Joint Replacements, a Baby Boomer’s Story
The United States is approaching two months since COVID-19 descended upon us, and the U.S. economy was blind-sided by the effects of the virus. Millions of American workers have been laid off, furloughed or told to work from home. Millions of businesses, both large and small, were also impacted and may not survive the forced closure. And yet I keep hearing: “When we return to a new norm . . .”
Fundamental things will change in the American marketplace, but no one can say exactly how it will look. Consider how COVID-19 might impact the individual disability income sector, and what the short and long-term effects may be.
Underwriting
In the short-term, the individual disability insurance industry adjusted quickly and uniformly to the new environment our agents and brokers found themselves. The industry quickly realized that without changes in our ways of doing business, the agents and brokers we support would be unable to continue their work with current or prospective clients.
The idea that sales would exclusively be made remotely, and the fact that face-to-face paramedical services would be difficult to schedule, was a challenging paradigm for underwriting departments. The industry found itself compromised in its ability to order physician statements or other medical records. This forced each carrier to review their business landscape to develop new underwriting rules and risk mitigation strategies while still supporting new sales.
Moving forward it will be interesting to see what changes the IDI industry will make permanent when the pandemic subsides. I believe we will not return to the past, but instead will continue to support some of the relaxed underwriting requirements moving forward.
Technology
Most of the individual disability market developed some version of e-applications. Much of the industry struggled in the past to achieve widespread implementation by agents and brokers. As an industry, we often offered simplified underwriting as leverage to encourage technology implementation amongst agents.
COVID-19 caused IDI carriers to train their field force, agents, home office staff and prospective clients on the advantages of updated technology in managing and processing applications.
Most insurance home offices rapidly moved employees to remote work setups. Employees were suddenly, and some for the first time, provided with laptop computers and technology for remote access. Since then, remote employees are able to process new business with minimal delays. It’s likely when the pandemic ends, many employees will want to continue to work from home on some level after experiencing the benefits and overcoming the learning curve of remote work.
It is also likely that paper applications for insurance will become an outdated practice. There will be little reason to move back to the manual data entry of applications when technology is already in place that streamlines the process. Many agents who have written business have successfully beta-tested the technology, and its true – technology is winning against paper.
Employment and Employee Benefits
Within the last decade, the IDI market has gotten more comfortable with both contract workers and remote work.
Contract workers and remote working were accelerated in the aftermath of the 2008 market meltdown. Many employees were downsized and offered the opportunity to work as long-term contractors (also known as habitual workers). Many of these individuals also migrated from working in a corporate setting to working from home.
The IDI industry may see a substantial increase in the number of people who migrate to a contract worker status, and/or continue to work remotely. This change will force the risk managers at IDI carriers to better understand this increasingly common work arrangement and adapt their risk approach when underwriting.
The employee benefit business will also be affected when works make a shift towards contract work. Like in the Great Recession, individuals often were unaware of their need for personally owned insurance products like life, dental, vision and individual disability income protection. This new workforce will have workers considering how to replace their old employer benefits with benefits packages they create themselves.
Across the board, IDI carriers have not seen a reduction in new sales due to the pandemic. Conversely, it appears COVID-19 is sparking a new interest in current and prospective policyholders to purchase their own IDI policies. For example, at Ameritas, we have seen sales closing at 132 percent above our goal for April. Year-to-date sales are currently at 123 percent of target, only reinforcing the argument that IDI policies are becoming more prominent.
Claims
Outside of the immediate claims, the long-term impact of COVID-19 on those who were infected, and their morbidity will not be immediately understood.
To date, carriers have been notified of possible IDI claims, but due to the longer elimination periods (90 days) on individual disability products, claims have yet to go beyond that period. Since business overhead disability policies are often sold with shorter elimination periods of 30 or 60 days, these policies may be more likely to see claims. But even that will depend on the coronavirus prognosis and subsequent recovery. Another unknown is how the coronavirus may impact mental health claims. There is evidence to suggest the virus is negatively affecting mental health, which in turn could create an unexpectedly higher number of mental health claims. Our industry is following the claim experience closely and learning how the effects will impact the individual disability insurance marketplace going forward.
Outlook
Fundamental things will change in the American marketplace, but no one can say exactly how it will look.
There will be other items that will need to be worked through. Several states and the federal government are pressuring the property and casualty market to cover the losses from the pandemic through business interruption policies. Most of these policies either explicitly state they do not cover losses associated with a pandemic or they identify specifically what is covered – and the losses via a pandemic is not included in the policies. Forcing carriers to cover these claims such will likely be challenged in the courts. These results may also cause a fundamental change in our business.
As we arrive towards a new normal, it will be important to look back on how this pandemic has and will continue to shape the future of the IDI business in ways we can only imagine.
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