Tag Archives: Paul Correia

U.S. group disability insurers experience market consolidation, 7.3% growth in new sales in 2017

Milliman recently released the results of its 2017 U.S. Group Disability Market Survey, a comprehensive report that analyzes the short- and long-term disability (STD/LTD) market, including sales and in-force business.

In total, 25 disability insurers representing over 90% of the market contributed data to the survey, which provides analysis of premiums, cases, and covered lives in 2016 and 2017 for all participating companies. The report ranks participating companies by both STD and LTD in-force premium and new sales totals, and offers insight into current trends in the group disability market.

We’re continuing to see strong growth in the marketplace despite consolidation among U.S. group disability insurers. And while the market consolidation may have played a factor in poorer performance for some insurers in 2017 compared to previous years, overall new sales for STD and LTD markets are up by a combined 7.3%.

Survey highlights include:

• Combined STD and LTD in-force premium for participants was approximately $16.7 billion in 2017 compared with $16.0 billion in 2016.
• STD new sales premiums saw an 8.5% increase from 2016 to 2017, while LTD new sales premiums increased by 6.6%.
• Unum, Lincoln Financial Group, and Cigna retained the top three spots for new STD sales premium in 2017. Unum, The Hartford, and MetLife took the top three spots for new LTD sales premium.
• Average STD premium per life increased by 0.9% for in-force business, and by 2.0% for new sales; average LTD premium per life increased by 2.7% for in-force business and by 3.3% for new sales.

Copies of the full report are only available to participating companies. For a summary of results, click here.

Summary of key results from 2016 U.S. Group Disability Market Survey

The 2016 U.S. Group Disability Market Survey covers employer-paid and employee-paid short-term disability and long-term disability insurance products and includes an analysis of premiums, cases, and covered lives from new sales and in-force business in 2015 and 2016. Twenty disability insurance companies contributed to the 2016 survey. Milliman consultants Paul Correia and Jennifer Fleck offer some perspective.

Paid family leave proposal leaves states with funding issues to consider

President Donald Trump’s 2018 budget proposal includes a paid family leave insurance program for workers in the United States. Under the president’s proposal, states would be allowed to design the paid leave program for their own jurisdictions as long as the benefits meet minimum standards. This means that some states may have a lot to consider when preparing for a new insurance program, such as funding methods, administration, and specific benefit design features. The article “Paid family leave in the United States” by Paul Correia offers some perspective.

Gen Re and Milliman publish 2014 and 2015 U.S. Group Disability Market Survey

Milliman and Gen Re, a leading global life/health reinsurer, are pleased to announce results from their first jointly produced U.S. Group Disability Market Survey.

The U.S. Group Disability Market Survey, originally launched in 1987, has returned after a brief hiatus as a result of a collaborative partnership between Milliman and Gen Re. The report covers sales and in-force results for short-term disability (STD) and long-term disability (LTD) products and includes analysis of premiums, cases, and covered lives from new sales and in-force business for 2014 and 2015.

Highlights from the survey include:

• Total premium was approximately $4 billion for total STD in-force business and $10 billion in 2015 for LTD in-force. This is believed to represent 90% to 95% of the group disability insurance market, with 26 disability insurance companies participating.

• Combined STD and LTD in-force premium was about $14.7 billion among contributing companies, versus $14.1 billion in 2014. STD in-force premium increased by approximately 6% from 2014 to 2015, and LTD in-force premium increased by approximately 3%.

• Combined new sales premium (STD and LTD) was approximately $2.1 billion for 2015 versus $2.0 billion in 2014. STD new sales premium increased by approximately 8% from 2014 to 2015, and LTD new sales premium increased by approximately 2%.

Copies of the full report will be available only to participating companies. For a summary of results, click here.

Captive insurance considerations for group life and long-term disability sponsors

Captive insurance can help employers reduce the costs of group term life or long-term disability (LTD) benefits. This arrangement provides employers with greater control over invested assets and possible tax savings. However, sponsors need to assess the underlying risks associated with these types of captives because they are different from the risks related to traditional captives in the property and casualty (P&C) sector.

In this issue of Benefits Perspectives, Milliman’s Paul Correia presents an overview of the evolving captive insurance market for large benefit plan sponsors. He also discusses significant risks that employers should think about regarding these funding arrangements. The following excerpt highlights some key risk considerations:

• Risk diversification—Employers with existing captive arrangements for P&C coverages may see opportunities for improving their enterprise risk management practices by adding group life and disability programs to the mix. Because P&C risks are often uncorrelated with group life and LTD risks, combining the different coverages under one roof may provide a better spread of risk. The resulting diversification may help mitigate risk by reducing volatility of claims experience. Similarly, an employer that does not have an existing captive and wants to establish one for employee benefits programs may also consider funding its P&C insurance through the captive, in order to diversify the captive’s risk attributes.

• Counterparty risk—Due to the nature of captive transactions that involve U.S. employee benefits, captives depend on the fronting companies to underwrite the risks and adjudicate the claims. The underwriting for group life and LTD insurance depends in large part on very company-specific perceptions of the underlying risks, such as LTD claim termination run-out patterns (i.e., whether benefits are paid for months or decades, depending on the cause of the disability) and group life mortality improvement. The adjudication of group life and LTD claims also tends to vary substantively from one company to another. The fronting company’s ability to effectively underwrite the risks and administer claims is an important risk consideration for employers that use captives to reinsure group life and LTD programs.

• Catastrophic risk—All insurance companies that provide group life and disability coverages are exposed to catastrophic risk. One random event, such as a plane crash, can cause extraordinary losses. This is a particularly important issue for group insurance writers due to the concentrations of risk by employer group and location. Catastrophic risk is a big concern, even for group insurers that have many group customers. It is an even greater concern to captive insurers that insure only one group. The impact of a catastrophic event can be reduced by entering into reinsurance and stop-loss agreements.

Health exchanges pose opportunities and challenges for group life and disability products

The expansion of private and public health exchanges into more diverse insurance markets presents both opportunity and risk to group life and disability insurers. Exchanges promise insurers potential growth opportunities through new forms of distribution. Still, there is uncertainty as to how new business will evolve under these models.

Milliman’s Paul Correia authored a recent article in Best’s Review discussing strategies that group life and disability carriers should consider in marketing products on the exchanges. Here is an excerpt:

Pricing on Exchanges
Many group life and disability insurance companies are still developing their exchange strategies. Those that are considering participating in exchanges are giving serious thought to the inherent pricing challenges.

The lack of historical experience in this market segment poses obvious challenges. First, the demographics and risk characteristics of future insured populations are unknown. Some insurers speculate that exchanges may be popular among cost-conscious employers and first-time buyers of ancillary products, for example, but there are many unknowns, such as variations by employer size or location.

Second, future participation levels are unknown. Most voluntary group life and disability insurance products have minimum participation requirements to mitigate anti-selection risk. But it may be difficult to enforce these requirements in exchange markets.

One-on-one sessions with employees and group meetings at the work site have been effective for boosting participation, but these initiatives likely will not be integrated with exchange enrollment platforms. Insurers may be reluctant to refuse coverage to a case that fails to meet a minimum participation requirement on an exchange. They may also be pressured to dispense with minimum participation requirements entirely.

Finally, there are concerns over allowing plans to be split among multiple insurers. Disability and life insurers typically have been immune to this issue, although it is not uncommon in the large-group medical insurance market. The primary concern is that allowing employees to choose from among multiple insurers’ plans will exacerbate anti-selection risk. The consensus, however, seems to be that exchanges will not split disability and life insurance plans among multiple insurers in the near term, although this could be a subsequent development.

Enrollment and Administration
Group life and disability insurers understand that exchanges can provide valuable enrollment platforms for tapping into new markets. It is likely, however, that some exchanges will be better than others at providing enrollment and distribution support, and some may be able to provide administrative services that others cannot provide.

These insurers should pay close attention to capabilities such as the ability of an exchange to efficiently process changes in employee earnings, or the ability to effectively administer open enrollments of new hires. Exchanges that have solid front- and back-end capabilities should appeal most to group life and disability insurers.

Some group life and disability insurers have not invested in voluntary products and are now faced with the decision of whether to invest in these products and potentially participate in exchanges or not. Insurers that already operate in voluntary markets need to decide what types of products should be offered through exchanges.

Designing products that are attractive to employers is critical. Equally important is the ability to market these products on exchange platforms. Insurers are considering marketing strategies that take advantage of exchange formats. For example, insurers may see opportunities for distributing less-prevalent ancillary products, such as accident indemnity and critical illness insurance, traditionally sold through work site distribution channels. Because exchanges fundamentally facilitate sales of voluntary products, they could prove to be effective at bolstering enrollment and participation in these types of products.

To read the entire article, click here.