Making Od Ways New Again
Offering Disabiity Insurance To Workers Over Age 65
By Aison Be
As the baby boomers age, agents who se disabiity insurance may be spending more time finding coverage for active workers who are in their ate 60s, 70s and even 80s.
The aging of the work force presents agents with a short-term chaenge and a ong-term chaenge, experts caution.
The short-term chaenge is finding coverage today for a handfu of successfu, pre-boomer business owners, professionas and executives who go into the office every day even though they are we past the norma retirement age, they continue.
Some of the agents fit that description themseves.
Theyre heathy. They know something about how the word works and how to cose a sae. Experts are asking Why shoud they retire, and why shoud they give up on borrowing the cash they need to expand their businesses or move up to nicer homes simpy because theyre 65?
Even if oder workers reay want to stay home and coud retire with a decent income, some keep their jobs to maintain their active-empoyee heath coverage, they say.
The ong-term chaenge wi be finding disabiity coverage for senior workers starting 6 years from now, when the odest boomers start to retire, they add.
Baby boomer Drew King, president of John Hewitt & Associates Inc., Portand, Maine, recenty taked about the aging of the work force at the disabiity risk management firms annua conference in Bonita Springs, Fa.
“We have met the enemy and they are us,” King announced. “Its said that, every 9 seconds, a boomer turns 50.”
Traditionay, King said, disabiity insurers have preferred to cover groups of reativey young, heathy fu-time workers.
Few disabiity insurers ike writing individua poicies for insureds over the age of 70, and most credit disabiity insurance poicies terminate at age 66 or 67.
Athough many group disabiity insurers et senior workers participate in their pans, few have much interest in workers over age 60. One obstace is that 80% of workers over age 60 suffer from a chronic heath probem, King noted.
But, in many cases, “boomers wi want and have to work onger,” King said.
Socia Security officias pan to move the norma retirement age to 67, from 65, by 2027. Officias wi probaby push back the norma retirement age even further sometime after 2010, when the boomers start to reach age 65, King said.
Mitra Toossi, an economist with the federa Bureau of abor Statistics, has projected that the number of U.S. workers between the ages of 65 and 74 wi increase 48% by 2012 to 5.4 miion from 2.8 miion in 2002 and that the number of U.S. workers who are at east 75 wi increase 24% over that period, to 1 miion from 760,000.
The number of senior workers shoud increase much faster between 2012 and 2022, when arge numbers of boomers reach age 65.
Meanwhie, boomers say they expect to continue to have to make good on big financia commitments in their ater years.
When Astate Financia, a unit of The Astate Corp., Northbrook, I, commissioned a “Retirement Reaity Check” survey from Harris Interactive Inc., Rochester, N.Y., in 2002, it found that 27% of boomers expect to carry mortgage debt into retirement.
Statistics on ate parenthood are hard to find, but anecdota evidence suggests that some boomers wi be saving for their chidrens coege education and paying coege tuition bis we into their 70s.
One constraint facing insurers that want to write either group or individua disabiity coverage for senior workers is the difficuty of coming up with rates.
Federa benefits aws do et empoyers and their insurers take actua caims experience into account when designing and pricing disabiity coverage for oder workers.
Metife Inc., New York, for exampe, is one of many group disabiity carriers that offer shorter benefit duration periods for members of group ong-term disabiity pans who become disabed after age 60.
For workers age 59 and younger who are insured under Metifes sma TD pans, the maximum duration of the TD benefit extends to age 65, according to a Metife Sma Business Center TD pan highights description. For insureds age 69 and over, the maximum duration is ony 1 year.
But few disabiity insurers have much data about caims fied by workers over age 65, King observed.
King suggested that another chaenge for insurers might be finding ways to design and price disabiity poicies for committed senior workers who go to their jobs every day even though they aready have disabiities.
In the ong run, actuaries, insurers and reinsurers wi have to work together to tacke the probem.
In the short run, what does an advisor do today for a 58-year-od boomer who has a thriving aw firm, a 1-year-od son and 15 years of payments eft to go on his mortgage?
Experts offer some ideas:
- Warn the cient about the difficuty of insuring against the risk of oss of income after the norma retirement age.
- Recommend that the cient start paying off debt now, even if he is heathy and has reasonabe pans to work for many years after the norma retirement age.
- Suggest that oder boomer business owners who want to expand think about taking on younger partners who can appy for oans and quaify for the disabiity coverage needed to ensure that the oans wi be paid off.
- See if the cient can enro in an empoyment-based group pan that offers at east 12 months of coverage.
- Dea with experienced brokers who know which carriers wi write individua coverage for appicants over age 70.
- Consider using annuities to generate the income stream needed to fund debt payments.
Reproduced from Nationa Underwriter Edition, Apri 23, 2004. Copyright 2004 by The Nationa Underwriter Company in the seria pubication. A rights reserved.Copyright in this artice as an independent work may be hed by the author.