Producers Need To Retool To Sell In The New DI Market
Disability income coverage–the Montreal Expos of the insurance industry, long ago slated for contraction–has risen from the ashes of controversy, burgeoning loss ratios and a sales slump.
Now, DI is poised to ride a strong resurgence and return to profitability.
Of course, the market (and the need) never really went away. In the 1990s, it was the disappearing acts of agents and insurers that took this product line out of the positive limelight. Then came reduced benefit levels, questionable claims practices, higher rates, tighter underwriting, and ultimately working consumers vulnerable to a loss of earning power.
Before, in the “Greed is Good” decade, it was cool to sell DI. There were plenty of high indemnity, benefit-rich policies. And it seemed one “own-occupation” claim could pay out more than the total assets of the national treasury of Argentina.
More accurately, it was good to sell DI until policyholders started filing claims in significant numbers. The resulting meltdown touched off a flurry of industry exits, drastic policy changes and finally a run-in with CBS “60 Minutes.”
Ironically, leading the way in the DI market today are several carriers who chose not to follow Alice down the rabbit hole in the previous game of competitive product enhancement. They chose not to create too-good-to-be-true policies.
Mocked at the time, even by their own field forces, these insurers chose to stay a practical course. They maintained their DI portfolios throughout the lean years of 1986 to 2000, when the individual non-cancelable industry lost money year after year. They kept benefit amounts at reasonable–and thus insurable–levels. They relied on disability definitions that were fair and underwrote the risk properly, enabling the companies to grow even through the market downturn.
Finally, these companies explored new ways to write business, including providing coverage for the new at-home worker.
Now, suddenly, these companies are no longer a few. More players are in the DI market and more products are available for sale than at any time in the past decade.
One carrier has even re-introduced a pure “own-occupation” policy for physicians. This companys argument is that todays physicians are different than doctors a decade ago. They are more managed-care oriented. Further, the monthly benefits offered to them are far lower than at any time during the 1980s and early 1990s, thus further reducing potential risk.