IDI Market Shows Signs of Future Rebound

August 09, 2011, 1:52 p.m. EDT 1 Min Read

The U.S. individual disability income (IDI) market saw a significant drop in premiums between 2008 and 2009, and while that drop continued between 2009 and 2010, it was far less severe, according to global consulting and actuarial firm Milliman Inc. Even with the premium drop, there is an underlying strength in claim experience and overall profitability, Milliman concluded after conducting its annual survey of the IDI market. Fifteen insurers—which Milliman said represents 90-95 percent of the traditional IDI new business currently issued—were asked about business issued between 2002 and 2010, the distribution of sales among key marketing segments, current underwriting requirements, product offerings, favorable and unfavorable trends, and opportunities and obstacles in the current market. In total, these 15 contributing companies issued policies with $321 million of new annualized premium in 2010:

Assurity

Berkshire

Illinois Mutual

MassMutual

MetLife

Mutual of Omaha

Northwestern Mutual

Ohio National

Principal

RiverSource

State Farm

The Standard

Thrivent

Union Central

Unum

Some key highlights from the 2011 survey include:

• Combined premiums from new business dropped for the second consecutive year as a result of poor economic conditions. However, the drop from 2009 to 2010 (-3.4 percent) was significantly lower than the previous year (-12.5 percent) signaling that future sales may be on the rebound.

• Survey contributors reported favorable claim experience and continuing strong profitability. Although the economy has caused depressed sales, it has not resulted in any observable unfavorable claim trends.

• In spite of an overall drop in sales, new premium on policies sold to physicians continues to grow, both in absolute dollars and as a percentage of total new premium for the industry. The growing prevalence of IDI sales to those in medical occupations is similar to sales patterns prior to catastrophic financial losses of the mid-1990s.

• The obstacle to long-term financial health of the IDI market mentioned most frequently by contributors was competitive pressures, followed by the economy and aging or uninterested producers.