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Disability insurance is an important component of an individual’s overall financial strategy. It provides financial support in the event of an unanticipated accident or illness that prevents an individual from working. It reduces the stress often associated with disability, allowing the individual to focus on their health and recovery. Actuarial projections from the U.S. Social Security Administration (SSA) in 2020 indicate that one in four 20‑year-olds will be out of work for at least a year because of a disabling condition before their retirement age.1 A common misconception is that disabilities are primarily caused by work injuries. However, most disabilities are not work-related and therefore are not covered by Workers’ Compensation.
Heart disease, cancer, mental health issues, musculoskeletal issues and diabetes are key contributors to long-term disability. Compelling evidence highlights the growing need for Income Protection and the importance of having Disability insurance.2 We will explore some aspects of Disability insurance underwriting, including some of the nuances of assessing morbidity risk.
There are four key elements evaluated for Disability insurance: health, occupation, income, and lifestyle. While health history is often the primary focus, it is important to use a holistic underwriting approach and consider each element carefully when assessing the risk. Does the medical history have an impact on the applicant’s ability to perform the essential requirements of their occupation? Are there economic or financial concerns that could impact earnings? Do they participate in activities that may put them at a higher risk for injury/disability?
Underwriters must assess the risk of future impairment, often working with limited or incomplete information. Individuals may have multiple subjective complaints that must be evaluated for their possible association with medical impairment. The medical diagnosis(es) may not be clear, prompting the underwriter to piece together the information on file to determine “what is most likely?” Each applicant is unique, requiring careful evaluation and critical thinking by the underwriter. The goal in Disability insurance underwriting is to provide excellent client value while making a balanced risk assessment.
Medical analyses ideally involve a “whole person” assessment, considering the connection of health to the biopsychosocial context of the individual. The U.S. Department of Veterans Affairs (VA) Whole Health Program represents an excellent example of a holistic approach to health represented by the image below of the “Circle of Health.”3 This graphic illustrates the dynamic relationship between health and many other aspects of life.
Subjective health complaints illustrate the challenges in Disability insurance underwriting where multiple comorbidities may have a synergistic effect. When assessing subjective complaints, holistic assessment may shed light upon key risk elements. It is often helpful to assess clues such as evidence of consistency (between self-report and medical evidence), credibility, and consensus (among health care providers). Because diagnosis does not equate to disability, a nuanced, holistic assessment is particularly important.
Underwriting challenges include achieving reasonable consistency of evidence-based underwriting risk assessment and application of underwriting guidelines that may not address the specific scenario. Underwriting risk assessments need to align with the company’s underwriting risk philosophy and pricing. The evolving legal and regulatory landscape represents additional challenges.4
Here are two cases that illustrate themes in Disability underwriting risk analysis.
A 52‑year-old male project manager who retired six years ago from the military. He declares two mild traumatic brain injuries and PTSD with suicidal ideation eight years ago, and full recovery, with no ongoing treatment or recurrence of symptoms. Medical records from his family physician (the last office visit was 18 months ago) indicate his height is 5’11”, weight 230lb (BMI 32; 10lb weight gain within the past 6 months), work stress, headaches, sleep issues, and symptoms of anxiety and depression without any psychiatric diagnosis made. He declined referral to a psychiatrist, for psychotherapy and antidepressant treatment.
This applicant’s self-report does not align with the medical records on file and several biopsychosocial stressors are noted. Although diagnosis of a psychiatric condition has not been made, the history and current symptoms suggest chronicity of untreated psychiatric symptoms. Occupational stressors are relevant to our risk assessment. Evaluation of and the potential connection of subjective symptoms and stressors are unclear.
45‑year-old female emergency physician. Her father died following a stroke at age 52. She has hypertension and hyperlipidemia. Her height is 5’4” and weight is 218lb (BMI 37). She is the main support for her elderly mother who has dementia.
She declares on her application that her work hours during the COVID‑19 pandemic were excessive, so she has reduced her hours to 30 per week. Medical records from her family physician indicate that in 2022 she had an 18‑month history of chest pain, tachycardia and palpitations which were fully evaluated by a cardiologist. The diagnosis of Post-COVID Condition (Long COVID) was considered. The family physician records indicate that her symptoms have fully resolved since November 2022 and there is no record on file of psychiatric symptoms or diagnosis. The most recent office visit on file is from six months prior to underwriting.
This applicant has a history of past and current biopsychosocial stressors, and her disclosure aligns with medical evidence on file. The occupational impact of the COVID‑19 pandemic prompted her to reduce work hours. The non-medical issue of reduced work hours, qualification for the amount applied for, and possible medical correlates need to be evaluated by the underwriter. Favorable features include resolution of cardiac symptoms and full specialist evaluation without cause identified, no diagnosis of Post-COVID Condition, and absence of psychiatric symptoms or diagnosis. The underwriter considers the recovery from past symptoms, response to biopsychosocial stressors and recent medical condition, including absence of symptoms and stability within the past year.
Using critical thinking, the Disability insurance underwriter assesses risk, and then applies evidence-based underwriting guidelines to provide a balanced risk assessment. The art and science of underwriting considers unique scenarios, multiple factors, and at times new conditions such as COVID‑19, while projecting risk many years into the future.5
The unique skillset of Disability insurance underwriters is integral to providing access to valuable insurance products that support clients and their families during their time of greatest need.
