Disability Insurance

[Scott at MD Financial Services]

Just a quick update.....

Ameritas rolled out their new product on Jan 23 of 2023, for some specialties there was a significant price increase.

Principal is supposed to roll out a new product with higher prices on February 15, 2023.

Ohio National just announced today they were no longer going to take new clients for their disability policies as of May 1, 2023.

[uksho]

Just a quick update.....

Ameritas rolled out their new product on Jan 23 of 2023, for some specialties there was a significant price increase.

Principal is supposed to roll out a new product with higher prices on February 15, 2023.

Ohio National just announced today they were no longer going to take new clients for their disability policies as of May 1, 2023.

Are too many physicians going on disability?

[Scott at MD Financial Services]

There was some Covid claim uptick and then certain medical specialties are seeing an increase in claims so that is now going to be addressed via premium increase... The other part of what is going on is that insurance companies invest in bonds with premium dollars until they have to payout claims. Bond yields have been very low for the better part of a decade so that is catching up to them. Inflation is hitting everything from salaries of employees, to office expenses and so on. Heck I heard one stat the other day from a carrier that in 2018 they were spending $5 million +/- on data and network security, in 2022 they spent $15 million +/- on it. Finally the reserve capital that carriers have to set aside for every dollar of potential benefit they might have to pay out is significant and some carriers just don't want to have that much capital tied up. I would not be surprised to see another carrier or two suspend their disability insurance division or even all insurance sales in the next couple of years.

If you already have a policy then none of this really matters as those are locked in and any increases that one might want is also locked in, it is the folks that don't yet have a policy that this is going to hurt.

[Romberg45]

I suppose residents who want to increase their benefit amount upon graduation will have to pay more for that increase now. Right?

[Scott at MD Financial Services]

If you don’t get a contract locked in the as the carriers each raise their rate then the cost would be more post that action for policy acquisition. For those that don’t want to spend much money while in training I would suggest just buying $1-$1.5k of benefit with increase options to utilize once you are an attending. By doing that then you are locking in the current rate structure.

[Path Guy FI]

I would not be surprised to see another carrier or two suspend their disability insurance division or even all insurance sales in the next couple of years.

What happens to the policies of those currently insured when a company suspends the division of said policy?

[Ethan Abramowitz]

When a disability insurance company stops issuing new policies, the previously issued policies remain in effect. This happened a few years ago with MetLife.

[The White Coat Investor]

Just a quick update.....

Ameritas rolled out their new product on Jan 23 of 2023, for some specialties there was a significant price increase.

Principal is supposed to roll out a new product with higher prices on February 15, 2023.

Ohio National just announced today they were no longer going to take new clients for their disability policies as of May 1, 2023.

If this is what a doc needs to get off their butt and buy this important insurance, great. But it would be better if deadlines like these were not necessary and people bought it coming out of school. The way DI should work is that agents are swamped from July to September. Instead they have business all year round and are busiest in March to June because of procrastination. I mean, the price for an individual doc is ALWAYS going up because they're getting older and more likely to get disabled every year.

[Ethan Abramowitz]

Just a quick update.....

Ameritas rolled out their new product on Jan 23 of 2023, for some specialties there was a significant price increase.

Principal is supposed to roll out a new product with higher prices on February 15, 2023.

Ohio National just announced today they were no longer going to take new clients for their disability policies as of May 1, 2023.

Scott at MD Financial Services
Very informative, as always. Do you know if there been any modification to the Own Occupation definition by either company? Historically, Ameritas used specialty language while Principal was more generic.

[Scott at MD Financial Services]

What happens to the policies of those currently insured when a company suspends the division of said policy?

Nothing happens to existing policies. I have had clients that bought contracts 25-30 years ago from companies that no longer sell disability insurance and the policies still function exactly as then did back in the 90's. Back in the 80-90's there were a ton of carriers, probably 30-40 at least) that had own specialty contracts, today there are 6 and as of May there will be 5. A good example is MetLife stopped selling new contracts in 2016 but clients that had the polices are fine and Met is still obligated to allow the increases on those benefits as the client desires.

[Scott at MD Financial Services]

Scott at MD Financial Services
Very informative, as always. Do you know if there been any modification to the Own Occupation definition by either company? Historically, Ameritas used specialty language while Principal was more generic.

The definitions did not change.

As for Principal being more generic, I would say that is title issue by Principal and in my opinion they got it wrong. Their base policy provision states that you have an Own Occupation Period to age 65. When you read that it essentially states if you can't do your specialty full benefits are payable unless you are employed doing something else. Well if it states that then that is not really Own Occupation in my opinion. What you need to then add is their rider HH757 which is titled Regular Occupation. When that is added then the policy states If you can't do your specialty then full benefits are payable even if you are working in another occupation (see below in BOLD. Again, in my opinion, they should have the base contract definition titled Regular Occupation and the specialized rider to protect you in your sub-medical specialty be called the Own Occupation rider. They did not call and ask me my opinion so that is what they came up with....

Here is one of their letters talking about this.

This letter will provide information about how the Your Occupation Period, the Regular Occupation and Transitional Occupation riders would apply in the event of a qualifying disability. Most of the policies (check the state specific policies for the exact definition in the applicable State), defines:
TOTAL DISABILITY - means solely due to Injury or Sickness:
1. During the Your Occupation Period
a) You are unable to perform the substantial and material duties of Your Occupation; and
b) You are not Working.
2. After the Your Occupation Period You are unable to Work in any occupation You are reasonably suited to by Your education, training and experience.
3. Both during and after the Your Occupation Period, You satisfy the requirements of the Claim Information section. If You are Retired, Total Disability means, solely due to Injury or Sickness you are unable to perform any of the normal activities of a retired person in good health and of like age and You satisfy the requirements of the Claim Information section. If You are Unemployed, Total Disability means, solely due to Injury or sickness, You are prevented from obtaining a job that You
are reasonably suited to by Your education, training and experience and You satisfy the requirements of the Claim Information section.
In order to be eligible for Total Disability, there must also be no reasonable job or work site modifications which would allow You to work.

YOUR OCCUPATION - means the profession(s) or occupation(s), not a specific job(s) or a job with a certain employer(s), You were actively Working in (and not Retired or Unemployed from) at the start of Your Disability. If You are Working in more than one occupation, Your Occupation includes all occupations You were actively working in at the start of Disability. At the time of a qualifying disability, Your Occupation is based on the substantial and material duties that you are working in right before the disability began. To determine the substantial and material duties, Principal Life takes into account such factors as the specific duties, the amount of time, and the amount of income derived from the duties.

If you are a physician or surgeon and the occupational analysis shows that just prior to disability the main duties, are for example, performing surgery and the majority of your office base practice was pre and post operative patients, for the claim we would consider Your Occupation to be a surgeon. We would also recognize other specialties and sub-specialties if the analysis would bear out that the main duties would show that a person was limited to those duties associated with a specialty or sub specialty. Examples of these would be radiologist, cardiologist, oncology, anesthesiologist and the other specialties and subspecialties recognized by such groups as the American Board of Medical Specialties, American Osteopathic Association or the American Dental Association.

If you are a trial attorney and our occupational analysis shows that just prior to disability the main work duties were limited to those related to trial work, we would recognize trial attorney as Your Occupation. What this means is, if it is determined that you were unable to perform the substantial and material duties of Your Occupation and you choose not to work in another occupation, you would be considered to be Totally Disabled and the maximum monthly benefit would be paid, subject to the terms of the policy. During the Your Occupation Period under Total Disability, you are not required to work in another occupation.

If you choose to work part time in Your Occupation, then Principal Life would evaluate the claim under the Residual Disability Benefit Rider, if that rider is included in your policy. If your medical condition restricted your ability to work and you had a loss of earnings of at least 20%, and you otherwise qualified under the policy provisions, then benefits would be paid under the Residual Disability Rider.

If the Transitional Occupation Rider was included in the policy, if you chose to return to work in a different occupation, and you had earnings less than what you did prior to disability, the Rider would replace up to 100% of the pre-disability earnings, but not more than the Maximum Monthly Benefit on the policy. If benefits would be higher under the Residual Disability, then we pay the Residual Disability benefit instead of the Transitional Occupation benefit.

If the Regular Occupation Rider was included in the policy, if you chose to work in a different occupation, then you would be eligible to receive 100% of the Maximum Monthly Benefit.

The information provided in this letter is not intended to waive or alter any provisions of the policy.
Every claim is evaluated on its’ own merits based on the provisions of the policy issued and facts of the
claim.
Thank you for choosing Principal Life Insurance Company.