May is Disability Awareness Month

Bundled D.I.

Clusters Help Profile Employers’ Disability Insurance Strategies

by Andrew Sullivan

Mr. Sullivan is senior Vice President of Disability and Small Market Business at Prudential Group Insurance. He is responsible for the profit and loss performance of these segments, as well as developing business strategy, setting business goals, and identifying growth opportunities. Connect with him by e-mail:

Our experience shows that employers approach their group disability insurance benefits programs from different perspectives. Some companies focus almost exclusively on cost control, for example, while others emphasize using claims administration to improve workforce productivity. Some offer both short-term and long-term disability insurance (DI); others offer one or the other. Companies can bundle DI with group life insurance or keep these benefits separate. While one employer may provide fully funded coverage, another might offer voluntary plans to supplement an employer-paid core benefit.

To develop and retain business, it is important for benefits advisors to assess employers’ disability strategies and provide the most appropriate solution. Making that assessment without a clear set of guidelines can lead to ad hoc and suboptimal solutions.

We recognize the value of an updated understanding of the DI marketplace as employee benefit plan sponsors face new challenges. In July 2013 the company partnered with market research firm Greenwald & Associates to survey over 600 larger employers (ranging from 100 – 10,000+ employees) that offered either short- or long-term disability (STD, LTD) benefits, or both. The survey findings were weighted by company size to reflect the makeup of employers in the U.S. economy.* Our goal was to gain a greater understanding of how employers are approaching employee disability challenges with:

  •  Benefit solutions;
  • Partners and services;
  • The type of disability benefits employers currently offer their employees;
  • The types of vendors they use; and
  • What services affect their carrier selection decisions.

The result was a better view of carrier selection criteria.

Distinct Groups

Survey participants were queried about their buying behaviors, service capabilities they valued and their level of advancement in absence management and return-to-work (RTW). The research identified five key influencers on their selection of a disability insurance provider. These influencers included:

1) the providers’ ability to lower health costs;

2) capability to improve workforce productivity;

3) integration with group life;

4) voluntary capabilities; and 5) ability to manage multiple types of leave.

When interpreting the results, consideration was paid to whether or not the company’s health coverage was bundled with group disability, and the company’s level of advancement in absence management and RTW.

Four distinct clusters of employer behaviors emerged from the responses: Already Theres, Aspirers, Health Bundlers, and Laissez Faires. Identifying a company’s profile using clusters has practical value because it indicates what the employer seeks and hopes to achieve with its DI benefits package. Survey respondents were asked to rank their disability program advancement on a scale of one to 10 (10 = “Most advanced”). This cluster segmentation provides insights that can help benefits advisors and brokers to add consultative value to their approach.

Cluster Characteristics

The clusters differ significantly in their approach to disability solutions.

The Already Theres are the most advanced – they value absence management and RTW and have taken action to implement these strategies
Already Theres rate themselves, on average, nearly seven on a scale of one to 10 on both absence management and RTW program advancement. When compared with Aspirers (described below), Already Theres have implemented more (63%) absence management. Already Theres have also implemented more (46%) RTW programs than Aspirers.

To develop and retain business, it is important for benefits advisors to assess employers’ disability strategies and provide the most appropriate solution. Making that assessment without a clear set of guidelines can lead to ad hoc and suboptimal solutions

Aspirers value absence management and RTW but have not taken action
Employers in this cluster are like the Already Theres because both clusters value advanced disability programs. However, Aspirers rate themselves, on average, the lowest of all four clusters in their progress on absence management and on RTW programs.

Health Bundlers see the big picture and are the least prevalent in the market
All clusters bundle benefits to a greater or lesser extent. However, Health Bundlers are unique in that they evaluate DI as one of several levers to manage their health plan. They are more likely than the other clusters to offer only short-term disability and not long-term disability. These companies are relatively advanced in their absence management and RTW. Of the five key influencers mentioned earlier, Health Bundlers rate four of them (voluntary capabilities excluded) as very important. These employers are also the least price-sensitive, with only 2% seeking the absolute low-cost carrier.

Laissez Faires are the least interested in investing in DI capabilities
Relative to the others, these employers place less importance on the five provider influencers cited earlier. They also consider it only somewhat important for a carrier to be able to lower health costs, quite different from their counterparts in all three other clusters. Evidencing their lack of interest in DI capabilities, less than one in five Laissez Faires have RTW programs. Only one in four have absence management in place.

Business Opportunities

A robust benefits package is an important tool for attracting and retaining valued employees and for managing productivity and maximizing human capital. From a consultative viewpoint, recognizing a company’s cluster profile can provide insight into its goals and likely buying behavior. That information can indicate possible approaches to meet both the cost-control and benefits-quality goals.

Cluster recognition can help advisors determine which carriers are most likely to be a good fit with an employer. As mentioned above, some employers are more price-sensitive regarding the cost of DI. Others have a greater interest in carriers who will help them manage workforce productivity.

For example, Laissez Faires are the most price-sensitive, with 13% choosing the absolute low-cost carrier. In contrast, Health Bundlers are the least price-sensitive and only 2% seek the absolute low-cost carrier. These two groups also differ in their receptivity to voluntary group DI offerings. Laissez Faires are least receptive to flexible voluntary group disability plans (43%). Health Bundlers are the most receptive (83% are very or somewhat interested).

Aspirers exhibit the most interest in improving their absence management and RTW programs. Four in 10 Aspirers envision their company improving at least three points out of 10 on absence management within the next three to five years; 30% of Aspirers have the same goal for RTW. This interest in program advancement and willingness to seek bids more frequently can create a business development opportunity when presenting carriers with strong absence management and RTW programs.

Advisors who recognize cluster attributes can avoid the mistake of presenting a lowest-cost, lower-service level carrier to a Health Bundler who is much less likely to be seeking that combination than a Laissez Faire.

Next Steps

The cluster segmentation that emerges from the research provides insight into employers’ primary buying criteria for disability and absence services and progress on the continuum of program advancement. By using this information with groups, advisors and brokers can accurately target solutions to satisfy their clients’ various DI benefit needs. Then, they can determine the next steps prospects and clients should take.




*Source: 2010 U.S. Census BureauGroup

Insurance coverages are issued by The Prudential Insurance Company of America, 751 Broad Street, Newark, NJ 07102