Mutual Of Omaha Tries Simplicity To Stir Disability Market

Individual disability income coverage is a tough sell these days for many insurance companies.  But a new simplified disability income policy from Mutual of Omaha could help generate interest in the stagnant income protection market.

The policy, marketed as Priority Income Protection, is the company's latest offering.  Mutual of Omaha is positioning the product as a simple and budget-friendly alternative to many disability policies in the market.

“Our market research shows that individuals seeking disability insurance want affordable plans, options for coverage amounts, and an easy-to-understand product,” Stephen Abels, senior vice president of Individual Pre-Retirement Solutions, said in a news release.

May is Disability Insurance Awareness Month and disability insurance companies use the month to bring attention to the value of that coverage.

Two features of Mutual of Omaha’s Priority Income Protection should attract policyholders. One feature allows policyholders to choose their monthly benefit amount up to a maximum of $2,000.

Another feature allows policyholders to choose a benefit period of 12, 24 or 36 months.

Priority Income Protection is ideal for applicants who prefer a simple policy in plain English, don’t want to undergo a medical exam, prefer budgetary flexibility and work in occupations for which coverage is more difficult to obtain.

Individual DI a Relatively Small Market

In the individual market, streamlining insurance policies so that they are more understandable and easier to sell is part of a deliberate approach by insurers in search of new, younger consumers in an era of low interest rates and slow policy growth.

Individual disability  insurance represents a tiny sliver of the insurance market with in-force premiums of nearly $4.8 billion among 18 disability insurers in 2014, according to Gen Re’s 2014 U.S. Individual Disability Market Survey.

In 2014, new sales premium of individual disability insurance rose by less than 1 percent to $384.4 million over the previous year, Gen Re also reported.

In March, MetLife announced it was suspending individual disability insurance sales but agents and wholesalers said the move would not have an immediate impact on pricing. Any short-term premium increases would have more to do with low interest rates than with a shrinkage in supply, distributors said.

Disability insurance can seem abstract, said Eric Reisenwitz, senior vice president of Group Protection Product and Operations with Lincoln Financial Group, and that is often a reason  people shy away from the coverage, even if they understand its importance.

“We insure our homes, our cars, and ourselves. Why wouldn’t we insure our income?” Reisenwitz said.

Disability insurance typically covers 60 percent of income lost because of a disability. U.S. government statistics show that a high portion of the population will become disabled at some point during their working lives.

Perception, Coverage Lags in Group Market

Only 67 percent of employees who are offered disability insurance through the workplace actually enroll, according to Lincoln Financial’s 2015 Special Report on Measuring Optimism, Outlook and Direction (M.O.O.D.) of Employee Benefits.

Employees who buy disability coverage through work often benefit from lower premiums than those available in the individual market.

Still, even in the group market, objections for not signing up range from “unnecessary right now,” to “too expensive,” the Lincoln survey found.

Government statistics indicate that many people are misinformed when it comes to how frequently disability affects people.

More than 25 percent of today’s 20-year-olds will become disabled before reaching retirement, according to the Social Security Administration.

In addition, more than 37 million Americans — 12 percent of the total population — were classified as disabled, according to a 2011 U.S. Census bureau survey.

The point is that disability happens more frequently than many people think, according to the Council on Disability Awareness.

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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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 [email protected].