The 2018 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 2017 and 2018. In total, 25 disability insurance companies contributed to the 2018 survey. Milliman’s Jennifer Fleck and Paul Correia provide more perspective in this paper.
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.
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.
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.
An employer’s decision regarding whether to insure its short-term disability (STD) plan depends on several factors, including the employer’s size, risk appetite, historical STD experience, desired plan design, cost considerations, and available resources. Milliman’s Tasha Khan provides more perspective in her article “Short-term disability: To be or not to be (self-funded)?”
Here is an excerpt:
STD plans typically pay a portion of lost income when an employee is disabled due to illness or injury. Usually STD covers the period of time between when sick leave/paid time off runs out and when long-term disability (LTD) benefits begin. Compared with life insurance or LTD insurance, STD is a high-frequency and low-severity benefit (i.e., there are many claims with relatively low benefit amounts, similar to most medical claims). This means that even smaller employers can quickly develop meaningful historical experience. Insurers generally consider STD claims experience to be fully credible at roughly 500 to 1,000 lives (varying by insurer and by benefit waiting period). This means that for a group with 500 or more employees, the insurance company will estimate the group’s future claims based primarily on that group’s past paid claims. This does not mean that future claims will be exactly equal to past claims; it means only that past claims are stable enough to be a useful predictor of future claims.
Due in part to this stability in claims experience over time, larger employers tend to be more likely to self-fund their STD benefits than smaller employers. For an employer with, say, 50 lives, STD claim payments could swing dramatically from year to year, making budgeting for these costs difficult. An employer with 5,000 lives, on the other hand, may expect claim payments to remain fairly stable from year to year.
Another consideration is the employer’s tolerance for risk. Even with a large and fully credible group, STD claims experience will change from year to year due to random volatility (as well as for other reasons, such as a particularly nasty flu season). With an insured plan, on the other hand, the premium to be paid is determined in advance, so the employer knows exactly what it will pay for STD coverage. The annual volatility risk is borne by the insurance company (although longer-term experience trends will ultimately be reflected in the premium rates charged by the insurer).
When choosing to self-fund, an employer should monitor its STD plan experience over time. Periodic experience studies help the employer understand how its plan is performing and make adjustments as needed. Such modifications may include revising the rates charged to employees or groups for the coverage, adjusting the liability calculations for claims that have been incurred but not yet fully paid, and reevaluating plan design and claim management practices. These types of studies may require the help of actuarial and financial resources. With an insured plan, the insurance company handles these functions….