At Frankel & Newfield, we keep an eye on the business side of the insurance business. We recently spotted a survey produced by JHA, by a division of General Re Life Corporation that featured participation by 27 disability insurance companies that reads like a list of our adversaries. It reveals the sad state of affairs for the disability insurance sector.
For the first time in ten years, both Long Term Disability and Short Term Disability premiums are down. The downward trend is clear – LTD sales are down from a 13% growth rate in 2000 to negative 2% in 2009. A few factors are in this mix: many companies have closed, or have let large numbers of employees go. Many employers have chosen to eliminate disability coverage altogether. The ten year combined annual growth rate has reached the lowest level seen by the sector in many years.
The report references a need for increased marketing efforts and adapting policies to meet the changing needs of the marketplace. The recent National Disability Insurance Month was certainly evidence of one way that this sector is trying to step up awareness of the product.
We would wholeheartedly endorse better treatment of claimants as a way to increase sales. With all of the bad news coverage surrounding disability insurance policies, who wants to have money taken out of their paycheck or purchase a private policy, when the expectation is that you won’t be able to get the benefits if and when you need them?
Our primary concern is what the decline in sales means for the individuals who contact our firm because their claim has been delayed or denied. The business model is pretty straightforward – the fewer claims paid, the higher profits for the insurance company. If they are selling less policies, we believe that they will strategically deny more claims, and that it will become harder as time goes on to successfully secure the benefits from a disability policy.