Individual disability insurance sales might double next year because of the greater gig economy, according to a Forrester researcher.
That prediction is based on inquiries the research firm has been getting from insurance companies, said Ellen Carney, principal analyst, application development & delivery at Forrester Research. The finding is one of the trends the firm identified to watch 2021.
The group disability market is far larger than the individual market, so why are carriers asking about the individual market? Probably because insurance companies are following where workers are going, especially with the pandemic's impact, Carney said.
The Growing Gig Gap
The ratio between full-time employees and gig workers has been reversing since 2001, to the point that one study observed that employees are becoming an “endangered species,” Carney said.
Carriers have noticed that group coverage is dropping and that there is a growing pool of workers who are not covered by traditional products such as disability insurance, which has seen flat sales in recent years. But, although carriers may be more interested in the individual market, they might not end up selling the traditional DI product. A key reason is price.
Carney acknowledged that some consumers might encounter sticker shock if they shopped for disability. So, new products might follow a parametric coverage model, which would provide income replacement but not at the same level as traditional coverage.
“It basically doesn't completely indemnify you,” Carney said. “It's a trigger-based insurance coverage. You see it for all kinds of potential risks. But it makes a defined payout, as opposed to ‘we’re gonna pay you forever.’
Instead of replacing income for a period, it could provide a grant of $30,000, for example. Although the benefit is lower, that approach has another upside besides lower price.
There is a less onerous process to receiving the benefit and no clawback from Social Security or Medicare.
Sales Opportunity For Digital-Savvy Agents
Carrier interest in innovating disability products should be good news for agents, particularly those who could be described as independent, digital, multiline agents, which Carney estimated makes up about 20% of the independent field force.
“These independent agencies or advisors have a rather nice digital profile,” Carney said. “They in many senses emulate the best of like a Geico or a Progressive. I think these are the guys that will do quite well with distributing this to an audience of gig workers.”
These are the independent agencies investing in tools such as a chatbot on their site so they can be efficient and user-friendly.
“You've got mobile apps, you've got great websites, you've got chat bots, you’ve got click-to-call-back, a lot of capabilities from a digital perspective,” Carney said. “And the beauty of it is it keeps the keeps the consumer from calling the carrier.”
Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected]
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