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Sales of individual guaranteed renewable disability insurance policies
have been holding up well during the recession, and are expected to grow
at an attractive clip. Higher-income individuals are also buying
bigger-ticket policies.
Over the past four years, sales of individual guaranteed renewable
coverage grew at an annual rate of 5 percent to $211 million in 2008,
according to according to insurance trade group LIMRA. Sales of group
coverage, as well as non-cancelable individual coverage, declined in the
first quarter, but remained up about 10 percent over the same period.
Karen Terry, manager of individual product research at LIMRA, believes
more will get disability coverage as the economy improves. “There is a
big opportunity for producers to get into this niche market,” Terry
says. ”It is a concentrated market with few carriers and products.”
Meanwhile, disability insurance premiums increased 3 percent on
guaranteed renewable policies in the first quarter of 2009, according to
LIMRA, Windsor, Conn.
A “guaranteed renewable” policy is a lower-cost policy that can’t
be canceled by the insurance company as long as premiums are paid.
Premiums can be raised, however, for an entire class of policyholders.
By contrast, non-cancelable coverage is more costly because it can’t
be canceled and the premiums are guaranteed not to increase.
The market for disability insurance is huge. Some 110 million Americans
lack long-term disability insurance coverage, according to the National
Association of Insurance Commissioners, Kansas City, MO. Yet one of five
to seven persons could become disabled due to illness or injury over the
next one to five years, according to a new study called, “The Impact
of Disability.” The study was conducted by Milliman, a New York based
actuarial consulting firm, and sponsored by The Life and Health
Insurance Foundation for Education and American’s Health Insurance
Plans.
Almost one-third of workers say they would have a difficult time
supporting themselves in the event of disability in the current job
market, according to the study. And 74 percent say they would face
financial problems after six months of a disability. Consumer concerns
over their livelihoods have increased the awareness of the need for
income protection.
Meanwhile, sales commissions are attractive for disability insurance.
Depending on the insurance company, the agency and the broker-dealer, a
producer can get about 45 percent to 70 percent of premiums paid over
the first few years of a group policy and trailing commissions of 17.5
percent. On the individual side, first-year commissions can run to 100
percent. Renewal commissions from years 2 though 10 are around 17.5
percent. After that, trailing commissions run about 5 percent.
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