As the COVID pandemic fades to the
background, the evolution of and
demand for the product continues
By Len Strazewski
Everyone remembers the COVID pandemic: Employees were told to work the best they could from their homes, restaurants closed and shifted to “hands-off” delivery, and people who dared to leave their homes wore masks to filter out the deadly virus. Until the public health authorities and the medical community at large got control of the disease, disability became a common problem, filling hospitals and driving people from their jobs.
One of the many effects of the COVID pandemic is increased demand for and the evolution of disability benefits, which are becoming more flexible and available at reasonable costs to employers and their workers as a paid or supplemental benefit.
“Employees are returning to their offices, with many employers requiring in-office attendance again,” explains Sheila Sokolski, vice president of product strategy and portfolio management at Sun Life U.S. “But regardless of whether they work in the office, from home, or they’re hybrid, employees are always going to need their health and disability benefits.”
As employees have transitioned to permanent or hybrid jobs, employers are trying to cope with their evolving needs and are increasing disability benefits. Once only an optional, supplemental coverage, long-term disability insurance has become much more common, almost ubiquitous in large employers and promoted to smaller employers.
Employers are responding to that need by making long-term disability (LTD) a priority benefit alongside short-term disability, Sokolski says. Sun Life has seen about 70% of its LTD plans fully paid by the employer, while roughly 30% are partially or fully funded by the employees, she continues.
“There’s a strong trend toward integration of benefits, providing a continuous level of protection for employees,” she adds. Employers are watching the employee claims data and adjusting benefits to provide a better safety net for their workers. They are integrating absence policies with short-term disability insurance, protecting corporate costs as well as employee income.
Regulatory factors also play a critical role, Sokolski says. Increasing state-level legislation around disability and paid family leave had created a demand for more services within disability programs.
“COVID shifted workplace culture, which encouraged insurance providers to innovate new ways to support return-to-work, including a variety of clinical programs and other health services that improve employee health and support productivity,” Sokolski says.
For agents and brokers, this evolution has put greater pressure on producers to match their client employers with the right carriers, she notes. There’s a greater-than-ever need to “meet the client where they are,” she points out, to provide services that meet the specific needs of employers in terms of size and regulation, claims history, technology and corporate strategy.
“COVID shifted workplace culture, which encouraged insurance providers to innovate new ways to support return-to-work, including a variety of clinical programs and other health services that improve employee health and support productivity.”
—Sheila Sokolski
Vice President, Product Strategy and Portfolio Management
Sun Life U.S.
“COVID was a wakeup call. It created a bump in demand that persists today, and as a result there is a really strong demand for disability insurance of all levels.”
—Andy Schafer
Vice President, Workplace Benefits
Principal Financial Group
Artificial intelligence, for example, as a support technology is becoming more prevalent, Sokolski says, and agents and brokers need to be aware of what their clients are using to meet their needs and what their clients will be demanding in the future.
“COVID was a wakeup call,” agrees Andy Schafer, vice president of workplace benefits at Principal Financial Group. “It created a bump in demand that persists today, and as a result there is a really strong demand for disability insurance of all levels.”
Demand for group disability that is employer paid in particular remains on the rise and increased demand leads to greater interest in what various levels of disability insurance can do for employers and employees, he says.
Principal research indicates that about 52% of workers ranked disability insurance as “extremely valuable” and that having access to disability benefits—employer or employee paid—improves employee retention.
However, Schafer says, income protection benefits have been generally undervalued, but as states enact and promote increasingly flexible paid family medical leave laws, employers will seek ways to fund and promote leave benefits. So far, they are a bargain.
“Short- and long-term disability benefits are ways to extend income protection for employees and, so far, rates for the coverage have stayed about the same,” Schafer says.
However, the market for disability insurance is changing again, industry sources say. As the COVID pandemic fades into the background, the insurance industry is acknowledging the need for income protection in more general ways.
“I think right out of COVID there was a tremendous sense of need for income protection, but now as awareness is dropping toward pre-COVID levels, employers are thinking again about what they need to protect and how they should provide that protection,” says Kevin Cranston, assistant vice president of product strategy and development for Reliance Matrix.
Usually the employer-paid long-term coverage pays about 50% of salary and employers advise employees to buy up to higher percentages of 66% or 75%. However, employees are purchasing voluntary limits for short-term disability insurance to cover the gaps between sick leave and long-term disability insurance.
And carriers are creating new disability insurance terms and structures to accommodate the new generation of workers, including gig workers and other contract employees, who need disability benefits but are not entitled to them under their contracts. The creativity is likely to continue, industry sources say, but at the same rate as COVID recedes.
As awareness is dropping toward pre-COVID levels, Cranston says, “employers and their consultants are turning their attention back to the strategic way they need to provide benefits to their employees, integrating health insurance with disability insurance.”
Cranston points to the rise in states’ legislative mandates for paid and unpaid leave. The federal Family Medical Leave Act mandates unpaid leave for employees who need to care for ill or injured family members. However, many states are taking the terms of the law and providing state-level paid leave. In one case, Massachusetts, paid leave is delivered through a private plan.
“Lots of states are getting paid medical leave and laws providing job protection,” he says. “Can employers afford it? The laws are well-intentioned, but the laws will require mandates not just for leave but also for income replacement and other benefits.”
“[E]mployers and their consultants are turning their attention back to the strategic way they need to provide benefits to their employees, integrating health insurance with disability insurance.”
—Kevin Cranston
Assistant Vice President, Product Strategy and Development
Reliance Matrix
“Insurers are accepting more responsibility for addressing challenges for their customers and bringing forth solutions to help [with] … financial security, but also mental health issues, care-giver benefits, various forms of leave and other value-added services.”
—Kim Rudeen
Head of Absence Management Products for Employee Benefits
The Hartford
Compliance will be expensive, he says, and developing insured benefits that comply with the laws will be a challenge with administrative costs and administrative terms and conditions.
Insurers are experienced in managing financial claims from disability insurance and can also manage claims from legislative demands, such as expanded family leave.
The legislative evolution will also create opportunities for agents and brokers, who will have to bear the burden of education, preparing client employers to manage the new responsibilities and communicating the terms and conditions of new disability coverage as it evolves to meet the new needs.
“There will be more embracing of support tools to manage the data of the new benefits,” Cranston says. “Agents and brokers have already been critical in supporting the new health data tools and their role in group health insurance and eventually disability.”
Kim Rudeen, head of absence management products for employee benefits at The Hartford, says employers still have many challenges that they will address with absence management tools, including disability insurance and return-to-work programs.
The insurer recently launched new data and leave-planning tools for employers and employees to manage benefits data, she says, and inform employees about what benefits are available and how to access them. “Insurers are accepting more responsibility for addressing challenges for their customers and bringing forth solutions to help them overcome more of their problems, including financial security, but also mental health issues, care-giver benefits, various forms of leave and other value-added services.”
The Hartford’s Future of Benefits Study found that 89% of employers would welcome a service that could track different leaves in one place. The firm has introduced a new digital tool for employers, the Absence Dashboard, that allows employers to manage workforce productivity, identify trends and receive specific, timely information regarding employees’ absence requests and return-to-work plans, the company says. These insights can prove highly valuable to employers in managing the productivity of their workforce and shaping future benefit strategies.
“Leave and absence information has always been available to employers, but our goal is to continuously improve the customer experience,” says Rudeen in promotional information for the new data tools. “We heard their feedback loud and clear, and they want to be able to access all the information easily and on one screen.”
For more information:
The Hartford
thehartford.com
Principal Financial Group
principal.com
Reliance Matrix
reliancematrix.com
Sun Life U.S.
sunlife.com/us
The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.
