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COVID-19 Hangs Over Individual Disability Market: Milliman

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What You Need to Know

  • Between 2018 and 2019, the number of new policies sold fell 6.6%.
  • Premiums from the new policies sold increased 0.4%.
  • Some survey participants worry about a lack of advisor interest and a loss of home office market knowledge.

U.S. sellers of individual disability insurance have been doing well — but some say the COVID-19 pandemic is starting to affect claims.

One insurer told disability market trackers at Milliman that it has seen a 200% increase in claim notices resulting from COVID-19.

Another said it has seen a “significant increase in claims based on risk of disability due to potential exposure to COVID-19.”

Robert Beal and Tasha Khan have included those observations in a newly promoted Milliman individual disability issuer survey report that was created in September 2020.

The Milliman Individual Disability Market Report

Milliman is a Seattle-based actuarial consulting firm. Beal and Khan based the report on questionnaire responses collected in late 2020, after the first two waves of COVID-19 cases had passed.

The results include responses from 15 insurers. Those insurers account for about 90% of U.S. individual disability insurance sales.

Gen Re released another individual disability market survey report earlier in the year. That report was based on questionnaire responses from 16 insurers.

Market Performance Data

Some of the latest market performance data in the Milliman report is for 2019, and some is for the first half of 2020.

More on this topic

The Milliman analysts found that, between 2018 and 2019:

  • The number of new individual disability policies sold in the United States fell 6.6%, to 270,000.
  • New annualized premiums from new policy sales increased 0.4%, to $402 million.
  • The percentage of new policies purchased by doctors and surgeons increased to 32%, from 30%, as the percentage going to lawyers held steady at 6.4%.
  • The percentage of new policies sold by career agents fell to 40%, from 42%, and the percentage sold by brokers increased to 43%, from 41%.

The midyear 2020 numbers show that COVID-19 hit sales growth hard.

In 2019, seven insurers reported an increase in new annualized premiums from new individual disability sales. The median participant reported a 2% drop in sales.

In the first half of 2020, just five insurers reported higher individual disability sales than in the first half of 2019. The median participant reported a 3% drop in sales, and two insurers reported decreases of 33% or more.

Survey Participant Observations

Milliman asked the survey participants many questions about how the individual disability market looks to them.

Many of the participants reported seeing stable or improving claims experience, and some said their companies are more interested in the individual disability market.

Advances in technology have been helping more disability insurance claimants return to work, and loss ratios at typical issuers have been stable.

In response to a question about unfavorable trends, many participants cited low interest rates, COVID-19 and uncertainty about the economy.

In the long run, participants said, possible threats could include a general lack of consumer awareness of the need for disability insurance, an aging client base, young advisors’ focus on asset management business, and a loss of home office knowledge about the individual disability market.