Enabling the Disabled – Income Insurance Protection for the Future
May is Disability Awareness Month. As this year’s campaign concludes, it is important that carriers and insurance agents continue to educate consumers about this product year round. No matter what your chosen job or occupation is, everyone is concerned about their financial stability if they no longer were collecting an income. Financial advisors often talk about having emergency savings in case there are unexpected expenses or loss of employment. However, the topic of disability or long term work absences is not usually discussed.
I recently had a friend experience a short term absence from work. While exercising, she herniated a disc and was restricted to bed rest. She was unable to work for a few weeks, and applied for disability. Because she did not have disability insurance, she had to rely on her parents to cover her financial obligations while she recovered. She was lucky that her parents were able to help with her health care and expenses.
According to a Life Happens survey, a person has a three in 10 chance of suffering a disabling illness or injury that would keep them out of work for three months or more during their career. Most people regardless of their age, employment status or income level, are aware how often disabilities affect their ability to work. According to the Council for Disability Awareness, accidents do not account for the majority of long term absences. Critical illnesses, including Cancer, and back injuries are the most common reasons people are unable to work. The average duration of a long term disability claim is 34.6 months.
Currently only one-third of American workers are enrolled in private disability coverage. Only 67% of employees offered disability insurance through their employer actually enroll, as reported by Lincoln Financial. This represents 40 million employees with coverage. One in four working Americans say they would have trouble supporting themselves financially immediately after suffering from a disability that keeps them out of work. Another 50% would have financial trouble in one month or less.
Disability insurance is not marketed in the same way life, health or auto/homeowners insurance is marketed. A quick Google for insurance quotes yielded the following results:
Insurance products are not easily understood by consumers, and most coverage types force the buyers to think about unpleasant situations. Auto and health insurance coverage are mandatory for individuals, and yet we see a large segment of the population uninsured in these categories. Consumers without life insurance often choose not to purchase coverage because they feel they cannot afford the premiums. People do not purchase disability insurance because they do not think they will get into an accident or unable to work.
Aflac currently has 5 different commercials airing for their disability insurance. The humor and spokes”duck” used in the commercials has helped create awareness for this type of insurance. However, due to Aflac’s distribution channels, the consumer cannot purchase the insurance on their own. Unlike other products, disability insurance is offered through work benefits or agents. The path to purchase is not an easy one for consumers.
Many carriers market disability insurance as Disability Income Protection. This spin on the product should help engage the consumer. Many millennials, who still may be covered on their parent’s health and auto plans, do not often think about buying insurance at all. This product is more practical at this time in a millennial’s life as it can help cover their student loans in addition to their other expenses. Gen X and Younger Baby Boomers are often part of the sandwich generation, taking care of their children and parents at the same time. Income protection can help maintain the finances for multiple generations.
Insurance carriers who participated in this month’s Disability Insurance Awareness campaign include MassMutual, MetLife, Aetna, Lincoln Financial Group and Prudential, to name just a few. Mutual of Omaha has also taken part in this month’s promotions. They have released a new product, Priority Income Protection. This product is positioned as simple and affordable, compared to other products on the market.
An agent is still required to purchase the policy, but the underwriting does not require a medical exam. This new product also allows the consumer to choose the monthly benefit and benefit period. In a news release announcing this product, Mutual of Omaha cited research that showed individuals are looking for “affordable plans, options for coverage amounts, and an easy-to-understand product”. We see this today for auto, health and life products. Applying this to disability insurance, and other products as well, helps serve the consumer and insurance carriers at the same time.
Insurance distribution channels are changing, and adapting to the way individuals purchase goods and services. Agents are no longer the only option for comparing and purchasing insurance policies. By restricting the sales channel for disability coverage, the insurance industry may be alienating a large number of potential insureds who do not want to work with an agent. Carriers should continue to work on products that can be purchased direct. This year represents the 10th annual Disability Insurance Awareness Month. Based on the number of policies currently in force, it will take more than a month’s campaign to educate the working consumer. Perhaps more education could have benefited my friend, who after being independent for so many years, had to rely on the bank of mom & dad.