In 2018, the disability insurance industry grew nearly 2.3% reaching a revenue of $21 billion, according to IBISWorld. One revenue driver is likely to be the increased outsourcing of both short-term and long-term disability benefits as well as the outsourcing of the administration of the benefits to the insurance carriers. Unum conducted a recent study that showed four out of five employers are now outsourcing long-term disability benefits and three out of four are doing the same for short-term benefits. In the year 2019, we expect this number to rise.
Employees Paying the Bill
Also expected to rise is the employee’s contribution to the expense of disability insurance. Employers have been playing a large role in contributing to their employee’s long-term and short-term disability benefits by at least 15%. This will likely change in the coming years as more and more employers integrate voluntary benefits into their portfolios, thus shifting more cost to the employees.
Not Reducing Demand
Employers are offloading the work and shifting the costs, but it’s not likely to reduce the demand for disability insurance. We’re entering a time of consumer awareness and desire for wellness and preparedness. Especially for individuals with families and others that depend on them, they take their financial responsibilities seriously and recognize they need income protection if they miss work due to illness, injury or pregnancy.
The most common reasons for short-term disability claims are*:
- Pregnancies (25%)
- Musculoskeletal disorders affecting the back and spine, knees, hips, shoulders, and other parts of the body (20%)
- Digestive disorders, such as hernias and gastritis (7.8%)
- Mental health issues including depression and anxiety (7.7%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (7.5%)
The most common reasons for long-term disability claims are*:
- Musculoskeletal disorders (29%)
- Cancer (15%)
- Pregnancy (9.4%)
- Mental health issues including depression and anxiety (9.1%)
- Injuries such as fractures, sprains, and strains of muscles and ligaments (9%)
We’re getting better as a nation at preparing for the unexpected. According to the American Council of Life Insurers, 2/3 of working adults in the United States have disability insurance. And the Federal Reserve reports that over 50% of American adults indicate they have enough savings to cover three months of living expenses in the event they’re not earning any income. As insurance professionals, we know these numbers used to be much lower. The nation is educating itself and finding ways to prepare, including obtaining the right insurance.
*Integrated Benefits Institute, Health and Productivity Benchmarking 2016 (released November 2017), Short-Term Disability, All Employers. Condition-specific results.