Disability claims skyrocket, raising new puzzle alongside ‘excess mortality’

Along with a baffling rise in post-pandemic mortality rates that has insurers stymied, the number of Americans claiming disabilities has skyrocketed since 2020, adding another puzzling factor that could impact corporate bottom lines.

After rising slowly and steadily since the turn of the century and hovering between 25 million and 27 million, the number of disabled among the U.S. population rose nearly 35 percent in the last four years, to an all-time high of 38,844,000 at the end of November, according to the U.S. Bureau of Labor Statistics.

Reasons behind the stunning increase vary, but many seem connected to the COVID-19 pandemic. A sizable number of COVID-19 survivors claim long-term health issues, the so-called Long COVID, which includes symptoms like chronic fatigue, respiratory problems, and neurological impairments. The CDC estimates that 15 million Americans may have Long COVID symptoms as of 2024, with some experiencing debilitating conditions.

The CDC and World Health Organization have recognized Long COVID as a contributing factor to rising disability rates. Moreover, the COVID-19 virus has shown to worsen pre-existing chronic conditions, like diabetes, cardiovascular disease, and autoimmune disorders, also leading to increased disability rates.

Mental health disorders also surge

Along with those ailments is the surging levels of anxiety, depression, and other mental health disorders, from pandemic-related isolation, loss of loved ones, financial hardships, and economic uncertainties. Many mental health conditions are classified as disabilities under U.S. law when they significantly impair daily functioning.

Finally, the transition to remote work has led to a rise in ergonomic injuries such as back pain and repetitive strain injuries due to poorly designed home office setups. While remote work reduced some risks, it increased sedentary behavior and musculoskeletal issues, heal h experts say.

Added to the natural increase in age-related disabilities and greater diagnoses and reporting among the aging baby boomer population, the number of people with disabilities is expected to continue to rise, experts say, further stressing financial and operational pressures on disability insurers.

“As the workforce decreases due to a rising number of individuals claiming disabilities, the target market for insurers offering workplace benefits also decreases,” says Samantha Chow, Global Leader for Life Insurance, Annuities and Benefits Sector at Capgemini, a multinational consulting and IT services company. “With declining participation rates due to inflation and rising cost of living, this will ultimately impact the revenues of these insurers.”

Additional protections needed

On the other hand, Chow said, as these individuals exit the workplace, they will have a need for additional insurance protection that they would otherwise get through their employer, such as dental insurance, long-term care, critical illness, and life insurance.

“This will increase the target market opportunity for insurers who offer individual products through agents or direct-to-consumer,” she said.

Indeed, awareness of the importance of disability coverage may rise, creating opportunities for insurers to expand their customer base. Meanwhile, employers might invest more in group disability coverage for their employees, especially as workplace wellness gains importance.
Such gains and opportunities could, however, be offset by a boost in disability and long-term claims, raising insurers’ liabilities, experts say, as well as a need to increase reserves in anticipation of payouts.

“With decreased income, many individuals will be limited on the protection products they can afford, limiting them to very low face/minimal coverage products,” Chos said. “While there may be an increase in individual policies sold, the revenue gains will be minor for these insurers.”
Insurers that adapt and invest in risk assessment, customer service, and wellness initiatives may turn these challenges into long-term growth opportunities.

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Doug Bailey is a journalist and freelance writer who lives outside of Boston. He can be reached at [email protected].