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The Disability Business Is Returning To Work

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Disability insurance seems be ‘returning to work,’ to use a popular industry concept.

For more than a decade, the business has lived in the shadow of its former self, nursing losses or consolidations of carriers, distribution and sales. In recent years, industry stalwarts have tried to reinvigorate things, but sales still lagged optimism.

Now, finally, the line is showing some bounce. As reported by NU Senior Editor Allison Bell in NU’s May 5, 2008 issue, new sales in 2007 were up across the board.

Specifically, compared to 2006, new sales rose 18% for group long-term disability; 10% for group short-term disability; 5% for voluntary group disability; 6.2% for non-cancellable individual disability; and 8.7% for guaranteed renewable individual disability. Also the total number of covered employees increased by 5% for LTD and 3% for STD, and the total number of new individual policies issued rose 3% to 226,284.

These numbers come from surveys of 27 group carriers and 15 individual carriers by JHA, Portland, Maine.

Whether the results represent a blip or a trend remains to be seen, maybe in JHA’s 2008 and 2009 surveys.

Still, the 2007 upturn occurred at a time when the U.S. economy was sluggish, if not in formal recession. Further, the overall individual sales growth rate was the highest in about 5 years, according to JHA vice president Stacy Varney, as quoted by Bell.

Those 2 facts alone suggest it’s time to give disability products a fresh look.

Earlier in the 2000s, disability professionals kept telling me that they’d been wracking their brains, trying to figure out how to increase sales. Most of these professionals reached the same conclusion–that the industry needs to do more education about the risk of disability and the availability of disability insurance. This education should be directed not only at consumers but also at brokers and other distributors, they said.

Why? The lag-boy image the business had acquired in the past decade has been a powerful disincentive to newcomers. The business needs more than new products and processes to trigger turnaround, they said.

As it turned out, the leaders put their money where their mouths were. They formed the International DI Society, Seal Beach, Calif.; and the Council for Disability Awareness, Portland, Maine, both of which have since taken on educational projects. For instance, IDIS says it now partners with the American College on education program.

Many disability interests also joined with the Life and Health Insurance Foundation for Education, Arlington, Va., to launch Disability Insurance Awareness Month–an educational venture supported by at least 15 other insurance organizations.

These are not small initiatives for an industry that’s regaining its sea legs. But it’s clear the industry leadership believes the alternative is worse.

So now the business is sending a message that it’s scrappy again, willing to reach out and insure someone. Judging by last year’s results, the message is getting through.

Don’t be surprised to see new product offerings follow. In fact, 2 new entries popped up in the past few weeks. That’s one of the energizing effects of happier sales results–a “you want it/we’ve got it” approach to new momentum.

This is not to say everything is peachy-keen. The disability business still faces challenges.

For instance, in 2007, major private U.S. disability insurers paid $7.7 billion in benefits, up 7% from 2006, according to a new report from the Council for Disability Awareness, Portland, Maine. (BTW: Social Security Disability Insurance benefit payments rose 4.3%, to $91 billion.)

Further, over the past 10 years, the number of U.S. workers with long-term disabilities grew by 4 times the increase in the U.S. workforce, CDA said.

Another disturbing CDA finding: More younger workers in their 20s, 30s and 40s are experiencing serious disabilities.

From a consumer standpoint, such figures make a compelling case for owning disability insurance, whether group, voluntary, individual or some of each.

From an insurance standpoint, though, those same figures should serve as fair warning that, sooner or later, pressures will mount on claims, pricing, and underwriting, and that insurance regulators will be keeping close watch on all of this.

But it’s far better for the industry to keep the education initiatives moving, the sales increasing, and the industry profile rising, than for it to pull back out of fear that unbridled growth will unleash unwanted problems.

The actuaries, underwriters and claims adjudicators learned a lot in the past few years. Now, it’s time to let them show it.