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Life Health > Health Insurance

DI Portability: The Trickiest Feature

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Portability might be one of the trickiest disability insurance policy features for benefits advisors to market.

Many producers and enrollers who sell individual disability policies at the worksite make a point of mentioning portability.

“Employees are more attuned to the fact that, Hey, I own this,” says Steve Vermette, an Orlando, Fla.-based managing general agent for Colonial Supplemental Insurance. “People are keeping their policies longer than they ever have.”

But experts interviewed say some disability insurers and benefits advisors downplay portability features because of concerns about risk management issues, employer perceptions and cost.

Most individual disability policies sold through the worksite are portable. Many traditional group disability policies also offer portability features, which usually are called “conversion” provisions.

At Prudential Financial Inc., Newark, N.J., about 25% of the group disability policies on the books include conversion provisions, according to Michael Witwer, a senior vice president in Prudentials group insurance unit.

“Theres a higher price for that,” Witwer says. “Its not standard. We havent seen any major increase in activity in this area.”

Pension services companies and group life insurers brag about portability features, and the federal government has written some group health portability requirements into law.

Employers let go millions of workers over the past few years. Some experts predict that many workers will leave on their own once the economy improves.

Some healthy workers who leave their employers cut all benefits to conserve cash. Others “want to have their health insurance and want to have their disability,” Vermette says.

But many group disability insurers still assume that workers who are aware enough of the importance of disability insurance to pay for it themselves either are on claim or are well on their way to filing claims, Vermette says.

The answer may be use of realistic pricing strategies and policy provisions that allow for some underwriting when workers make use of portability provisions.

Some insurers and producers fear that employers view portability more as a product flaw that encourages employee turnover than as a product feature, Vermette adds.

Today, he says, employers are coming around to an understanding that offering benefits with portability features can reduce turnover by showing employees that the employer really cares about their well-being.

Cost may be a tougher obstacle: the typical portable worksite disability policy costs about 2 or 3 times more than a comparable group disability policy, Vermette says.

But buyers of individual worksite policies can make up for the higher rates by buying just as much coverage as they can afford, rather than accepting one-size-fits-all group coverage, Vermette says.

Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 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.


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