Disability insurance is getting a digital upgrade

Disability insurance is trending upwards in 2024 as Americans close the gap between needing good coverage and getting it.

According to LIMRA, a financial services research firm, 46% of Americans claim they require “some sort of disability insurance,” even as just 18% of U.S. adults have disability insurance, according to LIMRA’s 2024 Insurance Barometer Study.

What’s not in doubt is that working Americans need disability insurance to ensure their standard of living.

The LIMRA study notes that U.S. households with one disabled adult need 28% more annual income to keep that standard of living stabilized compared to households with no disabled adults. 

According to LIMRA’s data, consumers without disability insurance coverage say their families “would resort to tapping into personal savings (48%) or retirement funds (26%) to meet their day-to-day expenses.” In that scenario, consumers must understand there’s a” lot at risk should the primary wage earner become disabled,” LIMRA reports. “Disability insurance can help safeguard against undermining one’s future financial security.”

Digital insurance rising
The good news is that disability insurance is easier to get, manage, and receive payments than ever.

Take the insurance giant MetLife.

The New Jersey-based insurer rolled out a new customer experience that heavily relies on digital tools and services. The experience allows customers to “screen certain permission-based medical and pharmacy claims and user activity to deliver personalized benefit education and streamlined claims processes across MetLife’s robust portfolio of products” from their laptops, phones, and e-readers.

To MetLife, getting customers digitized is no luxury – it’s a necessity.

According to MetLife’s 2024 U.S. Employee Benefit Trends Study, 62% of employees are not completely confident they know about all of the insurance benefits available, which leads directly to “lower benefit utilization and satisfaction.” The same study notes that 73% of employees say benefits integration “is important to them, underscoring increased expectations for streamlined and cohesive (digital) experiences.”

How insurance companies are using technology
Insurers are putting artificial intelligence to work in several key areas, most notably underwriting, marketing, risk assessments and ratings, and fraud prevention. Additionally, insurers are leveraging AI to create customer-engaging chatbots. Progressive and Geico have immersed AI-powered chatbots in their customer service operations for years.

To insurance companies, risk assessment may be the first among equals in using technology to improve bottom-line performance and optimize customer management. Here are three reasons why.

Leveraging AI models on risk assessment tasks. Consider how insurers are installing AI into insurance underwriting. Historically a labor-intensive process, digitizing it enables insurers to improve the process both for the consumer and the company.

That leads to a quicker and more efficient underwriting process that enables disability insurance consumers to avoid having to fill out 20 pages of forms, drive to an insurance office to meet with an agent, or travel to a medical clinic to get checked by a physician, deliver body fluid samples or give blood. AI simply creates a customer profile based on existing policyholder data and allows the insurer to quickly and confidently assess the potential customer’s risk profile and deliver policy options, offer a price, or turn down the applicant in a matter of minutes.

Video chats and risk assessment. Insurance companies have also historically used questionnaires to gauge risk assessment in disability insurance applicants. That’s not always useful, especially in the disability market where so many applicants are covered by employers, who add another layer of scrutiny to the risk evaluation process (like employees working for foreign companies).

Video chat technologies allow insurers to assess customer risk remotely. Doing so is easier for the insurance applicant who either covers the video chat session on his or her own or has a company benefits staffer handle the meeting by proxy.

This enables insurance companies to save money creating, transmitting, and managing questionnaires, saves money on travel expenses for company risk engineers, accelerates risk assessment, and removes subjective judgment from the risk management process. One risk management analyst can assess customer applicant data from a single video session within an hour of viewing the chat.

Using IoT to track customer data. Insurance companies are also constantly gathering data on disability and health insurance remotely via cell phones, smartwatches, and vehicles, usually through a mobile app from the insurer or third-party partner.

This helps insurers gain more insights into their health care customers while simultaneously gathering data on their key insurance assets.

For instance, insurance risk analysts can track a customer’s health habits, such as exercise activity, sleep habits, blood pressure, sugar levels, and heartbeat, via IoT-based wearables and smart watches. Insurers can also access a customer’s medical records, including check-ups and clinic visits, to evaluate policy risks.

That tracking scenario helps the customer, too. A disability or health insurance applicant who exercises regularly, improves their diet, and quits smoking and drinking can earn lower premiums through better health behaviors, as insurers reward customers for healthier lifestyle behaviors.

Digital insurance experience is becoming normalized
Among other experiences, the worldwide COVID-19 pandemic forced people to recast their health and insurance experiences and rely on digital experiences to complete forms remotely or talk to doctors and nurses via video chat.

According to a recent EY Global Insurance Consumer Survey, regular customer interactions with insurance agents rose from 28% before the pandemic to 43% after the pandemic.

That trend is expected to expand significantly in the next decade as technologies like AI and machine learning make it easier and more effective for disability insurance customers to engage digitally with insurers that want to do the same for better customer experiences and superior risk assessment “bottom-line” outcomes.