the importance of accurate upfront pricing to ensure manageable, predictable renewal rates, especially for small and medium-sized businesses sensitive to cash flow fluctuations. Financial results from Principal's second quarter show a mixed picture: while net income increased to $433 million, revenue declined to $3.7 billion compared to the previous year, and new sales of dental insurance showed a slight decrease. Overall, specialty benefits revenue rose, underscoring the growing importance of these products within the broader insurance market.