Milliman%3A California Disability Rules Will Increase Policy Costs

California regulators want individual disability insurers to adopt a more liberal definition of total disability; eliminate requirements that certain claimants be receiving specific types of medical care; and eliminate requirements that certain claimants not be engaged in any form of work.

Because California is known for high disability claim rates, its residents already pay about 10% more than the national average for group disability coverage and about 20% to 70% more for individual disability insurance, the Milliman actuaries write.

Adopting the California regulators’ current proposals probably would increase individual disability insurance costs by 21% to 33%, and it might increase group disability insurance costs 28% to 46%, the actuaries write.

The shift to a new, more liberal definition of total disability would probably be the most expensive change, and that change alone could increase California disability premium rates by 10% to 15%, the Milliman actuaries write.