Survey Probes Employer And Planner Attitudes Toward Disability Insurance
What opinions, motivations and plans are driving the key players in disability insurance coverage decisions?
Recent surveys of employee benefit decision-makers and financial planners conducted by Health Insurance Association of America, Washington, D.C., and JHA Inc., Portland, Maine, explored that terrain. The findings cast light on how employers and planners value disability insurance.
First, the employee benefit decision-makers point of view. More than 400 employer respondents completed the survey representing close to a million employees.
Among other things, this survey found that employers are motivated to offer disability insurance protection in order to compete for the employees they need.
Almost half the employer respondents (46%) consider their benefits packages to be better than comparable employers, while almost 51% consider their packages “average.” Only 4% could bring themselves to say their benefits packages lagged behind.
Not surprisingly, employers named health/medical benefits as the most important to employees. But 86% also said they need to offer additional benefits in order to stay competitive. In fact, over 60% who offer short- or long-term disability coverages reported doing so to attract and retain employees.
A related finding: The employers indicated they are not motivated to offer disability insurance as a means of absence management and returning disabled employees to work.
Relatively few said they value disability coverage as a return-to-work or absence management tool. In fact, less than a third of those surveyed strongly agreed, or agreed, that “disability insurance is effective in speeding rehabilitation and return-to-work.” Just under 21% disagreed with this statement and 3.5% strongly disagreed.
In addition, few identified return-to-work as a top reason for offering disability insurance. Only 13.5% that offer STD coverage, for instance, reported doing so in order to help enhance productivity and control absenteeism. For employers offering LTD coverage, this figure was even smaller, only 8.9%.
However, in yet another finding, the employers indicated they clearly recognize the need for disability insurance and are well aware that workers compensation and Social Security Disability Insurance do not sufficiently cover the financial risk of disability.
For example, 86% of the employer respondents acknowledged that workers compensation and Social Security Disability Insurance are not adequate to provide the disability income protection their workers need.
Meanwhile, many seemed to judge the importance of insurance coverages more on the likelihood of a claim than on the financial risk it addresses. While this “finding” is based on a number of comments employer respondents made rather than on survey analysis, many employers showed they clearly value a coverage more if they have seen more frequent claims. Therefore, they seem to undervalue LTD–because they have not seen many claims.
Now, for the financial planner findings. These results reflect responses from nearly 175 active planners representing almost 50,000 clients.
Among other things, these planners indicated they do recognize the value of DI insurance, but they rank its importance below that of other coverages.
Specifically, 77% said disability insurance is necessary to secure a clients financial well being. But when ranking the importance of disability insurance compared to life insurance, a significant number (27%) viewed disability insurance as being less important. By contrast, only 9% viewed life insurance as being less important.
Another key finding among the financial planners was that they apparently generally believe that employer LTD coverage is adequate.
Whether or not a clients employer offers disability insurance appears to be the major factor influencing a planners recommendation regarding the purchase of individual disability insurance. When a clients employer does offer disability insurance, only 16% of planners said they were very likely to recommend purchasing individual disability insurance.
Not surprisingly, the higher the clients income, the more likely the financial planner is to recommend individual disability insurance, even when the client has coverage through the employer. Such recommendations indicate that planners believe employer coverage is inadequate for higher income levels.
When a clients employer does not offer disability insurance, on the other hand, 77% of the planners indicated they are very likely to recommend the purchase of individual coverage.
In sum, employers and planners make their disability insurance decisions for different reasons, but both appear to value the coverage.
Winthrop Cashdollar, the director of the Center for Disability & Long Term Care Insurance at Health Insurance Association of America, Washington, D.C., can be e-mailed at email@example.com. Marcy Updike, the director of market research for JHA, Inc., Portland, Maine, can be e-mailed at Mupdike@jhaweb.com.
Reproduced from National Underwriter Edition, February 24, 2003. Copyright 2003 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.