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March 05, 2006 at 02:00 PM
Recent statistical reports continue to show that the disability market is underpenetrated. Though the industry is making some progress, the total number of individuals covered for long-term disability has not increased much in the last few years.
Only about one-third of employers offer disability coverage.
Growth in this market is possible: Employers are almost twice as likely to offer medical and life insurance as to offer disability, leaving a penetration gap of more than 30%. Closing even half of this gap could result in another 13.5 million insured people or approximately $2.4 billion of additional premium for the disability industry. We need to pay attention to this issue and find ways to increase the number of employers offering disability insurance.
After much effort over the years, traditional carriers have not been able to appeal to this untapped market. However, the solution may be closer than we understand. Substitute products or nontraditional answers given by competitors outside of our traditional disability industry may hold the answer to the question.
Selling disability policies to a first-time buyer is a difficult task for a few reasons. Most obvious is the squeeze on employers’ budgets after years of double-digit medical cost increases. Based on the results of many surveys, most employers believe traditional disability policies must be employer-paid. Therefore, when faced with rising medical costs, many employers do not even consider offering disability coverage. They become entrenched in solving the challenges of providing medical coverage instead.
In fact, surveys indicate that disability falls behind medical, life and even 401(k) plans. As a result, brokers assume that employees are not interested in purchasing disability coverage, so they focus on products that sell more quickly. On the other hand, employers say their brokers do not speak to them often enough about disability coverage, so they believe it is not as important as other coverages. This business environment is counterproductive, and we can infer that by simply highlighting disability alternatives to employers, brokers could significantly increase the possibility of sales.
