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Group DI Inforce Premiums Rose 6% Last Year, JHA Reports

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Combined short- and long-term group disability inforce premium grew about 6% in 2005, to $11.2 billion, a new report says.

Insurance companies participating in a study by JHA, Portland, Maine, reported a 7% increase in LTD inforce premium and a 4% increase in STD inforce premium. The results were similar to those in 2004, according to JHA.

The survey also shows new U.S. group sales for both products increased by 3%, totaling over $1.9 billion in new annualized premium.

The number of employers offering disability coverage rose by 4% for STD and 3% for LTD. The total number of insured employees rose by 1% for STD and 4% for LTD, JHA reports.

However, client growth was mixed. There were 4% more employers for both products, but the number of employees covered fell 2% for LTD and 5% for STD.

The average number of lives per case for new sales has been declining for the past few years, particularly for LTD, JHA finds.

Part of the reason may be that the smaller business segment “is typically less price sensitive and less competitive than the larger case market,” notes Stacy Varney, vice president of marketing and business development for JHA.

The survey also finds that average premium per life was up 6% for new sales of both products, to $217 for LTD and $193 for STD. Inforce premium per life for both was up 3%, to $228 and $192, respectively.

Meanwhile, the voluntary benefits market for both products declined for the second straight year.

Voluntary LTD sales fell 16% in 2005 to $83 million on top of a 34% slump in 2004, while STD sales in that market were down 8%, to $80 million, compared to a 4% decline in 2004, JHA reports.

Total inforce premium in the voluntary market increased 4% to $376 million for STD and 2% to $613 million for LTD.

The average premium per life in the voluntary STD market rose 14%, to $277, for new sales and 17%, to $309, for new LTD sales in that market.

For inforce policies, average premiums in the voluntary market grew 9%, to $293, for STD and 6%, to $315, for LTD.

There were some problems with the group disability market, JHA reports. Carriers reported mediocre closing ratios and a general failure to achieve sales goals. A partial explanation: Many companies also report finding it harder to hire experienced sales reps.

The U.S. group disability marketplace continues to be dominated by the top 10 carriers, which wrote 76% of new STD business in 2005 and almost 83% of new LTD business, according to the report. Those results were similar to 2004, when the top 10 carriers wrote 77% and 82% of new sales, respectively, for STD and LTD.

In 2005, the top three carriers in STD new sales premium were:

–Hartford Life, with a 17% market share and $104.3 million in premium;

–UnumProvident, with 11.2% and $68.7 million; and

–MetLife, 9.3% and $56.9 million.

In LTD new sales premium, the top three carriers were:

–Hartford Life, with a 16% market share and $215.5 million in premium;

–MetLife, 14.1% and $190.8 million; and

–UnumProvident, 11.5% and $155.4 million.

Twenty-nine group disability carriers, representing over 95% of the U.S. insured group disability market, took part in the 2005 survey.

JHA is a disability reinsurance, consulting and research firm that is a subsidiary of General Re Life Corp., a Berkshire Hathaway company.