Issuers of U.S. individual disability insurance coverage might have rejected a higher percentage of the applicants in 2018 than in 2017.
Analysts at Milliman, an actuarial consulting firm based in Seattle, have included figures supporting that possibility in results from a recent survey of 15 U.S. individual disability insurance issuers. The participating insurers account for about 90% of U.S. individual disability insurance sales.
Robert Beal ad Tasha Khan ran the survey project.
The survey team asked about many topics, including the maximum amount of coverage available to people at various income levels, the occupations of the new policy purchasers, and sales volume.
The analysts found that:
- The number of policies sold increased 13% between 2017 and 2018, to 289,000.
- New annualized premiums from new policy sales increased 1.5%, to $401 million.
- The percentage of new policies purchased by doctors and surgeons fell to 30%, from 31%, as the percentage going to lawyers increased to 6.4%, from 6.1%
- The percentage of new policies sold by career agents held steady at about 42%, and the percentage sold by brokers held steady at about 41%..
The analysts also gave details on trends in underwriting. The analysts based the data for the underwriting questions on answers from 12 insurers for some questions and 13 insurers for others.
The percentage of individual disability insurance applicants who received clean, “issued as applied” decisions increased to 53% in 2018, from about 52% in 2017.
The percentage of applicants who received rates that were higher than they’d expected, or coverage terms that were tougher, fell to 30%, from 32%.
But the percentage who received a flat rejection increased to 16.6%, from 16.1%.
One reason could be a shift in which issuers sold the coverage.
The Milliman analysts prepared a chart supporting what agents and brokers in the individual disability market have long known: Each issuer has its own, distinctive approach to individual disability underwriting.
One issuer that provided underwriting data rejected only 9% of the applications it received from 2014 through 2018, but it sold the coverage on an “issued other” basis to 46% of the applicants.
Another issuer was more likely to reject applicants but less likely to modify coverage terms: It rejected 23% of the applicants, and it sold issue-other coverage to 17%.
A link to the Milliman individual disability insurance issuer survey is available here.
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