Huge Opportunity in Disability Insurance

Outdated technology and sales strategies have hurt disability insurance, but a D2C platform is now available that tackles the problems.

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A 2020 report from LIMRA found 54% of all people in the U.S. were covered by some type of life insurance. A 2021 report from the same organization found a mere 14% of Americans were covered with a disability insurance policy, down from 16% in 2020.

But which product — life or disability insurance — is more likely to be needed by a policyholder? 

During the average career, someone is 3 1/2 times more likely to become disabled than they are to die.

It’s an eye-catching incongruity. 

Then consider that many Americans live paycheck to paycheck and are woefully unprepared for an injury or illness that prevents them from earning steady income for an extended period.

A recent study from Breeze found 47% of Americans couldn’t cover a $1,000 expense with just personal savings (57% of women and 38% of men). The study also found the plurality (29%) of employed respondents could only last one to four weeks on both savings and debt if they suddenly stopped earning an income. 

Despite the huge need, disability insurance remains a very small slice of the insurance marketplace. Only about $430 million in disability insurance premium was written in 2020 compared with almost $200 billion in life insurance premiums in the same year.

Why?

For too long, disability insurance has been hurt by outdated technology and sales strategies, as well as a lack of clarity around the product. 

See also: Managing Absences for Disability Insurance

Legacy insurance carriers have lacked a direct-to-consumer platform (D2C) to provide disability insurance to consumers. With the majority of disability insurance sales still coming through the traditional network of brokerage general agencies (BGAs), this product has been sold the exact same way for over two decades.

Insurance is going the way of quick, online quoting that uses data and predictive analytics to not only approve or deny applicants but also determine their policy details. But disability insurance is playing catch-up. Carriers have lacked the data science capabilities required to quickly, digitally and accurately match consumers to a disability insurance policy based on occupation, health and other personal factors. 

That lack means certain occupations cannot get fairly valued disability insurance quotes in a streamlined manner and are possibly pushed away from purchasing. 

Look at the increasing number of 1099 workers. They may want disability insurance because they do not receive the same protection as full-time employees and may change jobs frequently.

However, carriers have lacked the data analytics to accurately and quickly price out a disability insurance policy for 1099 employees because there are so many variables at play. 

Selling disability insurance has long been complicated because there is widespread confusion about what the product is, the benefits it provides and how the underwriting process works. The potential to grow this market just through consumer education is massive. But agents and brokers have stayed away because of the complexities involved in underwriting.

See also: What Is Happening to Life Insurance?

At Breeze, we’re working to grow the disability insurance market through a direct-to-consumer platform that uses data analytics to accurately and quickly quote policies in an entirely digital manner across a wide variety of professions and backgrounds. The legacy carriers we work with can still sell disability insurance through the traditional agent and broker network but now have a D2C marketplace that can hit consumers in every corner of the country. Agents, brokers and BGAs can also use our platform.

The potential for disability insurance is massive -- and the more that activity can move online, the more consumers can be reached.


Colin Nabity

Colin Nabity

Colin Nabity is the CEO and co-founder of Breeze, an insurtech focusing on disability and critical illness insurance.

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