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Disability Event Speakers: Stability Is Not Enough

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PONTE VEDRA BEACH, FLA. — U.S. disability insurers have held sales and revenue reasonably steady over the past year, but speakers here at a disability insurance conference organized by JHA urged attendees to seek growth, not just stability.

“All of our businesses are mature businesses,” Drew King, president of JHA, Portland, Maine, said during the opening session. “We have to figure out a way to re-start the growth part of the curve.”

JHA, a disability reinsurance and consulting unit of General Re Life Corp., Stamford, Conn., is still compiling disability insurance market performance data for 2009. Analysts at the firm are expecting sales figures to be about the same as in 2008 or lower, and the amount of premiums earned on in-force business to be flat, King said.

Participants in some hard-hit sectors of the insurance market might wish that they could report sales that were down just a little bit, rather than down sharply. But, in the disability insurance market, the possibility that in-force earned premiums may have flattened out is troubling, King said.

Normally, King said, inflation, increasing wages and the growth of the workforce push earned premium revenue higher even in soft years. This year, the soft economy and the weak job market have reduced or eliminated those sources of growth.

Most disability insurers continue to be profitable, but their penetration of the employer market is about the same as it was 20 years ago, King said.

Meanwhile, in the benefits market, because of the weak economy, “refusal rates are creeping up,” said Michael Shunney, general manager of the employee benefits group at the Wellesley Hills, Mass.-based U.S. operations of Sun Life Financial Inc., Toronto (TOR:SLF).

Sun Life has started gathering and analyzing data for a voluntary market study to be published in June.

Preliminary results show that the percentage of employees who take up health insurance when it is offered continue to be higher than for dental, and much higher than for long-term or short-term disability benefits. But the results also suggest that the percentage of workers who refuse a benefit may be increasing by 2 or more percentage points for many products, including LTD and STD benefits, Shunney said.

Sun Life also found evidence that workers think facing a big dental bill would be about as much of a problem as facing a disability leading to a loss of income, Shunney said.

Shunney recommended that disability insurers try to expand their market by going beyond insuring white-collar workers, and by working harder to come up with ideas for new products and new approaches to marketing.

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Shunney praised Unum Group Corp., Chattanooga, Tenn. (NYSE:UNM), for its efforts to develop the Simply Unum program, which gives employers access to a menu of modular benefits products, including traditional, employer-paid disability products and voluntary, employee-paid disability products.

Shunney also praised the Aflac Duck marketing campaign developed by Aflac Inc., Columbus, Ga. (NYSE:AFL).

“Look at Aflac and how much Aflac has changed the game,” Shunney said, “People talk about them by name, and they’re starting to call on brokers more and more.”
Sun Life itself recently began running a campaign to promote awareness of its own brand, Shunney said.

Also at the JHA conference:

- Maggie Leyes was helping the Life and Health Insurance Foundation for Education, Arlington, Va., round up support for the May 2010 Disability Insurance Awareness Month campaign.

Last year, disability insurance company executives were distracted by the financial crisis. This year, “I would say [support] is stronger than last year,” Leyes said. “Now that the economy has stabilized somewhat, people are better able to focus on the task at hand.”

LIFE believes the task is to help consumers understand the risk of disability and understand the need to “protect your paycheck,” Leyes said.

- Kenneth Millsap was showing off the Disability Logic! System for Crowe Paradis & Albren L.L.C., Wakefield, Mass. Crowe Paradis helps people with disabilities apply for Social Security Disability Insurance. The Disability Logic! can predict who likely an applicant is to succeed at getting SSDI benefits.

Crowe Paradis used data from insurers and other sources to develop the system.

One surprise: Crowe Paradis staffers who reviewed the data inside the system have found that applicants in the Northeast have an above-average chances of success, applicants in some parts of Texas have a below-average chance of success, and applicants in the Midwest are somewhere in the middle.

- Graham Cox and Gregg Hirsch suggested that insurers should think through the legal implications before they sell, and price, packages of basic group life insurance and extra, optional life insurance. In theory, if a company increases the optional life price to subsidize the basic life insurance, or vice versa, the company could run into problems with antidiscrimination laws, the Employee Retirement Income Security Act, and, in New York state, a law that requires each group life policy to be “self supporting,” the speakers said.