Recent Developments in Disability Insurance in the United States of America

SynopsisThis Paper is a review of the developments in the issuance of disability benefits in connection with life insurance policies which have taken place in the last ten years in America, since Mr. Hunter's Actuarial Study was written. It does not deal with accident and health insurance issued as a separate contract.Disability benefits have been changed repeatedly to meet the needs of the policyholders, from the original waiver of premium benefit in event of permanent disability to the present liberal form known as the 90-day clause, which provides not only for waiver of premium but a monthly income payable during disability not reducing the face amount of the policy. Any sickness which renders the policyholder unable to work for a period of at least 90 days is considered as total and permanent disability.Some companies have been more progressive than others in liberalising their contracts, and at the present time there is a considerable variety of different forms of disability benefit to be had.Several years ago most of the States or the Union passed laws whereby certain standard provisions were made compulsory for all life insurance policies, and two committees have recently been working on standard provisions for disability benefits. The committees made a report which has been adopted, and commencing with July 1, 1930, most of the States will require standard disability provisions, which will result in a much greater uniformity of contract than at present. The standard provisions are set out in the Paper.The question of premiums and reserves is next taken up, and a brief summary is given of the disability investigations which have taken place in the last ten years. There has been a feeling on the part of the companies that they were losing money on disability, but owing to the frequent changes in the forms of disability benefits issued sufficient time had not elapsed to obtain enough data to calculate reliable rates of disability and of death and recovery among disabled lives. Without these it was, of course, impossible to find whether the premiums charged were adequate and whether the reserves on active and disabled lives were too large or too small.The New York Life Insurance Company made an extensive investigation in 1929, covering over 18,000 claims under policies with the 90-day clause, and the results showed that both the premiums charged and the reserves on active lives, based on Hunter's table, were much too small, whereas the reserves on disabled lives were in excess of the true values.This investigation also showed that the loss on females was very much greater than on males, a fact which has also been brought out in the experience under the British National Health Insurance scheme. The ways in which some of the large companies have attempted to solve the question of granting disability benefits to women are outlined in the Paper.The Paper includes rates of disability and premiums for a unit payable at disability and for an annuity of 1 per annum payable monthly during disability according to various experiences.