Workplace disability insurance saves taxpayers billions of dollars, protects working Americans from financial hardship

Group disability insurance protects as many as 500,000 families a year from impoverishment, according to an economic analysis by Charles River Associates released today at a symposium hosted by the Financial Services Roundtable, the American Savings Education Council and the Aspen Institute.

Commissioned by employee benefits leader Unum (NYSE: UNM), the analysis estimates that private group disability coverage translates into direct savings of up to $4.5 billion a year to the government and taxpayers.

"This groundbreaking report quantifies the immense economic value financial protection products such as disability, life and long term care insurance provide American workers,” said David F. Babbel, emeritus professor at The Wharton School and leader of the Insurance Economics Practice at Charles River Associates. "These benefits provide a financial safety net in the event of misfortune, helping the government avoid billions of dollars in public assistance payments as a direct consequence of the insurance.”

Financial Security for Working Americans: An Economic Analysis of Insurance Products in Workplace Benefits Programs examines many facets of these benefits, from individual need to business value to social benefits.

Its conclusions are clear: most consumers lack basic financial protection; the workplace is the most effective avenue for access to affordable coverage; and these benefits provide undeniable and concrete value to the government as well as the individuals they help protect.

"Employer-sponsored financial protection benefits provide a critical financial safety net for individuals and families, particularly lower- and middle-income Americans,” said Unum CEO and President Tom Watjen. "While many employers do offer private disability insurance to their employees, a full two-thirds of working Americans don’t have access to this type of safety net.

"We hope that this report contributes to a meaningful conversation among consumers, employers, insurers and policymakers as we move forward together to provide important financial protection to working Americans.”

The symposium, PROTECT 2011: Workplace Benefits and Financial Security, was held at the Newseum. It outlined the importance of insuring against risk and protecting financial assets in an age of scarce government resources and difficult economic times. Participants included Senators Kay Hagan (D-NC) and Bob Corker (R-TN), representatives from the host organizations and the CFA Institute, Certified Financial Planner Board of Standards, American Institute of CPAs and benefits industry professionals.

Highlights from Financial Security for Working Americans

The need for financial protection:

• About 1 in 3 workers will be disabled for at least 6 months during his or her earning years, with the median length of disability being 2½ years.
• Most Americans do not have the financial resources to pay their bills if they become unable to work. More than 70 percent of American households could not pay their normal living expenses if a wage earner is disabled for six months.

The value of employer-sponsored benefits:

• Employers today spend $10 billion in premium each year to provide disability insurance to 40 million workers. Collectively, this insurance generates $590 billion in economic welfare for employees.
• The $21 billion employers currently spend on group life insurance generates up to $3.5 trillion in economic welfare for 75 million covered employees.

An affordable resource:

• Group disability premiums can be as little as $25 per month or $300 per year, and group term life insurance premiums for someone just starting a career can be less than $1 per year per $1,000 of death benefit.
• An employee in his twenties earning $40,000 to $50,000 per year suffering a disability can obtain well over $1 million in payments from an employer-sponsored disability plan.

The gaps in financial safety nets:

• In 2009, only 60 percent of civilian wage earners were covered by group life insurance, and only 32 percent were covered by group long-term disability insurance.
• The total economic welfare value of these insurance products could be substantially higher if more employers made the insurance available to their workers.

The public-private partnership:

• Employer-sponsored disability insurance promptly provides a crucial, uninterrupted income stream for the months or years it typically takes the Social Security Administration to determine whether an individual qualifies for government benefits.
• Wage earners with disability coverage are much less likely to fall into poverty if they become disabled, and therefore are less likely to require public financial assistance.

About Unum

Unum (www.unum.com) is one of the leading providers of employee benefits products and services in the United States and the United Kingdom. Through its subsidiaries, Unum Group paid approximately $6 billion in total benefits to customers in 2010.

About Charles River Associates

Charles River Associates(R) is a global consulting firm specializing in litigation, regulatory, and financial consulting, and management consulting. CRA advises clients on economic and financial matters pertaining to litigation and regulatory proceedings, and guides corporations through critical business strategy and performance-related issues. Since 1965, clients have engaged CRA for its unique combination of functional expertise and industry knowledge, and for its objective solutions to complex problems. Headquartered in Boston, CRA has offices throughout North America, Europe, the Middle East, and Asia. Detailed information about Charles River Associates, a registered trade name of CRA International, Inc., is available at http://www.crai.com.

About the Financial Services Roundtable

The Financial Services Roundtable represents 100 of the largest integrated financial services companies providing banking, insurance, and investment products and services to the American consumer. Member companies participate through the Chief Executive Officer and other senior executives nominated by the CEO. Roundtable member companies provide fuel for America's economic engine, accounting directly for $74.6 trillion in managed assets, $1.1 trillion in revenue, and 2.4 million jobs.