MetLife to Exit Individual Disability Insurance Market
MetLife, Inc. the fourth largest provider of long-term disability insurance by market share[1], is suspending sales of its individual disability insurance policies. In an internal memorandum to producers, MetLife Client Solutions Senior Vice President Kieran Mullins announced that the company would be suspending the individual disability insurance block of business effective September 1, 2016. In the memo, Mr. Mullins cites the goal of creating a new U.S. Retail organization for its insurance products and the “difficult, but strategic” decisions that led to the shutdown of their individual disability insurance product:
This was not an easy decision to make, given the growth and strength of our IDI business. However, we believe it is the best course of action for the immediate future. While there is tremendous opportunity in this market, the suspension provides us with the time and resources needed to properly separate the U.S. Retail business from MetLife. There is a significant amount of work to be done to retool existing systems – and implement new systems – that will ultimately provide the most value to our customers and sales partners in the years to come.
Insurance news websites are already speculating that the shutdown could put pressure on the remaining thirty-one companies selling individual disability insurance to raise premiums. Because MetLife controls such a substantial share of the individual disability insurance market, their departure effectively reduces the size of the pool in which the risk can be spread. Cyril Tuohy, writing for Insurancenewsnet.com, points to the move as an opportunity for the remaining companies in the market to innovate and attract the business MetLife will be leaving behind. The company’s departure will favor the insurers whose individual disability policies cater to physicians, dentists, and other high-income professionals, such as Guardian, Principal, The Standard, Ameritas and Northwestern Mutual.[2]
In an accompanying FAQ, MetLife assured producers that existing policies would not be affected by the change, and that they would continue to support policy increases by the terms of the Guaranteed Insurability Option, Automatic Increase Benefit, and Life Event riders. The memo also noted that MetLife would continue sales of its group, voluntary, and worksite disability products.
It is important to remember that even though MetLife must continue to service its existing policies, shutting down sales of new policies can still affect current policyholders. Absent the need to sell new policies, an insurer may have less incentive to provide customer service or avoid a complaint from the state insurance board. Additionally, once a block of business closes, the easiest way to maintain profitability of that product is through claims management. In real terms that is typically accomplished through claims denial and benefits termination. We discussed these very tactics in a 2012 blog post about Unum’s management of its closed block of individual disability insurance products.
If you have a MetLife individual disability insurance policy, pay close attention as the business focus shifts away from selling new policies and toward the management of existing policies. If you have a question or concern regarding your MetLife policy, contact our office.
[1]http://www.statista.com/statistics/216499/leading-long-term-disability-insurance-carriers-in-the-us/
[2]“Will MetLife’s Suspension Send DI Prices Soaring?” Cyril Tuohy, insurancenewsnet.com. http://insurancenewsnet.com/innarticle/agents-split-di-pricing-wake-metlife-suspension
