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Message To DI Clients: Keep Your Coverage In Hard Times

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The only thing worse for a worker than facing a tough job market may be facing a tough job market without the physical ability to work.

Disability insurers and producers are trying to convey that message to employers and individual income protection clients, to persuade insureds that they should try to keep disability insurance and other protection products in place even when cash is tight.

At this point, disability insurers are strong, and they have plenty of capacity to write new coverage, according to Robert Taylor, president of the Council for Disability Awareness, Portland, Maine, a nonprofit group that spreads information about disability risk and strategies for coping with disability risk.

Many disability insurers have reported that claims have been within expectations this year.

JHA, Portland, Maine, a disability risk management and consulting firm, says revenue from in-force long-term group disability insurance cases increased about 5% between the first half of 2007 and the first half of 2008.

Meanwhile, the financial crisis itself may be helping to make points that disability insurers and producers have spent years trying to promote.

The financial crisis is “really magnifying the value of your income,” Taylor says. “People’s savings are drained. People are in debt. If there’s one thing you want to protect, it’s your ability to earn an income.”

Workers should not stop insuring their incomes any more quickly than they will stop insuring their cars or their homes, Taylor says.

But disability insurers and producers will continue to face the same challenge they always face, even when times are good: workers rarely believe that disability can happen to them, Taylor says.

The CDA has responded by offering producers and others the CDA Disability Awareness Toolkit, a collection of statistics and other resources that producers can use to educate workers about disability risks.

A unit of MetLife Inc., New York, reminds consumers in its latest benefits selection guide that having adequate disability insurance is as important during challenging times as it is during more prosperous times.

Disability insurers may be able to help by coming up with more products designed to be sold directly to workers, Taylor says.

In addition to thinking about ways to maintain current disability insurance ownership levels, insurers and producers are thinking about the effects of the economic crisis on disability insurance claims.

Traditionally, “when unemployment rises, claims rise,” Taylor says.

But, in the early 2000s, new plan designs kept the economic slump from increasing disability claims, and insurers are hoping the plan designs now in place will continue to keep able-bodied workers from using disability plans as supplemental unemployment insurance programs.

Disability market watchers worry, however, that a severe slump could increase the number of justified claims, by hurting workers’ health.

Researchers at the National Business Group on Health, Washington, found, for example, that 47% of workers at large U.S. companies who participated in a recent survey said work demands are preventing them from leading a healthier life, and 25% said they are facing more stress than they faced 2 years ago.

When CIGNA Corp., Philadelphia, commissioned a worker survey in late September and early October, researchers there found that about 5% of the participants said the state of the economy has been keeping them from going to the doctor for necessary medical care, and about 1.5% said the economy has been affecting their ability to eat properly.

At some disability insurers, a slump could affect absence management programs.

Workers may be more likely to show up when they are worried about losing their jobs, but employers might be more interested in hiring outside vendors to help them keep close tabs on the workers who are absent.

Nationwide Better Health, a unit of Nationwide Mutual Insurance Company, Columbus, Ohio, recently rolled out a collection of tools designed to help employers handle problem absences.

Nationwide’s Time Off Planning Service can mark absences as unexcused, establish probationary periods, generate disciplinary letters, and keep an accurate record of unexcused absences.


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