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Boomer Disability Rates May Beat Carriers' Expectations

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The baby boomers who actually have private disability insurance could end up staying healthier than disability insurers have anticipated.

Traditionally, every one-year increase in the average age of an employee group has had a big effect on claims.

“Cost increases of 4% to 8% per age year are common,” according to researchers at UnumProvident Corp., Chattanooga, Tenn.

Meanwhile, baby boomers make up 47% of the U.S. workforce, and the boomers born in 1946 have just turned 60.

“Obviously, the baby boomers are getting older,” says Richard Mucci, director of the group benefits operation at Hartford Life, a unit of Hartford Financial Services Group Inc., Hartford.

Disability insurers have been operating on the assumption that a higher survival threat for life-threatening illnesses is translating into a higher morbidity rate, Mucci says.

But figures from the U.S. Census Bureau and private companies such as Disability Reinsurance Management Services Inc., Westbrook, Maine, are hinting that boomers who have group disability coverage may be aging reasonably gracefully.

If disability figures are painting an accurate picture, lower-than-expected claims rates could give disability insurers a boost and, eventually, make it easier for financial professionals to find high-quality coverage for boomer-dominated employer groups at a reasonable cost.

The Census Bureau released its review of 2002 U.S. disability statistics in May.

The bureau does not break out a separate “baby boomer” age category. But a comparison of the 1997 and the 2002 disability prevalence figures reveals rapid improvement in disability prevalence rates for the 45-54 age group.

In 2002, all of the members of that age group were boomers, and the age group includes about half of U.S. boomers.

Only 19.4% of boomers in the 45-54 age group reported having any disability, down from 22.6% in 1997.

A comparison with the previous survey from 1991-1992 shows that the disability prevalence rate for the 45-54 age group has fallen from 23.3% in that survey.

Similarly, the prevalence of “severe disability” in the 45-54 age group has fallen to 12.6% in 2002, from 13.9% in 1997.

Deborah Small, products director at Disability RMS, says baby boomers with group long-term disability coverage seem to resemble other group LTD insureds.

In terms of matters such as durations of LTD claims and success at efforts to qualify for Social Security Disability Insurance benefits, “the numbers are very similar for non-boomers and the total block,” she says.

When Disability RMS reviewed claims for its own block of business, it found that baby boomers, who make up 47% of the U.S. workforce, account for about 56% of all group LTD claims incurred.

According to Disability RMS data, boomers are about 20% more likely to file LTD claims than other workers, but that gap is considerably smaller than the gap between the Census Bureau disability prevalence rate for the boomer age group and the 25-44 age group.

In 2002, U.S. residents in the Census Bureau’s 45-54 age group were about 73% more likely than those in the 25-44 group to report suffering from a severe disability.

The boomers with LTD coverage included in the Disability RMS data may be sturdier than the boomers included in the Census Bureau data for a number of reasons.

o All boomers in the Disability RMS database were healthy enough to hold jobs at some point. The Census Bureau data for the general population, in contrast, includes many who have never been able to work because they have been disabled since childhood.

o The boomers in the Disability RMS data had enough energy and education to get the kinds of good jobs that provide LTD coverage, and those boomers may be somewhat less likely to suffer disabling illnesses or injuries.

o Boomers with enough drive and education to get jobs with LTD coverage may find it easier than boomers in the general population to take other positions at their current employers if health problems affect their ability to do their old jobs.

Another sign that the boomers in the Disability RMS LTD database may be sturdier than boomers in the Census Bureau’s general population data lies in return-to-work figures.

About 43% of Disability RMS LTD claimants who are baby boomers end up returning to work, and that percentage is about the same as the return-to-work percentage for all Disability RMS LTD claimants, Small says.

For the most part, at any age, “people really want to return to work, if they at all can,” Small says.

Along the same lines, when Disability RMS analyzed the causes of LTD claims, researchers there found the percentages of claims caused by circulatory problems, cancer and other conditions were very similar for boomer claimants and the total block, Small says.


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