Whenever I do trends it seems to be one of the most popular features I do. I thought it might be fun to look back over the last decade of disability to see where we were, were we are today, and what those trends might tell us looking ahead. I will look at the companies still in the business, product pricing, definitions of disability, issue limits, participation limits, product features, profitability, and sales growth. Hang on as we have a lot to cover, but this has been most interesting for me and I hope it will be for you.
10 years ago there were more companies writing disability than there are today. Some notable companies that left in that time period were MONY, Minnesota Life, and Mass. Casualty. To get the real picture on this trend however you have to look back to 1990 because between 1990 and 1997 80 disability carriers left the market. Some notables on that list would be Equitable, Monarch, Maccabees, New York Life, and National Life of Vermont.
Today there are 20 companies still offering disability products and many of those only offer it through their captive agency field force. Today as a broker you have about 10 choices for companies that will allow you to represent their products and of those 6 are competitive in the white collar market.
Pricing for disability products has actually been coming down recently. As the industry has had some stability over the last seven years it has enabled companies to look at different cells for profitability and they have found more profitable cells than unprofitable ones. They have taken faster action to correct bad cells and this has allowed other cells to move up into higher occupation classes thus effectively reducing premiums. In addition to that with only two re-insurance companies left in the disability business the risk pool is credible in terms of scale, and scope so with our re-insurance partners we can arrive at better decisions on risk pools which benefits the consumer whose occupation is in a good risk cell.
Definitions of disability have been up and down over the last 10 years. In 1995 certain companies tried to move the market to an income replacement model sold on a guaranteed renewable chassis but that did not work. Today most white collar carriers offer own occupation to age 65, 67 or 70, and on a non-can chassis. All Medical and Dental specialties can find a carrier that has own occupation definitions for the full benefit period.
Issue limits 10 years ago were $10,000 a month with many carriers and some limited the benefit they would write to $7,500 a month. Today you can find carriers who will issue up to $16,000 of monthly benefit in the traditional policies and up to $100,000 in the non traditional policies.
Participation limits which were at $10,000 a month 10 years ago are now up to $25,000 a month in conjunction with underlying group LTD and $20,000 with other individual DI. Business Overhead Expense coverage was limited to $20,000 10 years ago and we can now get $40,000 a month for your clients with an extra $20,000 a month to hire a replacement.
Product Features: 10 years ago most carriers were leaving key man disability and until just recently no company was offering that product. There is now a carrier who has come back into that much needed market. CAT was not available 10 years ago but is common place today on all contracts. The first CAT riders would insure for up to 80% of income with a maximum of $6,000 a month. Now we cover up to 100% of income with an $8,000 a month benefit. Good Health benefits to reduce the waiting period each year that you don't have a claim did not exist 10 years ago. Own occupation in the medical and dental business did not exist 10 years ago but is now common place. Retirement Security, which will allow extra benefits to be paid to a trust for use at retirement continues to be a strong new product. You can expect to see new an innovative riders going forward.
Profitability: After 11 consecutive years of running in red ink as an industry profitability has returned and the industry as a whole has been in the black for 7 consecutive years. That has allowed for the pricing breaks, higher limits, and enhanced products we see today. A recent very interesting phenomenon has been on the claims side. In every recession we have had claims go up without exception. This recession so far has been different in that claims have not increased. We think this might be due to the consumer debt which has now passed GDP levels, and even those who would like to file a claim do not because of the drop in pay they would get from their policies and the fear of their job not being there when they returned. This may not be accurate and claims may go up suddenly as we continue to see the economy stressed.
In conclusion the disability industry is very healthy again. Sales are up but not at significant levels like we had in the 1980's and early 90's. Brokers left the disability sales market as their companies exited the business, and many just soured on the product in general due to the turmoil the industry went through. Stability seems to have returned with more sensible product offerings, good risk assessment, and proper pricing models. As new companies have emerged in their emphasis on disability sales we are starting to see a return to this product which has served the consumer so well. We hope you will be part of the resurgence in this much needed risk relief for your clients especially in this economy where their number one asset is their ability to work. Please e-mail us with comments or questions concerning this material.
Much of this is based on my own experience but is also backed up with information obtained from JHA, the disability research arm of Gen. Re. 
