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Life Health > Life Insurance > Term Insurance

Bad News for Pessimists

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It’s official: despite the nearly universal agreement that everything is getting worse, something is getting better: The likelihood that a group long-term disability insurance(LTD) claimant will recover is about 20% higher in the new claim termination tables than in the old tables.

The Society of Actuaries (SOA), Schaumburg, Ill., published that finding in the 2008 Long Term Disability Experience Study report, which is based on records of 1.2 million claims on the books of 21 U.S. disability insurers from January 1997 through December 2006.

The SOA brought in four times as many claim records as it collected when it analyzed 1995 LTD experience survey data for the 1996 Group Long-Term Disability Insurance Report, and far more than it used when it produced the 1987 Commissioner’s Group Disability Table, according to Roger Martin, a senior vice president at a unit of Unum Group Corp., Chattanooga, Tenn., and the SOA’s 2008 group LTD committee chair.

The 1995 study – Table 95a – is used by pricing actuaries but has never achieved official, statutory pricing standard status. The document still used for official purposes – the 1987 table – was adopted when President Reagan was in office and the Soviet Union was still united.

About 50% to 60% of the group claimants included in the 2008 study eventually recovered, and, over the course of the study period, typical recovery rates increased by about 10 percentage points to 15 percentage points.

The improvement may be due partly to changes in the mix of claims received, but it may also be a result of improvements in medical care and in insurers’ claim management and return-to-work programs, Martin said.

Variations in recovery rates were much bigger than variations in mortality rates – a possible sign that some carriers may have room to improve their return-to-work efforts, Martin said. The actuaries also saw slow, steady improvement in group LTD claimant death rates.

Mortality for the general U.S. population has been increasing at an average rate of about 1% per year. For group LTD claimants, mortality improvement has averaged 0.25% per year.

Mortality rates for workers who have recently filed group LTD claims linked to cancer continued to be high, but, after about five to seven years, death rates for claimants with cancer were about the same as the death rates for claimants with other conditions, Martin said.

“That was a new finding,” Martin said.”

When the SOA gathered data for the 1987 tables, it did not ask for any information about claimant diagnoses. For the 1995 tables, it put claims in just 4 different categories -maternity, mental and nervous, AIDS/HIV, and “all other.”

The SOA has now handed the 2008 table off to the American Academy of Actuaries (AAA), Washington, which is working with the National Association of Insurance Commissioners (NAIC), Kansas City, Mo., to try to use the study as the basis for a new statutory pricing document.

The SOA is preparing to ask the 21 companies that participated in the 2008 survey to provide data on claims experience for the period from 2007 through early 2011. Actuaries hope the new data will help answer questions about the effects of the recent economic slump group LTD claims and group LTD return-to-work efforts.


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