The year 2001 was a strong one for disability products sold to employees at the worksite. But with so much attention focused on health insurance now, the natural question for marketers is: Will voluntary disability products continue to grow in 2002?
Its a likely prospect, provided employers and employees receive sufficient information about the value of this coverage. As the year unfolds, insurers and marketers will need to address education issues in a targeted manner. Before seeing how, lets review whats been happening.
In 2001, sales of voluntary long term disability rose by nearly 60% and in-force LTD premium grew by over 20%, according to JHAs recent U.S. Group Disability Market Survey. Voluntary short term disability sales and in-force premium grew in 2001, too–by about 25%.
This year, however, group medical insurance premiums have been increasing by anywhere from 20% to 50%, depending on the case particulars. As a result, employers are out looking for alternatives to pay for their other employee benefit programs.
As they do, the idea of offering voluntary products will become even more appealing than it has been in the past because such products allow employers to offer coverage to employees without incurring costs.
Thats an overall perspective. Where disability benefits are concerned, the picture becomes a little bit fuzzier. Here is why.
STD and LTD ranked 8th and 9th in terms of valued benefits, according to the 2002 United States @ Work Survey by Aon Consulting. However, according to JHAs market survey, more employers offered voluntary disability benefits in 2001 than in prior years.
The two findings are conflicting enough to make a marketer wonder how future sales will pan out. Specifically, is the 2001 jump in voluntary disability sales a trend, or will the health premium increases hitting employers now put a damper on such sales in 2002 and beyond?
Some observers believe that, when employees are faced with having to pay some or all of the health insurance premium increases, they will choose to drop their voluntary disability coverage as a way to subsidize what they will have to pay for health insurance.
It is also possible that employees will drop other voluntary employee benefits–such as vision or other supplemental insurance coverages–as well.
Further, some market watchers point out that, if the defined contribution approach to employee benefit selection becomes a stronger trend, employees will be challenged to decide how they want to spend the dollars allocated to them by their employer. Because most employees do not understand the value of disability coverage, particularly LTD, this coverage may be the first to go.
Given those possibilities, it appears that the voluntary disability industry needs to put its energy into educating employers and employees about the value of disability coverage. Indeed, for disability sales to continue growing, the entire distribution chain needs to address this issue.
Here are some suggestions:
–Insurers should provide their sales representatives with important information to share about voluntary disability products, including key disability statistics and product details.
–Voluntary benefit enrollers should be armed with the same information on the need for disability insurance and leading causes of disability. This data should be shared with employers and employees at open enrollment meetings and be included in enrollment packages.
–Insurers should also provide producers with information that will help them identify opportunities for voluntary disability sales. This could include data on market penetration, demographic and economic information, leading causes of disability, the need for disability protection, and other sources of disability coverage.
Why deliver so much information? Because it is only after employers and employees understand the need for disability insurance that they can make informed decisions about how to spend their valuable benefit dollars.
For example, a 30-year-old employee is four times more likely to become disabled than to die, and a 40-year-old is three times more likely to become disabled, according to National Underwriters 2001 Field Guide. Employees can make better decisions if they know statistics like those.
This knowledge will become all the more important as the population ages. The aging trend means future U.S. workplaces will have fewer healthy employees than today, thereby increasing the need for income protection in the event of a disability.
In the next few years, employers will continue struggling to find a balance between offering valuable employee benefit programs and responding to competitive and financial pressures with effective alternatives. And significant health premium increases will continue for the next few years, adding to the employers burden, experts say.
In such an environment, employees will need to make decisions about how to spend their money and should do so only when fully informed about their benefit choices.
is vice president-marketing and business development at JHA, Inc, Portland, Maine. Her e-mail address is email@example.com.
Reproduced from National Underwriter Life & Health/Financial Services Edition, June 17, 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.