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.