Session 6 PD, The Multilife Individual Disability Insurance Market. Moderator/Presenter: Daniel D. Skwire, FSA, MAAA

Transcription

1 Session 6 PD, The Multilife Individual Disability Insurance Market Moderator/Presenter: Daniel D. Skwire, FSA, MAAA Presenters: Patricia J. Fay, FSA, MAAA Daniel Wisted, CLU, CHFC, CLTC

2 Multi-Life DI Carrier Perspective

3 Agenda Typical Multi-life Product and Limitations Underwriting in the Multi-Life Market Risk Mitigation Across the Product Life-Cycle 1

4 Product Limitations Little or no levers once sold Individual policy sold through Employer Sponsored market Employer (and broker) typically select the plan design Non-cancellable Once it s bought, carrier cannot cancel or change premiums on inforce policies Can file updated rates for new issues on same policy form Participating policies/dividends Filed rate schedules No flexibility to change without full filing Vary by plan design, occupation class, issue age Unisex (due to group market) Discounts Usually one or more discount levels (10 30%) Mandatory coverage (Employer Paid) discount 1

5 Underwriting - Employer not Employee Guaranteed Issue No Medical Underwriting Require actively at work for some period (typically 90 days) Employer Level Underwriting Preferred Industries (white collar, higher income) Stability of employer/industry Size of employer Employer Endorsement of Offer Initiation of Offer by Employer (not sought out by Employee) Clear eligibility rules Plan design selection little at individual policyholder level Financial documentation (salary, bonus, W2 income, etc) Supplemental to Group LTD 1

6 Management of Risk Across the Product Lifecycle Pre - Sale Select the most profitable risks Increase likelihood of future success (good enrollment, lower lapse) Enrollment Avoid anti-selection/ claims in waiting Ensure an adequate spread of risk Claims Discourage Fraud & Malingering Encourage Return to Work Not overinsure

7 Pre-Sale To quote or not to quote Profitable Risk Selection Census: Age, Gender, Occupation, Income Geographic distribution Industry Plan Design Risks Issue & Participation Limits Replacement Ratios Riders (richness) Coverage of variable compensation Likelihood of Success Producer Other offers / Competition Predictive modeling

8 Enrollment Considerations Adequate Spread of Risk Participation Size of Eligible Class Distribution of Benefit Eligible Who (PT definition) Anti-Selection Actively-at-work Multiple Enrollments Pre-existing Condition Limitations Previous medical declines Others Employer support of enrollment Appropriate Timing of Enrollment Technology & Use of Enrollers Use of Big Data

9 Claim Considerations New Claims Pre-existing Condition Limitation Elimination period Disability definition Limitation on mental disorder Length of Claim Replacement ratios Attitude (white collar, highly motivated) Return to Work Plan design (own occ, partial, mental disorder limitations) Others Sensitivity to Economic Conditions Geographic attitude Fraud / Social Media

10 Questions? Patricia Fay

11 The Multi-Life Individual Disability Market SOA Health Meeting Atlanta, Georgia June 15, 2015 Daniel D. Skwire, FSA Milliman, Inc. 1

12 What are Multi-Life Individual Products? Individual policies sold to three or more employees of a common employer, in an employer-sponsored setting Unisex premiums to avoid discrimination Discounted premiums Similar benefits to traditional individual policies 2

13 What are NOT Multi-Life Individual Products? Professional associations Affinity groups Broker-formed groups Group insurance policies 3

14 How Has The Multi-Life Market Evolved Over Time? 1980 s: List-billing for multiple employees Early 1990 s: Fully underwritten multi-life cases (e.g., doctor, nurse and office staff) Late 1990 s: Guaranteed standard issue for 20+ lives and 100% participation 2000 s: Voluntary guaranteed standard issue at lower participation rates 4

15 How is Multi-Life Business Underwritten? Medical Full Medical Underwriting: Small cases and/or low participation Guaranteed Standard Issue (GSI): Larger cases with high participation Guaranteed To Issue (GTI): Special situations where coverage is always issued, but may be substandard Financial Full financial underwriting for business owners Simplified financial underwriting for employees W-2 s or pay stubs No tax returns Flat issue and participation percentages to align with group coverage 5

16 What Risk Management Approaches are Used? Actively at work requirement Limited range of benefit choices Group-style pre-existing condition exclusion Full underwriting for late entrants and amounts exceeding GSI limits Active enrollment support for voluntary GSI plans Annual reviews of GSI offers 6

17 How Does Multi-Life Business Perform? 100% Actual-to-Expected Incidence by Amount 80% 60% 40% 20% Individual ML - Normal U/W ML - GSI U/W 0% Total Study period: Expected = 1985 CIDA Source: Society of Actuaries Individual Disability Experience Committee 15 May

18 How Does Multi-Life Business Perform? 100% 80% Actual-to-Expected Incidence by Amount 60% 40% 20% Individual ML - Normal U/W ML - GSI U/W 0% Policy Year Study period: Expected = 1985 CIDA Source: Society of Actuaries Individual Disability Experience Committee 15 May

19 How Does Multi-Life Business Perform? New Individual Disability Valuation Table Incidence Rate Modifiers Market Incidence Modifier Employer-Sponsored 79.9% Individual Bill & Associations 105.3% Source: 2013 IDI Valuation Table Workbook 9

20 What Does the Future Hold for Multi-Life Products? Better promotion of the value of packaging IDI with group coverage Better alignment of coverage amounts with changing incomes Expansion into middle income market Expansion beyond high-end non-cancelable products Creative packaging across product lines 10

21 Multi-Life DI Delivering the Strategy to Market

22 Multilife - Understand the Need Common gaps in Group LTD Plans Benefit Maximums The maximum monthly benefit with a Group LTD plan may not adequately protect the higher income earners Incentive Income Many Group LTD plans cover base salary only and do not cover bonus, commissions or other forms of compensation Taxability Employer-paid Group LTD benefits are typically a taxable benefit to the employee Portability Group LTD policies are typically not portable since coverage is tied to employer, employee may lose disability insurance coverage when employment terminates

23 Selling Multilife - Education is the key Current Plan Analysis (in-depth review of Group LTD program) Gap Analysis (understanding the risk) Replacement percentage Monthly benefit cap Exposed incentive compensation Taxability of benefit Statistical Analysis (evaluation of current employee census) Demographic analysis (define population risk) Plan design alternatives that may increase the level of coverage to Employees without increasing claims exposure on the Group Long Term Disability (LTD) program Provide recommendations based on employer s philosophy & goals (typically done on a percentage instead of I&P Tables)

24 Building Employer Support What is the employer trying to accomplish? Does the employer understand the need, product and cost of disability insurance? Will the employer endorse the product? Dedicated enrollment outside of other benefits? Will you have access to employees?

25 Enrollment Positive Experience Employees who believe their employers effectively communicates their benefits have a more positive perception of their workplace. Employer Open communication Strong competitive benefit No noise ; minimize frustration Flexibility (meeting unique needs of the employer) Employee Ease of enrollment Easily understandable benefit Accessibility of benefit consultant During enrollment After enrollment For the life of the policy On-going administration

26 Driving Participation Educating the Employee What happens in the event of a disability? Exposure above the Group LTD maximum? Uncovered forms of compensation ( e.g bonus, commissions, etc.)? At what point does employment terminate, if ever? Employee retirement plans? (Employee/Employer Contributions) Health coverage? Future stock awards? Non-qualified/qualified retirement plan pay-outs, earned income?

27 Case Enrolled - Responsibilities Employer Census data (terminations/newly eligible) Payroll deductions (voluntary plans) Broker/Agent/Consultant Provide administration support to service the multilife case Preservation of case plan design On-going enrollments Communication Insurance Carrier Efficient enrollment method options Uncomplicated underwriting processes Policy benefit increases Billing procedures (e.g. payroll deduction)

28 Large Case Enrollment Understanding the Risk Participation Requirements Proper timing and positioning Professional enrollment administration and tools. Get real-time results: Sample Case: 500 employees; $650 average premium 15% participation: $48,750 in premium 25% participation: $88,000 in premium 35% participation: $113,750 in premium

29 Common Plan Design Group LTD + IDI: Combination Plan: Combines cost-effective Group LTD with the noncancellable feature of IDI to provide employees with comprehensive coverage. Supplemental LTD Covers total compensation with higher monthly benefit maximums that stabilizes Group LTD cost and risk. Supplemental LTD Group LTD Covers a percentage of employees' pre-disability earnings up to a maximum monthly benefit on a monthly basis. Group LTD

30 Delivering the Strategy to Market Administration & Support 3 2 Education is Key Understand the Need 1

31 Questions? Dan Wisted