Have we learned anything about disability insurance since the pandemic?

 COVID- The pandemic’s 19 fatalities were a shocking and terrifying aspect, and an increase in life insurance purchases — LIMRA reported a rise in the second quarter of 2020 compared to the same period the year before — underscored that it made many people consider care for their loved ones realistically in the event of the unthinkable

In contrast, the even higher numbers are those who contracted COVID-19 and were rendered unable to work. This pervasiveness resulted from a greater understanding of the need for income protection in the event of a short-term or permanent incapacity. But enrolment did not always follow from that awareness.

According to LIMRA, ownership of disability insurance fell to 14% in 2021, marking a two-year decline from 20% in 2019. This can be attributed to several factors, including an abrupt increase in layoffs and furloughs of employees that resulted in many individuals losing their workplace coverage, as well as widespread financial uncertainty that prompted some individuals to get rid of certain coverage to save money. A survey conducted by Prudential last fall ahead of the annual 2020 open enrollment period indicated this was an issue, as 59% of employees who selected fewer benefits said they did so to save on monthly expenses.

Another reason was access. Pandemic restrictions in most workplaces affected enrollment, from canceled in-person benefits fairs to U.S. Postal Service delays. The pivot to all-electronic enrollment was seamless for many larger employers, but some smaller employers struggled. Additionally, in response to a shift in employee needs during remote work, some employers boosted nontraditional benefits to provide more support, including financial wellness services and child care resources. While these resources were absolutely needed, they may have also overshadowed other valuable benefits package components, including disability insurance, during a time when it was already difficult to effectively communicate with and educate employees.

While the purchase of disability insurance declined, claims in certain areas increased. The nonprofit Integrated Benefits Institute reported a nearly fivefold increase in the volume of short-term disability claims cases related to respiratory conditions between February and March 2020 as compared to the year before. During the height of the pandemic, 1 out of 5 clients looked to us to make either temporary or permanent adjustments to our contract related to the pandemic and the unusual situation it created. Further, 1 out of 10 clients made formal requests during 2020 for benefit plan changes.

When an individual files a disability claim, it’s because something is wrong, and our goal is to reduce their burden and stress. Prudential’s digital claims process, which we accelerated during the pandemic, enabled us to serve our customers better and faster. From the initial claim, which can be made online by the individual or the employer on an employee’s behalf, to the employee’s ability to sign up for e-delivery of documents and text updates, Prudential has significantly reduced the time it takes to file a claim and enabled an entire filing to be handled online without a phone call.

The pandemic showed us that ‘disability insurance’ still needs a new name

In Prudential’s 2020 open enrollment survey, the number of employees who felt benefits were an important part of their overall compensation jumped 10 percentage points to 77% in 2019. Despite calculations by the Social Security Administration that 1 in 4 workers in their 20s can expect to be out of work for at least a year because of a disabling condition before retirement, disability insurance continues to factor lower in employees’ benefits considerations. Why?

According to LIMRA’s 2020 Insurance Barometer, the most common reason people own disability insurance is that they have previous experience with a disabling event. In addition, Prudential’s open enrollment survey found that close to one-third of people who were laid off or furloughed due to the pandemic said they would have selected more benefits had they known. Both examples show that experience remains the best teacher when it comes to helping.

There is an agreement in our industry that the term “disability” prompts an “It won’t happen to me” response, causing many to eschew coverage. With clearer education on what disability insurance is and what it covers — namely, income protection for the physical conditions that prevent an employee from performing the material and substantial duties of their occupation and/or would result in a 20% or greater loss in their earnings — I believe we can see an increase in coverage adoption, post-pandemic.

Our looming challenges and opportunities

Prior to the pandemic, we were already seeing a trending increase in behavioral health disabilities, with an estimated 1.6 billion workdays lost per year, according to a Milliman research report on the potential economic impact of integrated medical-behavioral health care. It is anticipated they will be the leading causes of disability by 2030, and the pandemic has only accelerated this trend.

Unaddressed mental health conditions not only extend the time needed away from the office but can also result in behaviors often mistaken for performance issues, such as missing deadlines, showing up late, and exhibiting an overall lack of focus. Employers can support employees and provide specific help for those recovering from a disabling event by creating customized return-to-work plans and providing resources that can help them overcome the cognitive barriers that may prevent them from returning to full productivity.

Understanding that mental health plays such a massive role in disability outcomes, Prudential introduced NeuroFlow®, a behavioral health platform with a host of self-service tools designed to help claimants return to work after disability. When individuals are able to return to work with a healthy mindset, the strain on family caregivers is relieved, medical costs are contained and work productivity improves.

Coverage for all who need it

According to the International Foundation of Employee Benefit Plans, although 78% of employers surveyed offer short-term disability benefits to their employees and 63% offer long-term disability benefits, more than 50 million U.S. workers still lack any disability income protection.

The action taken by the federal government to provide emergency income protection for Americans in the early months of the pandemic through the Families First Coronavirus Response Act is proof that change can happen. Over the years, versions of a federal paid family and medical leave policy have been proposed amid calls for a public-private partnership to help secure financial stability for vulnerable workers when they need it most.

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Author: Rechelle D. Barbato