New annualized premium in the individual disability insurance market saw its highest year-over-year percentage increase in more than 15 years as it hit $392.2 million in 2015. This was an increase of 5.8 percent over the previous year, as insurers broadened their reach and claims incidence remained stable, according to new research published by Milliman.
Individual policy counts also rose, inching up 6.5 percent to 243,371 in 2015 from 228,437 in 2014.
“What Milliman’s IDI Market Survey reveals is that 2016 presents a much healthier picture of the market than in many past years,” said Milliman consulting actuary Robert W. Beal, survey author.
Milliman's survey, along with research published by General Re are among the two most widely followed market research reports in the industry.
An individual disability insurance policy typically replaces at least 60 percent of a wage earner’s income in the event that the employee can’t return to work. DI traditionally has been seen as a harder sell than other insurance products.
Executive Occupations Notch Highest Growth Rates
New DI premium growth rates in 2015 rose the most over the previous year in the following occupational categories: executives (10.2 percent), dentists (6.3 percent) and doctors (4.2 percent), according to the survey.
Year-over-year growth rates shrank among lawyers (-4.9 percent) and accountants (-1.4 percent).
Contributing to the favorable market trends were new product introductions using simplified underwriting, coverage for part-time employees, occupational reclassifications and rate changes, the survey said.
Premium and policy count increases in 2015 represent a bright spot in an otherwise tepid market for income replacement.
Life insurance products and annuities often represent an easier sell for many agents. Consumers either find individual disability coverage expensive or they don’t see a need for it because they can get it through an employer group plan at work, according to disability income experts.
But disability insurers aren’t standing still.
The DI industry has seen a number of improvements to its distribution model as well as changes to DI sales and support in recent months. These changes include electronic applications, simplified issue when sold in conjunction with a life application, online tools for agents to estimate rating and premium in real time, and better illustration tools.
Earlier this year, Mutual of Omaha announced new flexibility features to its Priority Income Protection disability insurance suite.
One feature allows the policyholder to choose his or her monthly benefit amount up to a maximum of $2,000. The other allows the policyholder to choose the benefit period of 12, 24 or 36 months, the company said.
“Overall, the industry is much stronger in terms of premium,” said Larry Schneider, a disability insurance agent with 40 years of experience, who was not connected to the survey. “Carriers are more aggressive and underwriting is easier and benefit amounts have increased.”
2016 Off to Strong Start
For the first six months of this year, annualized premium has increased 7.2 percent compared with the first six months of last year as DI coverage penetrates further into the corporate executive segment, the survey found.
Last year, 25 percent of new individual DI annualized premium was generated by the corporate executive occupational category. This was the highest percentage since 2008.
With the April announcement by MetLife that it would suspend new individual disability insurance sales effective Sept. 1, agents may have looked to other insurers to supply coverage in the lucrative segment that MetLife controlled, industry experts said.
Disability insurers are also quietly trying to broaden their base as deepening penetration into their traditional stronghold among medical professionals makes every additional disability policy sale more difficult.
Last year, 30.9 percent of new individual disability insurance annualized premium was generated by doctors and surgeons, the industry’s sweet spot. This penetration rate has held steady since 2010, according to Beal’s research.
For three of the 10 insurance companies contributing to the category data, doctors and surgeons comprised over 40 percent of new premium last year, with one in three exceeding 50 percent, the survey found.
With disability insurers having achieved a healthy penetration among doctors, the market is “very viable and wide-open” for insurers to sell coverage to other occupations, said Schneider, head of the Disability Insurance Resource Center.
“The doctors market is fairly saturated at this point,” said Beal. “Companies are aware of the lack of diversification and shifting to the middle market and to millennials. They (companies) want to tap into that. They will give it attention.”
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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