Trends Affecting the DI Market Today
According to last year’s Milliman survey of the industry, the disability insurance marketplace is thriving and stronger than it has been in 20 years. Much of that success is in part due to the relatively soft DI market and the slowly increasing number of life companies that are expanding their portfolios and offering more disability insurance products. Low interest rates and mediocre investment opportunities are forcing many insurers to battle for higher levels of gross premium. Consumers, whether they know it or not, are experiencing carrier competition that is generally driving disability policy premiums lower and pushing benefits and participation limits higher along most underwriting categories. DI underwriting is more liberal today than it has ever been, and we are seeing new trends affecting the market.
Insurance companies have traditionally catered to preferable risk selection among classes like physicians, attorneys and the high-end white-collar market. But disability carriers have begun to expand their marketing reach to Middle America and are finding profitability in the more recently-defined and greatly-expending grey-collar sector. Streamlined underwriting platforms have allowed insurers to effectively market more affordable insurance programs to occupation classes that in the past would usually balk at disability premiums. Much of that streamlining directly correlates to technology evolution and advances in automation.
Embracing contemporary technologies, disability carriers are finally making some inroads to the rest of the insurance industry by exploiting client receptiveness to digital advertising and social media marketing. Gimmicks like smart-phone apps and insurance calculators have become commonplace. Also, companies are beginning to offer user-friendly online enrollment platforms that provide quicker, easier underwriting and policy issuance.
Carriers and wholesale distributors are also working to make disability sales more attractive to brokers and agents by putting quoting engines and policy comparison software in their hands. But many of these novel tech advances have also broken down barriers between insurance companies and the end-line consumer, allowing for increases in direct marketing and sales which further weakens the traditional roles of independent insurance agents in this country.
The disability market is also seeing frequent back-office movement and changes in underwriting methodologies that make disability insurance sales more attractive to clients and easier processing for retailers.
Many domestic and international DI industry players have broadened their marketing of simplified-issue and guaranteed-issue plans on both group and individual chassis, allowing them to downsize their frequent use of expensive medical underwriting staff and save on costly and time-consuming policy paperwork generation. These overhead expense savings, theoretically, in turn translate into lower premiums for the consumer.
Besides the hefty discounts associated with simplified and guaranteed-issue underwriting, insured persons enjoy comprehensive disability benefits with a fortuitous lack of medical condition exclusions. Furthermore, prospects are spared the inconvenience of intrusive paramedical exams and blood and urine draws.
As is evident from the popularity of plans employing simplified underwriting, insurance companies are more frequently utilizing comfortable risk pools to pass savings on to consumers while expanding market reach. That pooling of risk has become beneficial even throughout the individual DI market considering the recent up-tick in association-sponsored disability insurance platforms.
Professional associations have flooded the DI market with so-called “proprietary” offerings of income protection benefits to their memberships on a voluntary simplified or guaranteed-issue basis. However, the marketing of many such programs seems to be quite hands-off and has therefore been widely unsuccessful.
Despite the immense volume of digital-based marketing and online enrollment programs found in the personal lines insurance industry today, the reliable source of disability insurance sales remains in the hands of experienced agents and brokers. Disability insurance still doesn’t sell itself and client/advisor relationships still reign supreme.
Much of the business world around us now takes place in the digital realm, but it seems that the DI market, although certainly testing the waters, is not quite fully there yet.
*Reprinted with permission from Advisor Today Magazine