Disability Sales Premium Rises 14 Percent in 2016

New sales premium for group long-term and short-term disability rose 14 percent to $2.3 billion in 2016 over the year-ago period, according to new data.

The improving economy and receding challenges with major medical coverage under the Affordable Care Act are credited with the rising numbers, experts said.

Long-term disability (LTD) premium from new sales rose by 15 percent to $1.4 billion and short-term disability (STD) premium rose by 12 percent to $858 million, according to the Milliman U.S. Group Disability Market Survey.

“It was a great year for sales and growth,” said Milliman actuary Paul Correia, who co-authored the report with colleague Jennifer Fleck. “There were a lot of positive trends and we’ll have to wait to see if they persist.”

There was a smattering of new first-time buyer business in 2016 compared to 2015, Fleck said.

Combined LTD and STD in-force premiums for the 20 insurers participating in the survey was $2.3 billion in 2016, up from $2 billion in 2015, the survey found.

Average LTD premium per life for new sales grew 1.1 percent to $222 in 2016 over 2015, and average STD premium per life for new sales in 2016 dropped 3.1 percent to $183 over the same period, the survey found.

LTD policies typically replace 60 percent of a wage earner’s income in the event the employee cannot return to work and STD policies replace a portion of income for up to two years.

Twenty disability companies contributed data to the 2016 edition of the annual survey, Milliman said.

Increases Tied to Broader Economic Trends

Lower unemployment and the rise in payroll growth, even if modest, have done their part to fuel premium growth in the group disability market.

Unemployment ended 2016 at 4.7 percent, but started 2015 at 5.7 percent, according to the Bureau of Labor Statistics.

Average hourly wages rose by 10 cents in 2016 over 2015, which represents an annual growth rate of just under 3 percent, NBC News reported earlier this year.

Insurers have also spent time rethinking their distribution relationships with benefit brokers and adding client-facing technology to enable people to enroll online, the Milliman actuaries said.

Disability insurers have improved their pricing and underwriting models by analyzing larger data sets or what is sometimes referred to as big data, Fleck said.

A new law in Maine, while not relevant to 2016 group disability numbers, could have an impact on 2017 group disability premiums.

The law offers employers tax incentives and opt-out provisions to promote greater participation in disability coverage.

Titled “An Act to Encourage Maine Employers to Offer and Employees to Enroll in Disability Income Protection Plans in the Workplace,” the law went into effect Jan. 1.

Other states are considering similar legislation.

IDI Market Report Published in October

In the individual disability income (IDI) insurance market, new premiums rose 5.8 percent to $392 million in 2015 over 2014, Milliman reported last year in a separate report.

The increase was due to insurers broadening their reach and to claims incidence remaining stable, said Milliman consulting actuary Robert W. Beal.

The year-over-year percentage increase was the highest in the IDI market in more than 15 years, Beal said.

The IDI market survey is released in October.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at cyril.tuohy@innfeedback.com.

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at cyril.tuohy@innfeedback.com.