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Working warriors: the growing number of people working beyond common retirement ages offers new opportunities for disability carriers and other insurers.

Retirement isn't on CVS pharmacist John Johns' mind--at least not for now. The 66-year-old is part of the growing mature labor force that's chosen to continue working or to re-enter the work force upon retirement.

Financial challenges, lack of retirement funds and the need for benefits are some of the reasons older individuals are remaining on the job. With that comes a new set of demands--a host of benefits to meet mature workers' needs.

Disability insurance is quickly becoming one of those top-of-mind concerns for mature workers. Many fear, however, these individuals lack adequate coverage, and that's opening the door for insurers and employers to step in to meet those needs.

New Generation of Workers

Today's workplace is seeing a fundamental shift to a more diverse work force, including more mature workers.

Employers are excited about the possibilities. Not only are mature workers generally seen as dependable, loyal and dedicated, they're also viewed as having a strong work ethic, solid performance record and years of experience. Many of the nation's largest employers, including Home Depot, Manpower, MetLife and others, are actively recruiting and hiring mature workers.

CVS/pharmacy has been one of the leaders in this effort. Several years ago only 7% of the corporation's employee force was over age 55; today that number has jumped to more than 18%, said Steve Wing, director of government programs for the Woonsocket, R.I.-based corporation.

For employees like Johns, flexibility, benefits and a steady income are part of the appeal to remaining in the work force. Johns is part of CVS' "snowbird" program that allows him to split his time working between a New Jersey pharmacy and stores in Florida.

Disability's New Day

As individuals age, so does the propensity for developing a disabling illness or condition. In fact, workers age 55 or older are two to five times more likely than younger workers to have disabilities related to diabetes, eye disorders, cardiovascular conditions such as coronary artery disease, and cancer, according to MetLife claims data.

"People tend to think of disability as accidents or injuries, but that's not the case. That's much less common for older workers because they tend to be more careful and less active," said Katie Dunnington, director of disability product management for Hartford Financial Services. Instead, she said, many of their disabilities are lifestyle-related, part of normal aging or a result of genetics. "They're more likely to have complications from illnesses and diseases that create a more complex medical picture."

But are mature workers adequately covered?

Many insurers don't think so. "We can make all the product changes in the world and reach out to these individuals, but the key issue is that they don't have coverage they need and we have to understand that it's a buying issue," said Dunnington.

"Baby boomers are having families later in life and having second families, so they have the need to protect their incomes longer. Reduced savings is also a significant issue, so if they become disabled they have less savings to tap into and the savings they have is earmarked for retirement," Dunnington said.

She fears mature workers are playing Russian roulette when it comes to their financial stability and financial future. "Product changes alone won't solve that. Instead, we need to convince employers that they have a vested interest in keeping older workers engaged in the work force and help them purchase a coverage by making it affordable for them."

That's opening a door of opportunity for disability carriers.

"Employers are primarily counting on keeping people working longer and increasing productivity to minimize the impact of a work force shortage," said Dunnington. "Disability income protection is a key way to help keep employees engaged longer in the workplace."

She said while 86% of individuals 55 or older have life insurance, only 32% have any long-term disability coverage. "However, you can make the case that their need for life insurance decreases as they get older," Dunnington said.

Matt Gottfried, director of individual disability income for Berkshire Life Insurance Company of America, said some of companies' key employees are in the over-55 arena, "so it could be traumatic if they become disabled. It's in the best interest of employers to make sure employees have protection for their income source and that employers, particularly smaller employers, protect their ability to do business in the future."

Back on Their Feet

An older population of employees has a higher frequency of claims, as well as longer durations of disability.

Mike Simonds, senior vice president of marketing and product development for UnumProvident, said the long-term disability claim cost of an average 55-year-old worker is more than double that of an average 45-year-old.

Carriers are working hard to help mature workers get back on their feet more quickly. "One of the key things employers can do is have a formal return-to-work support in place for those on disability," said Hartford's Dunnington. "We have a philosophy that all employees want to lead active, productive lives and work is a key part of that. So we focus in our contract language and claims process on helping people get back to work."

For UnumProvident, transitional work is an essential answer to the aging work force. "We invite employers to build transitions back to and out from work," said Dr. Ken Mitchell, vice president of health and productivity development. A transition back to work is more likely to reduce the incidences of short-and long-term disability because people don't have to leave the workplace to heal or recover work capacity, he said. "If they do leave the workplace, the employees have well-defined pathways to re-engage back to work. One of the most common questions employers ask is when is an employee coming back to work. But sometimes individuals and physicians don't know the answer. Family, work and changing health issues can interfere with expected return dates. It's important for employers not to just ask when but rather how the person will re-engage in full productivity. Once we know the 'how,' the 'when' is clear."

Berkshire Life offers a unique feature in its multilife benefits called "return-to-work incentive benefits." "If a person makes an attempt to return to work, we'll make them whole by providing a benefit that's their loss of income," said Gottfried. "It's designed to encourage them to make every attempt to return to work but doesn't penalize them if they can't return on a full-time basis. It's payable over a 12-month basis whenever the period begins, so it's flexible and allows the insured to dictate the pace they want to recover."

Wish List

Disability income protection isn't the only coverage mature workers are looking for.

Long-term-care insurance is becoming a popular option, particularly for the growing number of individuals over age 50 who are part of the "sandwich generation"--those faced with caring for both elderly parents and children and grandchildren. "Many older individuals are starting to have caretaking issues for their parents and are recognizing the need for this coverage. Disability income protects their paycheck, but long-term-care insurance protects their assets--the fruits of their labor over the working years," said Simonds.

While interest in long-term care has remained relatively stagnant, Kim Stattner, global practice leader for absence and productivity solutions for Hewitt Associates, believes that may soon change. "The long-term-care industry still probably hasn't experienced the onslaught of activity that can and will happen."

However, Dunnington said it's important that older individuals don't forgo one coverage for the other. "Long-term care tends to come in much later in life, and disability is needed to protect income today. It's overwhelming to think someone could lose their entire income and the ability to work. It can't be an either-or proposition"

Several carriers have added a contractual feature in what some in the industry are calling a "seamless transition" from disability income to long-term care at the age of retirement to assist this population.

Several other benefits are beginning to spike mature workers' interests. MetLife offers a critical illness product that provides a lump sum payment in the event of a critical illness, such as stroke, heart attack or cancer.

The need for dental insurance is also important for mature workers, said James Gimarelli, D.M.D., vice president of dental for Assurant Employee Benefits. "Research shows a definite tie-in between good periodontal health and overall health. Increased bacteria can be linked to a rise in stroke, heart disease and diabetes." Dental insurance allows mature individuals to get screenings, preventive services and new treatments that help preserve both oral and general overall health, he said. In addition, many dental services aren't covered by Medicare.

While mature workers have their own benefits needs, regulations prohibit organizations from segmenting benefits by age, and companies aren't able to gear benefit packages specifically for older workers. But employers are doing what they can to accommodate workers' needs. "I don't think the insurance industry has yet developed a portfolio of products and services for this segment that will ultimately exist in 10 years," said Stattner.

Forging Ahead

The mature work force is creating a land of opportunity for insurers.

"This is a very important market and we don't see the aging of the work force reversing itself anytime soon," said UnumProvident's Simonds. "Employers are moving away from a one-size-fits-all benefit world. Anytime you have a big change it always presents a risk and uncertainty, but it also creates opportunity. The trick in motivating a diverse work force with different benefit needs comes down to being flexible, investing in education and providing options for employees to choose from."

Milliman Inc. actuary Scott Haglund believes the changing work force will create a larger demand for substantial benefits for mature workers. "In the past, pension plans and medical benefits were the only things offered to older workers. Now there'll be more new considerations for them with benefits such as short-term and long-term disability and long-term care. There are new considerations for insurers that they'll have to work through because they won't be offering benefits on a regular basis to people after 65." He said that's becoming more commonplace. "I think they'll need to find more creative ways to offer significant benefits to meet older workers' needs, and we'll begin to see insurers and possibly employers try to find cost-effective solutions to address problems. That may not mean a one-size-fits-all or blanket policy. The biggest need will be to figure out what they have to replace, such as long-term care or retirement replacement," he said.

Ten years from now it will be common for a 70-year-old to still be in the work setting, and that'll bring up many more ramifications, said Dr. Ron Leopold, national medical director and vice president for MetLife. "A decade from now the disability income industry will have to get creative about how to offer financial protection products for those workers."

Hewitt Associates' Stattner believes the demand for individual disability policies will continue to grow. "As employers look to manage overall health and welfare benefit costs, group disability is one benefit that's not used by the masses, so it's an area where employers could look to scale back the overall benefit to minimize costs. As the baby boomers continue to progress to the point of starting to appreciate their own risk to different diseases or injury, there'll be some increased interest in individual policies," she said.

Key Points

* Workers age 55 or older are two to five times more likely than younger workers to have disabilities related to diabetes, eye disorders, cancer and cardiovascular conditions such as coronary artery disease.

* The growing number of mature workers is opening up opportunities for disability carriers; many of the workers aren't adequately covered.

* Mature workers are also becoming more interested in long-term-care, critical illness and dental insurance.

The Aging Tsunami

34 million workers ages 55 or older will be in the labor pool by 2014.

70 million baby boomers are set to retire in the next 10 years.

70% of workers plan to work beyond their "normal" retirement age or never retire.

Sources: Bureau of Labor Statistics, AARP

Filling the Demand

Many people aren't aware of their benefits after 65, said Mike Simonds, vice president of marketing and product development, UnumProvident. Employers need to be cognizant of "financial literacy" said Dr. Ken Mitchell, vice president of health and productivity development. That involves making sure older workers understand their benefits, resources, available funds and coverages, he said.

He also said employers will be faced with what's referred to as "generational competency,' which involves various pressures, themes and practices being brought to the work force by different generations. "Companies now have 25-year-olds working beside 55-year-olds. Employers have to understand and adapt to meet those diverse needs," said Mitchell.

He also foresees more claims by the sandwich generation. "Our research has shown us that those older workers who take off on the Family Medical Leave Act to care for a family member are more likely to have to file their own claim of short-term injury or workers' compensation within six months of leave of the FML claim."

Employers aren't taking any chances. A number are partnering with carriers to offer health and prevention programs to address the needs of their mature labor force. "These workers bring an increased number of ailments that they'll continue to work with, and employers are putting more emphasis on wellness programs and disease management. Instead of taking a more stern position of knowing that costs are coming so they'll do what they can do to limit exposure and risk, they're trying to be greater advocates for employees and continue to make programs available to allow them to better manage their health and ultimately minimize the consequences associated with health ailments," said Kim Stattner, global practice leader for absence and productivity solutions for Hewitt Associates.

UnumProvident recently joined with Matria Healthcare to create a new disability and disease management partnership aimed at helping employers combat rising health-care costs and improve work force productivity. UnumProvident links its disability claims management expertise with Matria's disease management programs to better supplement and manage the care of employees with chronic or high-cost health conditions. "This type of partnership is tailor-made for the older worker who's more likely to have to deal with the impact of a chronic disease or an emerging combination of physical impairments affecting work capacity," said Mitchell.

Learn More

Assurant A.M. Best Company # 70135 Distribution: Agents

Berkshire Life Insurance Company of America (a subsidiary of Guardian Life Insurance Company of America) A.M. Best Company # 07409 Distribution: Agents and brokers

Hartford Life Group Insurance Co. A.M. Best Company # 07681 Distribution: Brakers, consultants, third-party administrators and trade associations

MetLife A.M. Best Company # 06704 (Metropolitan Life Insurance Co.) Distribution: Career agents, LTC specialists, independent agents, wirehouses, banks and contractual through AARP and federal

Unum Life Insurance Company of America (UnumProvident) A.M. Best Company # 06256 Distribution: Independent brokers and agents, corporate marketing agreements, benefits consultants, direct sales force

For ratings and other financial strength information about these companies, visit
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Article Details
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Title Annotation:Rethinking Retirement
Author:Chordas, Lori
Publication:Best's Review
Geographic Code:1USA
Date:Feb 1, 2007
Previous Article:Best's rating changes.
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