Trends in Disability Insurance Policies: Key Changes and Developments

Over the past few years, several trends have emerged within the disability insurance industry. The COVID-19 pandemic, government policies, and regulatory requirements have shaped the landscape. As the global pandemic continues, disability insurance providers must adapt their policies to encompass new challenges, leading to significant trends within the sector.

One major trend in disability insurance policies stems from an increased focus on mental health problems and stress-induced diagnoses due to the ongoing pandemic. Insurance providers are now prioritizing coverage of mental health issues following the surge in demand due to the increased stress levels individuals face amidst the global crisis. Additionally, the pandemic has highlighted the importance of economic disparities in the accessibility of disability insurance, leading to discussions around policy improvements and revisions to serve the general population better.

Another notable trend in the disability insurance sector is the shift toward digitalization and technological advancements. Policyholders are now expecting seamless online experiences, which has led to insurance companies’ adoption of digital tools and platforms. Furthermore, as the pandemic has forced many industries to pivot to remote work, the disability insurance landscape has decreased claims related to physical labor, with an increasing number of workers adapting to jobs with less manual labor demands.

Impact of Covid-19 on Disability Insurance

The Covid-19 pandemic has significantly impacted various aspects of the insurance industry, including disability insurance. This section explores the shift in long-term and short-term disability claims during the pandemic.

Shift in Long-Term Disability Claims

As the pandemic disrupted lives and economies around the globe, there has been a notable shift in long-term disability claims. A study by the Social Security Administration found that applications for disability insurance increased during this time (source). This could be attributed to the pandemic exacerbating existing health conditions or causing new ones and an increased awareness of the need for disability insurance.

During the Great Recession, Social Security Disability Insurance (SSDI) applications increased by 28 percent, with about one-quarter of this increase attributable to the recession (source). A large share of these applications were approved, suggesting that many workers with a disability left the labor force during this time.

Short-Term Disability Changes

Short-term disability insurance policies have also been affected by the Covid-19 pandemic. These policies tend to be more expensive when purchased as an individual but may be less expensive when offered under an employer’s group plan (source). Due to the pandemic, there has been a growing demand for short-term disability policies as individuals seek to protect their income in case of illness or job loss.

One interesting data finding reported a 23% increase in short-term disability claims between 2020 and 2021, largely attributed to the coronavirus pandemic and its impact on the national psyche (source).

In response to these changes, insurers may need to adjust their offerings to address the evolving needs of their clients by providing more comprehensive and flexible disability insurance policies.

Innovations in Disability Insurance Industry

As trends in the disability insurance industry evolve, innovations have emerged that are reshaping the landscape of insurance policies for individuals with disabilities. Among them, the rise of insurtechs, e-tailers, and a focus on customer-centricity are prominent themes that stand out.

Insurtechs and E-tailers

Insurtech companies are increasingly playing a significant role in the disability insurance market. They leverage cutting-edge technologies, such as artificial intelligence, distributed infrastructure, and advanced analytics, to create innovative solutions tailored to meet the needs of individuals with disabilities.

For instance, AI-powered tools are being developed to process claims more efficiently, resulting in faster payouts and smoother experiences for policyholders. The distributed infrastructure allows insurance providers to offer flexible and customizable policies that cater to the unique requirements of customers living with disabilities.

e-Tailers are also beginning to play a critical role in distributing disability insurance products. As these digital platforms, which focus primarily on consumer experience, provide policyholders with convenient online access, purchasing disability insurance becomes a seamless, user-friendly process, reaching a wider audience and increasing overall accessibility.


Another major trend in the disability insurance industry is the focus on customer-centricity. With increasingly personalized products and services, the needs of the policyholders are being placed at the center of the insurance offering. This approach allows individuals with disabilities to secure insurance that caters to their specific situation and requirements.

The emphasis on customer-centricity is evidenced through technological advancements, such as digital tools that simplify the quote comparison process and platforms that effectively communicate policy benefits and limitations. As a result, policyholders can make informed decisions about the coverage that best suits their needs.

As the disability insurance industry continues to innovate and adapt to the changing landscape, keep an eye on these trends and stay informed on how they can benefit you or a loved one with a disability.

Policy Provisions and Changes

Disability insurance policies have experienced various changes in provisions over time to accommodate the evolving needs of policyholders. This section will discuss two critical aspects of these policies: Benefit Period Adjustment and Waiting Period Modification.

Benefit Period Adjustment

The benefit period is the duration for which the disability insurance policy will provide financial support if the insured becomes disabled. Typically, the longer the benefit period, the higher the premium.

In recent years, insurance providers have introduced flexible benefit period options, allowing policyholders to choose the most suitable duration based on their unique needs and financial situation. Common benefit period options include:

  • 2 years
  • 5 years
  • 10 years
  • Until age 65 or 67

Policyholders need to assess their financial needs and the length of time carefully they may require support in case of disability, to select a suitable benefit period.

Waiting Period Modification

The waiting period, or the elimination period, is the duration a policyholder must be disabled before disability insurance benefits are paid. Insurance providers offer varying waiting periods, affecting the policy’s premium and its coverage.

Some standard waiting period options are:

  • 30 days
  • 60 days
  • 90 days
  • 180 days
  • 365 days

Shorter waiting periods generally result in higher premiums, as the insurance company assumes a greater risk by paying benefits sooner. Conversely, longer waiting periods can lead to lower premiums but may cause financial strain for the insured if they cannot work for an extended period.

Policyholders should carefully consider their financial resources, savings, and the impact of waiting periods on premiums when choosing a disability insurance policy that best meets their needs.

Economic Factors Affecting Disability Insurance

This section will discuss economic factors that affect disability insurance policies, focusing on inflation, interest rates, and loss costs.

Inflation Impact on Policies

Disability insurance policies, like many other financial products, are directly impacted by inflation. Inflation erodes the purchasing power of money over time, affecting the value of disability benefits.

As the cost of living increases, insurers must adjust their offerings to ensure policyholders can maintain their living standards in case of a disability. This may result in higher premiums or policy adjustments, such as indexing benefits to inflation, to protect policyholders from inflationary pressures.

Interest Rates

Interest rates are another economic factor that can significantly impact disability insurance policies. Insurers rely on interest income from investments to fund future claims, so when interest rates are low, insurers may need help generating sufficient investment returns.

Low-interest rates may compel insurers to increase premiums or adjust policy terms to ensure the financial viability of their disability insurance products. Conversely, when interest rates increase, insurers can offer policyholders more attractive policy terms, such as lower premiums.

Loss Costs

Loss costs are associated with insurance claims, including benefits paid to disabled policyholders and the cost of administering claims. These costs of successful claims affect the profitability of disability insurance products for insurers and can be influenced by various economic factors.

  • Rising medical costs: As healthcare costs continue to increase, insurers may face higher loss costs due to higher payouts for medical-related disability claims.
  • Economic downturns: During economic downturns, disability claims may increase as individuals face job losses and financial difficulties, leading to higher loss costs for insurers.
  • Shifts in workforce demographics: Aging populations and changing workforce structures can affect the prevalence of disability claims and directly impact loss costs.

Insurers must closely monitor and manage these factors to ensure the sustainability and competitiveness of their disability insurance offerings.

External Factors Influencing Disability Insurance

Various external factors can impact disability insurance trends and policies. This section will discuss two significant factors: climate change and public health, and geopolitical upheaval.

Climate Change and Public Health

Climate change is a pressing concern today, with potential implications on public health and disability insurance. This can manifest in several ways, such as:

  • The increased prevalence of vector-borne illnesses due to warmer climates may lead to a higher rate of disability claims.
  • Extreme weather events cause injuries or exacerbate existing health conditions, potentially resulting in more temporary or permanent disabilities.
  • Environmental factors, such as poor air quality and increased allergens, contribute to the development of chronic respiratory conditions that could lead to disability.

As climate change continues to impact public health, disability insurance providers may need to adapt their policies and risk assessments accordingly.

Geopolitical Upheaval

Geopolitical upheavals, such as political instability, civil unrest, and economic fluctuations, can also influence disability insurance. Some potential effects include:

  • Disruptions in international trade and supply chains could lead to job losses and increased claims for disability benefits.
  • Government policy or regulation changes impact the terms, coverage, and pricing of disability insurance products.
  • Complications in accessing healthcare services due to conflicts or economic crises potentially worsen the health conditions of those with disabilities and increase the need for disability insurance.

Understanding and anticipating the effects of geopolitical upheaval on disability insurance can help insurers better prepare for potential changes and create policies that effectively address the evolving needs of their clients.

Group Disability Insurance Trends

The group disability insurance market has seen shifts in recent years, with certain trends highlighting the importance and growth of this area within the industry.

Growth of Group Plans

Group disability insurance plans are experiencing growth in the United States. The U.S. group level disability insurance market was valued at USD 32.37 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 5.5% from 2023 to 2030. This growth can be attributed to the benefits and cost-effectiveness offered by disability insurance plans for both employers and employees.

As a result, many companies are increasingly offering disability insurance plans within their employee benefit packages. These offerings typically include both short-term disability (STD) and long-term disability (LTD) insurance products. According to Milliman’s 2021 U.S. Group Disability Market Survey, the report covers data from 23 participating insurance companies that provided information on new sales and in-force business for both STD and LTD products from 2019 and 2020.

Manufacturer and Infrastructure Coverage

Disability insurance is crucial for certain sectors, such as manufacturing and infrastructure. The physical demands and potential risks associated with these industries make it essential for employees to be protected with appropriate disability insurance coverage in case of injury or illness that may limit their ability to work.

In these sectors, employers are increasingly offering group disability plans to their workforce, resulting in better coverage and overall protection for the employees. This trend has led to a higher adoption rate of disability insurance policies amongst workers in manufacturing and infrastructure industries.

By implementing group disability plans, organizations operating within these sectors can ensure their employees’ financial stability and well-being, ultimately contributing to a healthier and more resilient workforce.

Social Security Administration and Disability Insurance

The Social Security Administration (SSA) is crucial in providing disability insurance to eligible individuals in the United States. Through the Social Security Disability Insurance (DI) program, the SSA offers financial support to workers who have become disabled and can no longer work and their dependents.

Over the years, there have been some key trends in DI enrollment and benefits. According to a study by the SSA, one in four people may experience a period of disability of at least one year before retirement age. As a result, there’s a growing need for accurate and updated rules and procedures to address the diverse needs of beneficiaries.

In recent years, the incidence and prevalence rates of disability under the DI program have declined. The exact cause of this decline remains unclear, but policymakers and researchers need to understand these trends to ensure the program’s continued effectiveness. Furthermore, the SSA has implemented a new rule that modernizes awarding disability benefits, reflecting advancements in medicine and the evolution of work. This aims to support individuals with disabilities who want to remain in the workforce.

Some highlights of the disability insurance benefits provided by the SSA include:

  • Average monthly benefits for disabled workers reaching $1,358 in December 2021, after a 5.9 percent cost-of-living adjustment.
  • The program’s focus on reflecting current medical practices and changes in the workforce to ensure accurate decision-making.
  • Considering the needs of non-elderly disabled workers and their eligible dependents when determining benefit eligibility.

It’s important for the Social Security Administration to keep abreast of trends in disability insurance enrollment and adapt policies accordingly. By staying current and responsive to the changing needs of beneficiaries, the SSA can continue to provide crucial support to disabled workers and their families.

Environmental, Social, and Governance (ESG) in Disability Insurance

Environmental, Social, and Governance (ESG) factors are increasingly important in the insurance industry, including disability insurance. Given the growing demands from stakeholders and the evolving risk landscape, insurance companies recognize the need to address these factors in their decision-making processes.

ESG considerations help insurers assess their underwriting guidelines, risk management practices, and investment strategies to better align with the principles of sustainable development. This can lead to the creation of innovative coverages and products that address emerging risks and underserved populations. For example, insurers may develop disability policies that provide additional support for mental health conditions or address the specific needs of gig workers.

Insurance regulators are also starting to incorporate ESG principles into their frameworks. The European Union has recently introduced sustainability-related disclosures for financial services providers, including insurers, to create a harmonized set of ESG disclosure standards. This is expected to have a cascading effect on insurance markets worldwide, influencing trends in disability insurance as well.

Stakeholders in the disability insurance sector, such as policyholders, employees, and investors, are increasingly concerned about the long-term impact of their choices on society and the environment. This has led to a heightened focus on the relevance of ESG factors within disability insurance and the broader insurance industry. Some key aspects that insurers may consider include:

  • Addressing the needs of underserved populations, such as lower-income individuals or people with pre-existing conditions who may struggle to access disability insurance.
  • Enhancing access to mental health support and other resources for policyholders who are recovering from a disability or illness.
  • Improving transparency and disclosure around ESG integration within underwriting guidelines, investment portfolios, and risk management practices.
  • Collaborating with other stakeholders, including governments and industry organizations, to drive positive change and promote a more sustainable and inclusive insurance sector.

By integrating ESG factors into their strategies and decision-making processes, disability insurers can enhance their resilience, better manage risks, and create more innovative and inclusive products for their policyholders.

Diversity and Inclusion in the Disability Insurance Sector

The disability insurance sector, like many industries, has been working towards enhancing diversity and inclusion (D&I) across various aspects of the insurance sector, such as workforce and supplier diversity. Recognizing that diverse and inclusive organizations can benefit from improved decision-making and consumer outcomes, insurance companies have started taking proactive steps to promote D&I in their businesses.

One trend that highlights the sector’s commitment to D&I is the focus on supplier diversity. An example of this is the Allstate Supplier Diversity program, which spent $235 million with minority-, woman-, veteran-, LGBTQ- and disabled-owned businesses in 2020. In addition, Allstate also provides a mentoring program to support diverse business owners in strengthening their companies.

There has been a growing recognition of the need for DEI within insurers’ organizations in recent years. This has led to insurance regulatory authorities, such as the International Association of Insurance Supervisors (IAIS), to address DEI as one of their key strategic themes. IAIS emphasizes the importance of advancing DEI within insurer’s organizations, as it supports better prudential and consumer outcomes.

However, much work must be done to ensure that diversity and inclusion are effectively addressed in the disability insurance sector. Recognizing the importance of eliminating disparities in access to disability insurance across different demographic and socioeconomic groups, industry players must stay committed to the cause and adopt innovative methods to foster a more inclusive environment for their employees and customers.


If you have questions about trends in disability insurance policies, this FAQ section is here to help. Here are some common inquiries and their answers.

What are the recent trends in Social Security Disability Insurance (DI) rates?

After a period of growth, disability incidence and prevalence rates under the Social Security Disability Insurance (DI) program have declined. The cause for the recent decline has yet to be made clear.

What factors are influencing the disability insurance landscape in 2023?

The disability insurance landscape in 2023 is expected to undergo significant changes due to factors such as inflation, rising interest rates, climate change, and talent shortage. These challenges are driving the industry to adapt and evolve to meet the needs of its customers and maintain its position in the market.

What are the two main types of disability insurance?

There are two main types of disability insurance: short-term and long-term coverage. Both replace a portion of your monthly base salary up to a cap, such as $10,000, during disability.

Why is disability insurance considered essential protection for most people?

Disability insurance is an essential protection for people, regardless of their occupation or income level. It safeguards against unforeseen events that are impossible to plan for, such as life-altering disabilities.