U.S. Group Level Disability Insurance Market Size, Share & Trends Analysis Report By Coverage Type, By Insurance Type, By Distribution Channel, By End-use, And Segment Forecasts, 2023 - 2030

Report Overview

The U.S. group level disability insurance market was valued at USD 32.37 billion in 2022 and expected to grow at a CAGR of 5.5% from 2023 to 2030. The growth of the market can be attributed to the benefits offered by disability insurance. Group disability insurance provides various benefits such as income replacement to employees who become disabled due to illness or injury, providing a portion of their income as a replacement. This helps disabled employees manage their financial obligations, such as rent or mortgage payments, utility bills, and other daily expenses.

Moreover, in the U.S., the group disability insurance premiums are tax-deductible for employers and considered a tax-free employee benefit. Employers can deduct the cost of providing group disability insurance as a business expense on their federal income tax return. Additionally, they are not required to pay payroll taxes on the premiums they incur for group disability insurance. Group disability insurance premiums are generally tax-deductible for the employer under Section 162(a) of the Internal Revenue Code (IRC) in the U.S.

The introduction of new schemes and offers by disability insurance companies is a significant factor driving the adoption of group disability insurance. As competition in the insurance market has increased, companies offer new and innovative products to attract customers and meet their changing needs. Group disability insurance providers are developing customized plans that meet the specific needs of employers and their employees. Some of these plans offer higher benefits for employees with jobs more susceptible to disabilities.

Regulatory compliance plays a significant role in the regional market. Compliance with regulations helps ensure that insurance companies operate within legal boundaries and maintain appropriate standards of practice. For instance, the Employee Retirement Income Security Act (ERISA) sets standards for administering and managing employee benefit plans, including group disability insurance plans. ERISA requires insurance companies to disclose information to plan participants, adhere to fiduciary standards, and file annual reports with the Department of Labor.

There is a general lack of awareness about group disability insurance in the customers. This can be attributed to several factors including inadequate education, low priority, misconceptions, and limited promotion. Many people are not aware of what group disability insurance is or how it works. The lack of understanding can prevent customers from seeking this type of insurance coverage. Insurance companies and employers may not provide enough information about the benefits of group disability insurance or may not offer sufficient educational resources to help customers make informed decisions.

COVID-19 Impact Analysis

The COVID-19 pandemic positively impacted the U.S. group level disability insurance market. The pandemic has highlighted the importance of being financially prepared for unexpected events, including illness and disability. This has prompted a growing interest among employees and employers in acquiring disability insurance policies to protect against potential financial risks associated with unexpected events. Additionally, insurance companies are taking this opportunity to expand their offerings and policies to meet the changing needs of their customers in response to the pandemic.

Coverage Type Insights

The long term disability insurance segment dominated the market in 2022 and accounted for a revenue share of more than 65.0%. Long term disability insurance covers a portion of the employee's income for a specified period, for instance, 2 years, 5 years, 10 years, up to the age of 65, or for life, depending on the policy. Employers generally offer long term disability insurance as part of their employee benefits package, and it is often a preferred option for employees looking for comprehensive coverage. Additionally, long term disability insurance premiums are typically lower than short-term disability insurance premiums, which makes it a cost effective option for both employers and employees.

The short term disability insurance segment is anticipated to register significant growth in the forecast period. Short term group disability insurance offers weekly financial assistance to employees who are entirely or partially unable to work due to a covered injury, illness, pregnancy, or mental condition. There is an increasing trend among employers to offer disability insurance as part of their employee benefits package. As a result, more companies are looking to provide short-term disability insurance coverage to their employees, driving segment's growth. Additionally, the rise in number of chronic illnesses and medical conditions that can cause short-term disability is fueling the segment's growth.

Insurance Type Insights

The employer supplied disability insurance segment dominated the market in 2022 and accounted for a revenue share of over 58.0%. Most employers offer disability insurance as part of their employee benefits package, and as a result, the employer supplied disability insurance segment has the most extensive customer base. Employers offer disability insurance to attract and retain talent, as it is an essential form of financial protection for employees who may be unable to work due to a disability. By offering disability insurance, employers can demonstrate their commitment to the financial well-being of their employees, making them more attractive to potential hires and helping to retain existing employees.

The high limit disability insurance segment is anticipated to grow significantly over the forecast period. The cost of living continues to rise, many individuals require higher levels of disability insurance coverage to maintain their standard of living in the event of a disability. High limit disability insurance provides greater financial protection, ensuring that they can cover their expenses and maintain their lifestyle in case of unexpected events. Additionally, the increasing awareness of disability insurance and the importance of financial protection has led to greater demand for high limit disability insurance coverage.

Distribution Channel Insights

The tied agents and branches segment dominated the market in 2022 and accounted for a revenue share of over 54.0%. Tied agents and branches have established customer relationships and are often seen as a trusted source of information and advice. This allows them to effectively market and sell disability insurance policies to customers, increasing their market share. Additionally, tied agents and branches have the backing of a large insurance company, which can provide them with resources and support to effectively market and sell disability insurance policies. This helps them to remain competitive in the market and dominate in terms of market share.

The brokers segment is expected to register significant growth in the forecast period. Brokers offer a more comprehensive range of insurance products from multiple disability insurance providers, allowing customers to choose from various options and select the one that best suits their needs. Additionally, brokers often have a deeper understanding of insurance products and can provide more personalized advice to customers. This can help customers make more informed decisions about their insurance coverage, leading to greater customer satisfaction and loyalty.

End-use Insights

The enterprise segment dominated the market in 2022 and accounted for a revenue share of over 64.0%. The enterprise segment typically has more bargaining power when negotiating rates with insurance providers. This allows them to secure more favorable terms and lower premiums, which can make disability insurance more affordable for both the company and its employees. Enterprise has a greater need for disability insurance due to the potentially significant financial impact that an employee's disability could have on the organization.

The government segment is anticipated to register significant growth in the forecast period. Government organizations have a large and diverse workforce often eligible for disability insurance coverage. Many government agencies and departments also have legal requirements to provide disability insurance for their employees. Secondly, there is an increasing focus on the importance of disability insurance and the benefits it provides toindividuals and society as a whole.

Key Companies & Market Share Insights

The latest trends adopted by disability insurance providers are digitalization, data analytics, simplified underwriting, Artificial Intelligence (AI), and Machine Learning (ML). Disability insurance providers are increasingly using digital tools and platforms to make it easier for customers to purchase and manage their policies. This includes online applications, policy management tools, and mobile apps that allow customers to access their policies on the go. Additionally, disability insurance providers are leveraging data analytics to understand their customers better and identify trends and patterns that can help them develop more effective products and services.

U.S. based group level disability insurance providers are aggressively investing in strategic initiatives, such as mergers and acquisitions, partnerships, and product launches, to offer innovative solutions to their customers and to stay ahead of the competition. For instance, in August 2022, amid economic uncertainty and ongoing pandemic-related challenges, AFLAC INCORPORATED introduced an improved version of its Aflac Individual Short-Term Disability Insurance, designed to assist employers in addressing the evolving needs of their valuable workforce. The company's insurance product for income protection offered monthly incomes to policyholders in the event of a covered injury, illness, or mental health condition, which left them incapable of working. Some of the prominent players in the U.S. group level disability insurance market include:

• The Hartford

• Unum Group

• Prudential Financial, Inc.

• MetLife

• StanCorp Financial Group, Inc.

• The Guardian Life Insurance Company of America

• Reliance Standard

• AFLAC INCORPORATED

• Mutual of Omaha Insurance Company

• Principal Financial Services, Inc.

U.S. Group Level Disability Insurance Market Report Scope

U.S. Group Level Disability Insurance Market Report Segmentation

The report forecasts revenue growth at country level and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the U.S. group level disability insurance market report based on coverage type, insurance type, distribution channel, and end-use.

• Coverage Type Outlook (Revenue, USD Million, 2017 - 2030)

  • Short Term Disability Insurance

  • Long Term Disability Insurance

• Insurance Type Outlook (Revenue, USD Million, 2017 - 2030)

  • Employer Supplied Disability Insurance

  • High Limit Disability Insurance

  • Business Overhead Expense Disability Insurance

• Distribution Channel Outlook (Revenue, USD Million, 2017 - 2030)

  • Tied Agents and Branches

  • Brokers

  • Others

• End-use Outlook (Revenue, USD Million, 2017 - 2030)

  • Government

  • Enterprise