The Once-Huge Throng Of DI Providers Has Evaporated
The disability insurance industry has some confessions to make to insurance consumers. I will offer some suggestions here, in hopes of drawing attention to the industrys critical need for expansion.
Recall that for over a century, the life insurance industry has been selling disability insurance. About 91 years ago, the late Solomon S. Huebner, founder of the American College of Life Underwriters, declared in his acclaimed “Life Insurance” that disability insurance is a part of the life insurance group of coverages. He also said disability insurance is as logical and needed for personal security as is life insurance.
The industry once moved forward with that understanding but not in recent years. Now, the business has some “fessing up” to do and some changing.
Confession #1. All life companies have not offered disability insurance. After hitting a high point of 535 disability insurers, the defections dropped the total to 350 in 1990 and down to 26 in 2003. This is totally unsatisfactory. Twenty-six companies cannot cope with the incredible task of insuring the payroll of American income earners.
Confession #2. Insurance producers not equipped with a product and not encouraged to sell disability have not tended to consumers well-being. Consequently, only 27% of income earners have any disability insurance and over half of that is inadequate, according to industry sources.
Confession #3. Most life companies aggressively seek “retirement income plan” life insurance but bypass the risk of forced retirement (disability) entirely. This reckless action has been considered as malpractice in several court cases.
Confession #4. The industry has defaulted in its duties to perform professionally for the insured, even though it knows about the critical importance of a well-planned disability program. It has pretended it did not notice that the industry has overlooked, ignored or specifically determined not to counsel people on disability insurance.
Some CEOs fear potential losses arising from disability insurance. Yet, risk assumption is the function that insurance charters anticipate, and it is widely accepted that there is inherent loss potential in any form of insurance. This fear exists, even though the disability industry has seen more profitable years than loss years over the past century.
Confession #5. Financial planning begins and ends with income planning, and proper income planning is impossible without adequate amounts of disability insurance. The industry has neglected this.
What to do about all of this? The life insurance industry must respond to this call or face the very real risk of having disability insurance nationalized.