By

U.S. group disability insurers scraped up solid gains in revenue in 2001 by covering more workers.

The 39 carriers that participated in the 2001 disability market survey conducted by John Hewitt & Associates Inc., Portland, Maine, increased group long-term disability insurance premium revenue 7% in 2001, to $6.7 billion.

Although growth was slower than in 2000, insurers achieved it in spite of skyrocketing health insurance rates, an economic slump and the disruption caused by the Sept. 11, 2001, attacks.

Average annual group LTD premium revenue per insured worker increased only 1%, to $195. Revenue from new group LTD sales rose only 2%, to $1.2 billion.

But, while U.S. employment was falling 1.3%, to 134 million, the total number of workers protected by group LTD was rising 6%, to 34 million, according to JHA.

On the group short-term disability side, revenue from new sales increased 11%, to $581 million, and revenue from policies already in force increased 11%, to $2.4 billion.

JHA, a unit of GeneralCologne Re that provides disability risk management and consulting services, compiles regular disability market reports to promote its research and advisory services.

Drew King, president of JHA, says 2001 was not so bad.

This year, “our prediction is that well see companies focused more on improving their underwriting results,” King says.

Group disability insurers continue to worry about health insurance costs and employment levels.

Group LTD insurers must keep a close eye on interest rates, because insurers depend heavily on bond portfolio investment earnings to help pay LTD claims.

But the Sept. 11 attacks do not seem to be having much direct effect on the group disability market, King says.

Many of the workers who did file attack-related STD claims will probably be able to return to work, King says.

He says more workers affected by the attacks may file LTD claims as six-month elimination periods end, and he emphasizes that questions remain about the number of stress-related claims that the affected workers will eventually file.

But group disability operations are not suffering anything like the catastrophic reinsurance shortage now plaguing group life operations, because “insurance companies never really bought catastrophic coverage for LTD the way they do for life,” King says.

Disability insurers are enjoying at least one major positive trend: expansion in voluntary, worker-paid disability sales programs.

New voluntary LTD sales increased 59%, to $98 million, and total voluntary LTD revenue increased 22%, to $432 million.

New voluntary STD sales increased 26%, to $56 million, and total revenue also increased 26%, to $200 million.

Eventually, employers that like their voluntary programs could switch to employer-paid programs, King says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 15, 2002. Copyright 2002 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.