Employees know very little about disability coverage. But when they learn about it, they often want it and are willing to pay for it. A Consumer Federation of America and Unum national survey finds that only 13% of surveyed workers know "a lot" about disability insurance, and less than half (47%) know what its benefits are, according to the survey of 1,200 employees. Yet, when informed about DI, a majority (90%) want the coverage, and 86% are willing to pay half of a $30 average monthly premium, and 56% are willing to pay the entire premium in order to gain income protection should they become disabled. According to a 2012 Social Security Fact Sheet, almost 1-in-4 of today's 20 year olds will become disabled before age 67.
Lack of awareness
Employees typically learn about DI from their employers, who often have competing priorities - with disability insurance education low on that list, explains Stephen Brobeck, CFA's executive director. "If employers do a good job of informing employees, they will probably be well informed ... but keep in mind the employers have a lot to be concerned about, even in light of employee benefits," he says. "[Employees and employers are] more concerned with health insurance then disability insurance, as they are more likely to use that health coverage in the near future. That does not mean disability coverage is not important, but it's easy to understand why many employees would not know that much about group disability insurance."
And since only a third of employers nationwide offer disability coverage, there is a huge majority of workers who have never even heard of the coverage, says Scott Maker, SVP of government affairs at Unum in Portland, Maine. Disability insurance has traditionally been marketed more toward brokers, which also plays into the lack of awareness.
"Unlike other coverages like 401(k) and health care, the marketing [for DI] has never been targeted at the consumer," says Tom Klett, VP of disability marketing at AIG Benefit Solutions. "Absent education, obviously you will find people who don't value it."
Paying for it
Both Unum and AIG say that when consumers learn about the coverage, they are willing to pay for it, but it often takes a backseat to what is seen as more important health insurance, as more, if not all, of employees' health care costs are shifting from employer- to employee-paid. "There has been a focus on shifting more cost to the employee, but that's also where the health care cost has been shifting," Klett says. "People will pay for [DI] but when it comes to open enrollment time, they have a limited budget and are asked to cover an increasing portion of their health care costs, so there is nothing left over."
A long-term disability policy typically replaces 60% of income, so for an average policy fee of $25-$30 a month, it may provide a return in the long run. "Like any type of insurance, you hope you don't have to use it," Unum's Maker says. "People insure their cell phones, boats, but they don't insure their most valuable thing - income. There is no more important thing to insure ... and no less expensive place to insure it" than through work.
Spreading awareness
To close the gap of those employees who do not have coverage, CFA says they are hoping the government will help spread awareness and they are talking with Washington now about legislation that would authorize an awareness campaign, "because that's the most effective way to reach the most number of people," Brobeck says, indicating that may include working with the Department of Labor or Small Business Administration.
Such a campaign is "one of the goals we hope to achieve working with colleagues in our industry, with policymakers in Washington and with non-profit partners like CFA who understand the great need [of] consumers for this type of coverage," says Brobeck.
Creating awareness amongst policymakers is the first step, Maker says, as "they need to understand that this is critical for consumers, but also good for government."
He points to a Charles River Associates 2011 survey that found that access to disability insurance in the workplace saves as many 575,000 families annually from slipping into poverty - and saves the government up to $4.5 billion per year in public assistance costs. "That's a compelling argument from a taxpayer viewpoint that this is important coverage," he says.
Broker opportunity
There is also an opportunity for brokers with this lack of awareness, says David Stoneback, director of product development for group disability insurance at MetLife in Bridgewater, N.J.
"[The] broker community is continuously looking for ways to add value to their customers and this is an education opportunity," he says. "[A MetLife] study found that 7-in-10 employers offer some type of disability insurance, [so] you have a 30% opportunity. There is an opportunity there to educate the employers."
Now is one of the best times to promote disability insurance, he says, as with health care changes there is the constant push to voluntary benefits and employers looking to cut costs, often falling on benefit programs. "From a broker's prospective, it's a lost revenue opportunity for them so [a] broker can [use DI to] drive the employer to be able to control costs of the benefit program and continue to offer valuable benefits," he says.
