Securing disability coverage can be complicated, confusing and expensive. But insurance experts, advisors or anyone who has suffered injury or illness can agree: it’s necessary. It’s unfortunate that long-term disability income (LTD) insurance and long-term care (LTC) insurance are so hard to fully grasp. It’s unfortunate, because LTD and LTC are two of the most important risk-management tools the financially-wise can employ to good effect.
Trustmark recently had a chance to take a fresh look at the disability insurance market with new research to understand consumers and disability. While there were countless insights into what consumers want from their protection, there is one insight that came through crystal clear in their research: We need to redefine disability insurance as an industry.
Consumers aren’t connecting
According to the Social Security Administration, about a quarter of today’s 20-year-olds will become disabled before they turn 67. But most people cannot think beyond their current health state, especially when they are young and healthy.
Interestingly, employees are struggling with understanding the ins and outs of disability insurance, even if they have a policy. Clearly, something about the way the product is being presented isn’t connecting with consumers.The Trustmark survey found that 47 percent of people feel they have an average to below average understanding of disability insurance.1 Needless to say, that’s a large number of people that probably don’t understand this critical product. On top of that, 84 percent of respondents feel that easy-to-understand coverage is either somewhat or extremely important with disability insurance.1 So, while many don’t understand disability insurance as it stands, they do want something that is easier to wrap their heads around.
Confusion even with policyholders
Digging a little deeper, Trustmark looked at some of the most misunderstood aspects of this type of insurance. These are some of the features that are misunderstood even within disability insurance policyholders2:
- Situations covered Whether the injury has to be at work and whether pregnancy is covered
- Payment timing Consumers are unsure when payments begin and how that interacts with time off and sick days
- Provider of payments Whether the employer or insurance carrier is making the payments
- Contribution during disability Whether premiums continue during disability
- Mental health and substance abuse coverage Some individuals were unsure if these were covered
Clearly companies need to do a better job of communicating basic features and benefits in these areas. But there’s an even larger issue that needs to be addressed.
Framing the conversation
It’s unfortunate that the statistics surrounding disability products are often used to frighten instead of enlighten prospects. The data aside, there’s an interesting nuance to the way we approach disability insurance not only in the naming, but also in the way we talk about it. When you look around at the insurance landscape, many products are no longer associated with the negative side of coverage. Life insurance isn’t called “death insurance”, and the LIA has done a great job reframing the way people think about it, even recommending it as a worthwhile gift for loved ones.
But the name “disability insurance” still holds a negative connotation that other products don’t. The word “disability” also lends itself to consumers thinking, “that won’t happen to me”, which is a major hurdle in terms of potential policyholders embracing and understanding a product. We have worked with countless clients on collateral and marketing campaigns where statistic after statistic is presented. But the issue remains, most people cannot envision the kind of tragedy that would require disability insurance happening to them.
To help people get on board, we need to simplify the conversation and take a different approach to how we present disability insurance. A person’s paycheck truly is one of an individual’s most valuable assets, and they need to protect it. I like this analogy. “If you had a machine in your house that consistently generated cash flow to live off of, wouldn’t you want to insure it?” You and/or your spouse are the cash machines in your household, and if you’re in your 20s, 30s or 40s, the chances are good that your ability to generate an income also represents your household’s largest present value “asset.”
So who is doing this well?
Here is a recent ad from Northwestern Mutual. It reads:
Help Protect Your Income With Affordable Disability Insurance Coverage. Find An Advisor! Your Income Is Likely Your Largest Financial Asset—Get The Right Policy To Help Protect It. Work With An Advisor. 160 Years Of Experience. Get A Disability Plan. Save & Invest.
Northwestern is including some statistics about what CAN happen in their materials but they mostly talk about lost wages, and protecting your income, an important slant.MassMutual frames the conversation similarly with their ad on Google to “Help Cover Your Living Expenses With Disability Income Insurance.
What if disability insurance was repositioned as “income insurance”? Redefining disability insurance to consumers in this simple way could be enough to move the needle.
With reporting from Trustmark.
1 Trustmark and Advantage Research, Inc. 2015.
2 Trustmark Connell Group Research. 2014.