State of the Disability Insurance Market in the United States: Trends, Growth, and Outlook

The U.S. disability insurance market continues to evolve, driven by demographic shifts, technological advancements, and changing economic conditions. Over the past five years, growth in sales across individual, Guaranteed Standard Issue (GSI), and business disability coverages has demonstrated both resilience and adaptability. Leveraging data from Milliman, LIMRA, and industry leaders, this article explores key trends, economic impacts, and market projections for the next 12 months.

Growth in Sales: A Five-Year Snapshot

Individual Disability Insurance
Individual disability insurance (IDI) remains a cornerstone of the market, with steady growth over the past five years.

  • According to LIMRA, IDI sales premiums increased at an average annual growth rate of six percent between 2018 and 2024.
  • In 2024, total IDI premiums exceeded $5.4 billion, driven by rising awareness of income protection needs among high-income earners and self-employed professionals.

Guaranteed Standard Issue (GSI) Disability Insurance
The GSI market has also grown significantly, as employers increasingly offer disability benefits to attract and retain talent.

  • GSI premiums have experienced a four percent annual growth over the past five years, reaching $460 million in 2023 (Milliman).
  • Employer-paid GSI plans continue to dominate, although employee-paid premiums now account for nearly 60 percent of the market.

Business Disability Insurance
Business-focused products, such as key-person disability insurance and business overhead expense policies are gaining traction.

  • Sales of business disability products have risen by an estimated eight percent annually over the last five years, reflecting the growing recognition of the financial risks associated with employee disabilities in small and medium-sized enterprises.
  • Simplified underwriting and higher issue limits have made these products more accessible for business owners.

High-Limit Coverage
Petersen International Underwriters, a leader in high-limit disability insurance, has observed increased participation and issue limits among domestic carriers. This trend reflects growing demand for higher limits of coverage, particularly for high-income professionals seeking coverage beyond traditional limits. While the domestic markets are increasing their limits in many areas, there is still the need for excess coverage in many other places.

Technological Innovations Transforming the Market
Technological advancements are reshaping how disability insurance is sold and underwritten:

  • Digital Application Platforms: Petersen International Underwriters has launched online platforms for personal and business disability programs. This mirrors many of the domestic markets’ approach as well.
  • Simplified Underwriting: Many carriers, including Petersen, are adopting streamlined underwriting protocols. Exams and labs are no longer required for a significant portion of disability applications, reducing friction for applicants and accelerating policy issuance.

Economic Impact on Sales (2023-2024)

Past 12 Months
The economic landscape over the past year has presented challenges for the disability insurance market:

  • Inflationary Pressures: Rising costs have stretched household budgets, leading some consumers to deprioritize discretionary expenses, including supplemental disability coverage.
  • Employment Trends: While low unemployment rates have supported group disability sales, wage stagnation in certain sectors has dampened individual disability policy growth.

Next 12 Months
Looking ahead, the market is poised for recovery and expansion:

  • Increased Awareness: Economic uncertainty has heightened awareness of the need for income protection, which is expected to drive sales growth in both individual and business disability lines.
  • Higher Limits: Domestic carriers have increased issue and participation limits in many occupations but still need to utilize higher limits in many cases.
  • Unique Occupations: The domestic markets have embraced some traditionally difficult to insure occupations such as Influencers and Remote workers, but there is still a very strong need for the specialty disability markets to fill in gaps for higher incomes and other unique occupations.
  • Enhanced Accessibility: Simplified underwriting and digital platforms are likely to accelerate policy adoption, particularly among younger, tech-savvy consumers.

Market Outlook: 2025 and Beyond
The U.S. disability insurance market is expected to continue its upward trajectory, supported by:

  • Aging Workforce: As the workforce ages, disability risks rise, increasing demand for coverage.
  • Evolving Employer Benefits: Employers are likely to expand disability offerings, particularly through GSI plans, as part of competitive benefits packages.
  • Innovation and Efficiency: Advances in digital technology and underwriting practices will streamline the application process and broaden the market’s reach.

Conclusion
The U.S. disability insurance market is adapting to economic challenges and leveraging technological advancements to drive growth. With strong performance in individual, GSI, and business segments, as well as increased participation limits and simplified underwriting protocols, the outlook for 2025 is optimistic. Industry players like Petersen International Underwriters are leading the charge by enhancing accessibility and innovating their offerings, setting the stage for a dynamic and customer-focused future.

By addressing the evolving needs of individuals and businesses, the disability insurance market remains a critical pillar of financial security for millions of Americans.

–Published with permission from Broker World Magazine.