At Mid-Year, Group LTD And STD Premiums Were Up

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U.S. group disability insurers had good luck with increasing enrollment and revenue in the first half of the year despite the softening of the economy.

The 39 carriers that participated in the mid-year disability market survey conducted by John Hewitt & Associates Inc., Portland, Maine, increased group long-term disability insurance premium revenue 9% in the first half of 2001, to $3.3 billion, and group short-term disability insurance revenue 15%, to $1.2 billion.

Insurers expanded by 15% the number of workers with STD coverage, which protects against disabilities that last for a few months, to 16 million, and the number with LTD coverage, which protects against disabilities that last for years, by 5% to 34.4 million.

New sales were a mixed bag.

On the LTD side, insurers increased premium revenue from new sales only 1%, to $711 million, while the number of new cases and the average number of lives per new case fell.

Half of the top 10 insurers reported an increase in new sales revenue for the first half.

The biggest carrier, UnumProvident Corp., Chattanooga, Tenn., increased its new sales revenue 30%, to $168 million.

On the STD side, insurers increased new case sales revenue 27%, to $381 million. The number of new STD cases fell 6%, to 20,489, but the number of workers in the new cases increased 24%, to 2.4 million.

Nine of the top 10 STD carriers reported increases in premiums from new STD case sales.

UnumProvident, the leader in that market as well as the LTD market, increased its new sales revenue 47%, to $99 million.

Drew King, president of John Hewitt, says the STD figures surprised him.

“It looks like the growth is being driven by larger cases,” King says.

Some large employers that once handled their own STD programs may now be handing the job over to insurance companies, King says.

Insurers also reported mixed results in increasing the average amount of premium revenue per life.

The average increased 10% for new LTD cases, to $182, and 4% for in-force LTD cases, to $194.

The average increased 4% for new STD cases, to $159, and only 1% for in-force STD cases, to $151.

King warns against relying too heavily on projections based on the mid-2001 results.

The mid-year results always include the effects of deals made the previous year, and the economy now appears to be substantially weaker than it appeared to be in the first half, King says.

John Hewitt analysts believe employers will avoid dropping disability coverage, but they are expecting weakness in new program sales and a possible increase in disability claims.

Meanwhile, efforts by the Federal Reserve Board to buoy the overall economy by cutting short-term interest rates are reducing the rates LTD insurers can earn on their large bond portfolios.

“It doesnt look like interest rates are going to rise any time soon,” King says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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