One nation, underinsured

U.S. lawmakers and a panel of industry experts met in March for a Senate committee hearing called “Stay-at-work and return-to-work: Lessons from the private sector.” The hearing focused largely on how the private sector supports employees through disability insurance, employment modifications and workplace accommodations, among other services. 

That focus on the private income protection industry was essential because it highlighted how common work-limiting illness or injury is and how to minimize the financial impact when it strikes. 

Our industry must continue to do its part by helping to educate consumers about the need for coverage and by seeking ways to simplify our products and make them more affordable to all Americans. But it's clear government can play an important role by helping to raise awareness with consumers, employers and others about the risks and consequences of disability.

Few people understand the average worker has a one-in-three chance of becoming disabled from illness or injury for six months or more during his or her working life. Most Americans are unprepared for the consequences of losing an income, even for a short period of time.

Income protection insurance is affordable, with group premiums often as low as $20 to $30 per month. But too few Americans are covered by private income protection. About 70 percent of private sector employees lack long-term disability coverage, according to the Bureau of Labor Statistics. 

Consider the economic environment in which this conversation is happening. 

Half of all households couldn't raise $2,000 within a month if they needed to, according to the National Bureau of Economic Research.

And more than half (60 percent) of workers have less than $25,000 in household savings, while 34 percent say they have pulled money out of savings to pay for basic expenses, according to a 2012 retirement confidence survey published by Employee Benefits Research Institute. 

In the same survey, 37 percent of people said they expect to work after age 65, as compared to 24 percent in 2007 and 18 percent in 2002. In addition, 26 percent of workers said they expect to be 70 or older when they retire and another 7 percent said they would never retire.

Only 52 percent said they felt even somewhat confident they would have enough money to live comfortably through their retirement years.

The most widespread income protections—workers' compensation, Social Security Disability Insurance and personal savings—are useful but insufficient. Three times as many disabling injuries occur off the job as on the job, and are therefore not covered by workers' compensation. 

The average Social Security Disability Insurance benefit is $1,100 a month, and is reserved for eligible disabilities expected to last for at least a year or result in death. About 70 percent of applicants are turned down on their first try, and the four-tiered appeals process can take years.

Support when it's needed most

The world of disability is uncharted territory for most people, and private benefits providers guide them through a difficult landscape by building supportive relationships with the common goal of helping employees recover and return to work. 

A key component of income protection insurance is the immediate assistance provided by experienced specialists, which reduces the impact of disability and maximizes the chances of someone returning to work. 

When an employee is sidelined by injury or illness, disability benefits replace 60 percent or more of the employee's income, helping families avoid real financial hardship. Employers also benefit from the role the coverage can play in recruiting and retaining a talented workforce and strengthening businesses. 

Private income protection insurers help employers better manage their businesses by maximizing productivity and minimizing absence. Studies show that disabilities can cost employers upward of 15 percent of payroll. By increasing the potential for returning to work after illness or injury, employers can save on the expense of recruiting and training replacements, and can reduce health care costs, as well. 

And the value of these benefits extends to taxpayers and the government. 

The increasingly collaborative conversation about the importance of income protection benefits also prompted the first Congressional caucus on these issues.

Early in 2012, U.S. Sens. Kay Haga, D-N.C. and Olympia Snowe, R-Maine, announced the Income Protection Benefits Caucus to bring attention to issues that affect the financial stability of millions of people and their families. 

The group will serve as a clearinghouse for information on these issues and react to related Congressional proposals. Work is under way to create a similar organization in the House.

 The benefits add up

Last year, Unum commissioned a study by Charles River Associates to assess the value of employee benefits with a specific focus on disability income protection provided in the workplace. 

The study found that private, employer-sponsored disability insurance saves taxpayers up to $4.5 billion dollars per year and helps as many as 575,000 families avoid impoverishment and the need to rely on public assistance programs. 

Individuals with income protection coverage who become disabled are much less likely to require support through government assistance programs, greatly benefiting taxpayers. In fact, the Charles River report suggests that poverty among working adults who become disabled during their careers could be virtually eliminated if all workers had some form of standard employer-sponsored disability insurance. 

Following the release of the study, Sen. Hagan and Sen. Bob Corker, R-Tenn., participated in a forum in Washington, D.C., on the topic of income protection and financial literacy that featured findings from the Charles River research. The forum was hosted by the Financial Services Roundtable, the American Savings Institute Council and the Aspen Institute. 

Clearly, employer-sponsored benefits can play a major role in addressing the growing need for financial protection for families and individuals and in taking pressure off government resources. 

Newly released research developed in partnership with the Consumer Federation of America shows that individuals need and want disability coverage – and that they would be willing to pay for it if their employers offered them the opportunity.

In partnership with Unum, the Consumer Federation of America—the country's largest consumer advocacy group— surveyed nearly 1,200 people this spring to learn about consumer attitudes and understanding of disability coverage. 

Missing work for at least three months because of injury or illness would create a financial hardship for 79 percent of workers and a “great hardship” for more than half of those surveyed. 

The survey also reveals that 75 percent of people do not know that the major causes of disability include common illnesses or health conditions. The most common reasons for disability leave include cancer, childbirth, muscle/bone disorders, heart attacks, strokes, and surgery.

Nearly nine of 10 workers said they think it is “personally important” for them to have this coverage, and nine of 10 said they think all businesses should offer disability insurance. And six in 10 said they would pay all of $30 monthly premiums to gain protection.

Protecting their most valuable asset—the ability to earn a living—is a critical step in creating a safety net for American workers. The private sector, government and advocacy organizations can work together to increase the awareness of the need for employer-sponsored income protection benefits and to make these valuable benefits more accessible to individuals and families. 

Scott Maker is senior vice president for government affairs at Unum.