The Impact of COVID on the U.S. Individual Disability Market
The widespread impact of the COVID‑19 pandemic created unique challenges for insurers active in the Individual Disability market in 2020. The stats garnered from our annual U.S. Individual Disability Market Survey show how sales were impacted across most of the industry last year. Overall, new sales premium fell back 6.5% to $398.9 million.
Nearly 70% of the companies in our survey told us they missed their projected sales goals for 2020, in part due to high unemployment levels, the lack of face-to-face contact at the point of sale, as well as companies delaying enrollments.
Non-Cancelable sales premium was down 5% last year, and Guaranteed Renewable (GR) sales premium decreased by 12%. Buy-Sell sales fared the worst, dropping by almost 20%.
Of the $398.9 million in total new sales premium, Non-Cancelable products represent 83% or $332.1 million, and GR is 16% or $63.5 million.
Buy-Sell accounts for less than 1% of new sales premium, and yet policies represent 43% of the total new benefit amounts in 2020.
The number of new policies issued declined by 11%; from over 275,000 in 2019 to 245,851 in 2020. Total benefit amounts fell by more than 10% to $1.6 billion.
Total in‑force premium from Non-Cancelable, GR and Buy-Sell combined was up 1.3% to $5 billion in 2020. “Non-Can” was fairly level at 1%, GR grew by 3%, while Buy-Sell fell nearly 4%, posting negative results for the 12th consecutive year.
Total Guaranteed Standard Issue (GSI) new sales premium (Non-Can and GR combined) declined by more than 12% to $47.9 million in 2020.
Non-Can GSI, which accounts for 98% of the total, fell 12.2% to $46.9 million, while GR GSI fell 16.5% to just under $1 million. Total GSI in‑force premium grew by 2.6% to $402.8 million.
Interestingly, 31% of the new sales occurred in the medical market with employee-paid premium accounting for 75%, compared with 66% the previous year. This could indicate a shift in focus, with an increased willingness to offer GSI in the medical market beyond the resident space and more companies offering these policies on an employee-paid basis.
Yet, it’s still proving hard to convince a mature distribution system that a great need for Individual Disability does actually exist down market and that there are other professions besides doctors who would benefit from the coverage!
So where does the industry go from here?
Certainly, carriers have demonstrated an ability to adapt in the short term to the different challenges that COVID‑19 presented. However, a great deal of uncertainty remains for the longer term from both an underwriting and claim perspective.
On a positive note, the pandemic may have created an awareness of income protection products among buyers that didn’t exist in the past. Hopefully, this will result in increased activity for all carriers.
As this new environment evolves and the market continues to adapt, Gen Re’s experienced team of dedicated Disability underwriters and claims experts will be here to support our clients. Get in touch today if there’s a particular topic I can help you with.
For more details on the last U.S. Individual Disability Market Survey, you can read our summary report.