Disability Insurance: Premonitions of Trouble Ahead
As insurance professionals, we must celebrate our current successes and the general good health of the DI market, but we must also be wary of future turbulence and the hazards the industry may soon face.
For the last decade it’s been a buyer’s market which has clearly been beneficial to the consumer. The world’s personal accident (including disability) markets are as “soft” as they have ever been. Among most occupation classes, premiums have remained static for years, and rate deflation has been rampant in the athlete and high-net-worth arenas due to fierce competition. Insurance companies have also been expanding their reach to the middle markets, making disability insurance more affordable and attractive to grey and blue-collar employees, again driving down prices.
It’s certainly a consumer’s market, but that will one day change. Interest rates have remained low and stagnant for years, but the general consensus is that the Federal Reserve intends to gradually increase interest rates in the near future. Over time, rising interest rates will in turn tighten up the insurance markets due to increases in reinsurance rates and decreases in insurance capacity as capital is moved to other financial institutions and securities exchanges. Investors will want to make the most of higher interest rates by moving cash out of insurance and into higher yielding sectors, creating an eventual “hardening” of worldwide insurance markets.
Domestic and international markets are also quite susceptible to increases in claim volume. Natural and political disasters and destructive acts of terrorism can cause markets to react sharply and eventually harden at the detriment of the consumer.
Other concerns raise additional caution. Recently, insurance giant MetLife exited the individual disability marketplace. Fewer carriers are offering DI than ever before, promoting an environment lacking in competition which will eventually drive rates skyward and will hinder the progressive evolution of the industry in general. Archaic product lines won’t be enhanced or modernized as quickly as necessary, which will ultimately detract from the benefits available to your clients.
The solution to all of this concern for the future is simple. Get your clients as much disability insurance as you can…now. Don’t stop at group LTD or basic individual benefits. Be sure to access the Lloyd’s market to acquire coverage up to 65% to 75% of income for all of your clientele, no matter if their needs demand individual or multi-life platforms.
Call Petersen International at (800)345-8816 for additional assistance.