Group Disability Still Limping
By
The aging of the workforce, the soft economy and continuing increases in health insurance premiums are causing problems for group disability insurers.
But brokers, insurance company executives and others in the market say insurers are finding ways to differentiate themselves from the competition.
Most employers that have group disability plans are keeping them.
The downturn in the high-tech industry is just a cyclical event, not a long term decline, says Phil Bruen, a vice president in product and market development at UnumProvident Corp., Chattanooga, Tenn.
"The strong industries are still going to look for good employees and want to keep them, and disability is part of that," Bruen says.
But insurers are having a hard time increasing sales this year.
Survey results from JHA Inc., a Portland, Maine, disability insurance risk management and consulting firm, show that combined revenue for group STD and group LTD policies increased 6% between the first half of 2002 and the first half of 2003, to $4.9 billion. But new sales fell 1% at group LTD carriers, to $788 million, and new sales fell 7% at STD carriers, to $335 million.
At UnumProvident, year-over-year growth in new customers is "probably less than double digits," Bruen says. "Historically its been double digits.
At Standard Insurance Company, Portland, Ore., true growth in the disability market remains at less than 6%, and that rate is similar to the industry growth rate, says Kim Doyle, an employee benefits product development manager at Standard.
Anita Potter, a products research manager at LIMRA International, Windsor, Conn., says most "new" group disability business is now takeover business.
"Carriers have had a hard time selling disability benefits to brand-new clients because of benefits costs increases, especially medical," Potter says.
"Standard does not differ significantly from our competitors in the amount of new business vs. takeover business that we write," Doyle says.
But "most group insurance business is already in force with other carriers," Doyle adds.
In some ways, the group disability market might be growing more traditional: Potter sees carriers being stricter with their underwriting these days because of profitability concerns.
Group disability marketing practices, prices or underwriting procedures have not changed significantly in the past year, according to Doyle.
But "there is more of a focus on integrity, financial stability and responsibility throughout the industry," Doyle says.
But some smaller players have been offering group disability insurance for rates that are much lower than the market average, Doyle says.
"These carriers may not be practicing disciplined and/or sound underwriting practices, due to their lack of knowledge [and] time in the industry," Doyle says. "Unfortunately, these types of practices put pressure on the entire industry at a time when profitability and growth are also under pressure."
Group disability insurers are trying to set themselves apart from their competition with flexible, competitive products, contract features and the addition of extra products and services, Doyle says.
Many carriers are trying to make their existing products work better.
Some companies have added and improved traditional long term disability features, such as medical-expense and housing-assistance benefits, Doyle says.
"These benefits assist disabled employees during an emotionally, and sometimes financially, difficult time," Doyle says.
In other cases, insurers "are working with employers to implement such things as integrated disability management and absence management to help them mitigate the risk and costs associated with absences due to disability and to help them offset some of the additional costs associated with the rise in health care premiums," Doyle adds.
Insurers also are trying to persuade the buyers of their disability coverage to purchase other products.
"The market is so tight that (an insurance company) cannot compete on its traditional product platform alone," Doyle says.
"As a result, carriers are upgrading their service delivery platforms and providing such value-added services as travel assistance."
