Life Insurers faced increased loss ratios for LTD business in 2011
by Wayne Dalton
Reprinted with permission from SNL Financia
Amid greater scrutiny of long-term disability claims by the Social Security Administration, life insurers faced increased loss ratios on long-term disability income insurance business in 2011, according to an SNL analysis of the accident and health policy experience exhibit for life insurers.
The loss ratio for individual long-term disability insurance rose from 94.06% in 2009 to 98.09% in 2011, and the loss ratio for group long-term disability insurance increased from 80.36% in 2009 to 85.71% in 2011.
The top 10 insurers in the group long-term disability market, based on premiums earned, represented 82.26% of the industry in 2011. The individual long-term disability market is even more concentrated, with the top 10 insurers representing 87.88% of the industry.
Unum Group, which is the largest insurer in both the individual and group long-term disability markets with market shares of 24.53% and 15.21%, respectively, saw increases in loss ratios in both markets between 2009 and 2011 that were in line with the industry.
Among the top 10 players in the group market, StanCorp Financial Group Inc. and The Hartford Financial Services Group Inc. had the largest increases in loss ratios between 2009 and 2011. StanCorp indicated that its increase was primarily due to higher claims. The Hartford cited unfavorable morbidity experience for its loss ratio increase.
Most disability benefits provided in long-term disability income insurance policies are coordinated with Social Security Administration and state disability programs. With increased denials of benefits through these programs, life insurers are seeing higher losses associated with long-term disability insurance.
While Northwestern Mutual Life Insurance Co. was the only top 10 company in the individual long-term market with a decline in its loss ratio between 2009 and 2011, the company indicated in the management discussion and analysis section of its annual statement that it is also experiencing higher claim costs, which could impact its loss ratio over time.
While loss ratios have moved upward, there have not yet been any major announcements of price increases for disability coverage. But that may change if scrutiny of claims by the Social Security Administration continues to increase.
Click here to access statutory insurance industry documents that include data reported in the Accident and Health Policy Experience Exhibit.