Understanding Disability Insurance. Unum Government Affairs

Transcription

1 Understanding Disability Insurance Unum Government Affairs 1

2 Agenda Employee income protection needs Addressing needs through disability insurance Employee and employer attitudes toward disability insurance BLS perspectives on disability insurance 2

3 1 Employee income protection needs 3

4 Lack of financial security The ability to work is often an individual s most important financial asset Living paycheck to paycheck 63% of Americans would find it somewhat or very difficult to meet current financial obligations if their paycheck were delayed by one week. Only 16% would not find it difficult. Even the relatively wealthy face this challenge, nearly one in 10 workers making $100,000+ live paycheck to paycheck. The inability to work creates a financial emergency for many Pew research shows that 57% of Americans say they are unprepared for a financial emergency. Only 37% of Americans would have enough savings to pay an unexpected expense of around $1,000. Just over half (53%) would reduce spending, borrow from family or friends, or use credit cards if they had an unexpected expense. 4

5 Disability statistics Disability can happen to anyone Incidence and Length of Disability Unum s Top Causes of LTD Claims (2016) The Social Security Administration estimates that just over 1 in 4 of today s 20-year-olds will become disabled before reaching age 67 Cancer Back Disorders (excl. injury) 13% 16% Once an individual has been disabled for 90 days, the average length of disability is 4 years Injuries Cardiovascular 9% 12% The average age of Unum s LTD claimants is 51 years old Joint Disorders 9% 5

6 2 Addressing needs through disability insurance 6

7 Options for disability-related income protection Government-Supplied Employer Sponsored Individually-Purchased Social Security Disability Insurance About 96% \ of the jobs in the United States are covered. Cost: Employer and employee each pay 6.2% of gross income for Social Security* * Mandated cost includes Social Security retirement and SSDI. Purchased through employer Employee pays some or all of premium Cost: ~$30 per month Purchased on the open market Individual pays all of premium High Cost: Premiums upwards of $2,500 per year 7

8 Social Security Disability Insurance has limitations SSDI offers minimal coverage and is not the answer for many employees SSDI pays only for total disability that is expected to last for at least one year or to result in death. Nearly 70% of workers that apply for SSDI are denied. Social Security program rules assume that working families have access to other resources to provide support during periods of short-term disability. Most employer long-term disability plans pay 60% of salary. SSDI typically pays an amount based on average lifetime earnings covered under Social Security. The ability of an individual to maintain their lifestyle degrades for higher earners. The average SSDI benefit for disabled workers is $1,171 a month. 8

9 Workplace access to disability insurance is important Employer sponsored income protection Access At least 90% of long-term disability insurance owners obtained their coverage through the workplace. 51% of U.S. workers report that their employer offers them longterm disability insurance. Less than 30% of employees report being enrolled in this coverage. Additional Benefits Economical pricing (group products are much more cost effective than individual) Many employees receive education through their employer. Employees are accustomed to making benefits decisions at the workplace. 9

10 Private disability insurance saves taxpayers money Unum sponsored a study with Charles River to quantify the impact of employer sponsored disability insurance. Saving taxpayers money Income protection provided by employer-sponsored disability insurance means that between 280k and 575k families each year avoid impoverishment and, therefore, do not need public assistance programs. On a very conservative basis, this translates into at least $ billion in savings per year to the government and the taxpayer Full report available online. 10

11 3 Employee and employer attitudes toward disability insurance 11

12 Employee views CONSUMERS DON T UNDERSTAND DISABILITY INSURANCE Almost 75 percent of consumers answered fewer than 5 out of 10 questions about their disability knowledge correctly. Moreover, only 1 in 25 consumers have a high level of knowledge about disability insurance. Percent answering number of questions correctly Not at all knowledge able 10% 13% 15% 19% 18% 14% 7% 3% 1% 0% 0% Very knowledgeable

13 Employee views CONVERSATIONS WITH CONSUMERS ECHO THIS LACK OF UNDERSTANDING Consumers are uninformed about the protection disability insurance offers. Employee interviews Interviewer: Do you know what [short-term disability] provides? Interviewer: Do you have any idea what is covered? Employee: I have no idea. Employee: Not really. 13

14 CFA studies The CFA (Consumer Federation of America) is an association of non-profit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. The CFA partnered with Unum to better understand attitudes toward disability insurance; we were not surprised by the results. CFA Studies Sponsored by Unum 2012: Employee Knowledge and Attitudes about Employer-Provided Disability Insurance 2013: 2013: Employer- Sponsored Disability Insurance: The Beneficiary s Perspective 2015: The Role of Disability Insurance for Small Employers 14

15 CFA studies ONCE EMPLOYEES UNDERSTAND LTD, THEY WANT IT The 2012 CFA study found that when employees are provided with more information about disability income protection insurance, their opinions are clear 9 out of 10 said they want employers to offer at work 86% said they would pay half of the premium cost ($15) 9 out of 10 said it was personally important to them to have it 56% said they would pay the entire cost for coverage ($30) 15

16 CFA Studies LTD BENEFICIARIES SAID IT MADE A MEANINGFUL IMPACT Findings in the second CFA study showed that among Unum s long-term disability claimants who received benefit payments, the coverage prevented: Recipients of long-term disability payments reported not just financial, but also social, psychological and healthrelated benefits: More than 50% from missing mortgage/rent payments, having to move out of their home or missing other bills. Nearly two-thirds said that payments allowed them to focus on taking care of their health without worrying about their finances. One-third from having to apply for government food programs 88% agreed that their employersponsored disability benefits helped them maintain a healthy emotional outlook. One-third from having to cut back on spending to the point of an uncomfortable lifestyle 68% said that their health would have been worse without disability payments. 16

17 Employer views CFA SMALL EMPLOYER STUDY Small employers agree that long-term disability is important 94% of small employers agree that most employees don t have enough savings to cover normal living expenses if they become unable to work due to illness or injury. A large majority (86%) of small employers that offer long-term disability insurance say that employees value and appreciate the benefit. 86% of small employers agree that it is important for employees to have long-term disability insurance to protect them financially if they become disabled. Eight in 10 (81%) small employers believe that offering long-term disability insurance is what a responsible employer does. 88% of small employers agree that offering long-term disability insurance demonstrates that they care about their employees. 17

18 Employer views Most employers are small employers and small employers are least likely to offer LTD. % of Offering LTD by Employer Size 10 to 19 employees 20 to 99 employees 32% 51% Over 80% of large employers (1,000+) offer long-term disability 100 to 499 employees 500 to 999 employees 1,000 to 4,999 employees 64% 77% 84% Only 32% of small employers (10-19) offer long-term disability employees On average 42% of employers offer LTD 81% 18

19 Employer views Small employers cite three main barriers to offering disability coverage Perceived Barriers Considerations It s too expensive to offer. Employees have not asked for it. Overestimating group coverage premium costs Unawareness of employee cost sharing options Lack of employee understanding about benefits of disability insurance We are too small. Concern about commitment to offering and ability to sustain 19

20 3 BLS perspective on disability insurance 20

21 BLS data is missing the full LTD picture In the National Compensation Survey (NCS), the Bureau of Labor Statistics (BLS) does not collect data on 100% employee paid benefits. The absence of this critical information means that BLS data shows an extraordinarily high uptake of 97% for longterm disability coverage. A 2015 LIMRA employer survey shows just 29% sign up when employees pay 100% of LTD premium. Unum sent our concerns to BLS in 2015 and

22 Employer- versus employee-paid disability premiums A sizeable minority of employers offering disability don t pay LTD premiums for enrolled employees Percent of annual LTD premium employer pays for employee Employer Employee 37% of employers Pay 100% 35% of employers Pay 10-90% 29% of employers Pay 0% Base: Employers offering LTD insurance 22

23 Unum s engagement with BLS Unum reached out to BLS for assistance in 2017 Excerpt of letter to BLS 23

24 Unum s engagement with BLS BLS responded that they are not able to support additional research regarding employee-paid DI Excerpt of letter with the reply from BLS 24