Checking-In on the DI Market
As a businessperson, it’s prudent to check the pulse of your industry from time to time. You become so engrossed with the daily grind and your company’s performance that you are destined to become myopic at times and lose sight of the industry as a whole.
The current status and outlook of your general marketplace is certainly an indicator of the future and how your business in particular may be affected. Fortunately for the brokers, agents and advisors in this country, several reputable sources have been closely monitoring the progression of the American life/health insurance industry; the results are in on the disability sector and the news is good.
Actuary and consulting giant Milliman released a thorough survey of the disability insurance industry last year. Indications from the survey relate the highest levels of new annualized premium in the DI market in over 20 years. In fact, there has been steady profitability in the market over the last five years. From 2011 through 2015, profit margins have averaged 10.5% which is remarkable given the inherent financial investment climate of low interest rates.
Another positive sign of the flourishing DI market is that in addition to the increase in new premium, companies are also seeing a comparable growth in the number of new policies written. The number of insured persons is growing organically which is in contrast to previous years where industry competition and participation limitations stunted growth exacerbated by clients simply moving their business from one company to another. Since 2010, there has been a significant uptick in the number of new clients fresh to the DI market.
The Milliman survey further went on to address the challenges still facing the disability insurance industry. DI continues to be relatively obscure in the life/health world when compared to medical and life insurances. The number of insurance companies that actively market and distribute the product is but a small fraction of the number of life companies out there. Furthermore, most American life and health agents and brokers aren’t familiar with the nuances of the DI market, nor are they regular prescribers of the coverage to their clients.
The prospective clients themselves are an additional challenge. Most working Americans think they are infallible, especially the large contingents of Millennials who still tend to be lackadaisical in recognizing the virtues of income protection insurance.
A lesser threat to the industry identified by Milliman is the competitive nature of the business and carrier focus on the physician and white-collar markets. Companies are not shifting attention to the middle markets as much as they should, leading multiple insurers to fight over the same business which in turn softens the upper markets and drives rates, profits and commissions lower.
So what does all of this mean to the future of the industry? Well, it seems the industry is on the right track, and is actively addressing issues that have plagued it in the past. But further adjustments can and need to be made. More education from a public platform is vital to the progression of the market. Also, insurance companies and brokerage houses must take a more proactive role in providing education and guidance to agents and brokers. Every insurance professional needs to know how important disability insurance is to their clients, and how profitable the sales can be.