Lehman: Initial Group LTD Rates Unrealistically Low

NU Online News Service, March 8, 2:52 p.m. – Many group long-term disability insurers seem to be winning new customers by offering unrealistically low initial rates, in the hope that they will somehow get big increases on policy renewals, according to a research note from Lehman Brothers Inc., New York, on a major Fort Myers, Fla., disability insurance conference.

Group LTD premium revenue grew only 6% in 2001, analysts Eric Berg and E. Stewart Johnson write, citing preliminary figures from John Hewitt & Associates Inc., Portland, Maine, the disability consulting and management firm that organized the conference.

"One theme we heard over and over during our conversations here is that the group disability business remains brutally competitive," the analysts write."Pricing conditions in the group-disability business today appear to be evocative of what goes on routinely in the car-rental business: There are standard rates but no one pays them. Everyone gets some sort of discount, and there always seems to be someone who is willing to work for less."