Session 126PD, Employment Trends Impact on Disabilty Insurance Moderator/Presenter: Presenters: Matthew Clark Liesl Turner - Robert F. Wade, FSA ...
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Session 126PD, Employment Trends Impact on Disabilty Insurance
Moderator/Presenter:
Presenters:
Matthew Clark
Liesl Turner
Robert F. Wade, FSA, MAAA
SOA Antitrust Disclaimer
SOA Presentation Disclaimer
Used with permission under license agreement with Shutterstock Session 126 - Employment Trends Impact on Disability Insurance Date: June 27, 2018 Robert Wade, FSA The Standard, Liesl Turner, Munich Re and Matthew Clark, Munich Re
Agenda
1. Historical Perspective
2. Current State / Recent Headlines
3. Industry Outlook
Finance / Manufacturing / Retail
4. Looking Ahead
Economic Repercussions
Occupational Shifts
5. Impact on Disability Risk
6. Open Discussion / Conclusion
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
2
20 things we don't do anymore because of technology
Memorize a phone number Record your favorite programs on tape
Use a phone book to find a company to do work around your Watch shows when they are broadcast
house
Park your used car on the street with a sign that says it’s for sale Run to the store for a last-minute gift
Do math in your head Cut things out of the newspaper
Call a family member to ask where they are Send a handwritten letter
Tell time by the hands on a clock Look up how to spell a word
Make photo albums Use a phone booth
Own a CD or record collection Carry enough change to make a phone call
Make mix tapes Use a travel agent
Call a theater to get movie times Get your old checks back from the bank every month
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3
Current state: Recent headlines
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
4
Current state: Recent headlines
More than 70% of US fears robots Most Americans would favor Robots to work in 50
Retail Apocalypse: 20 big retailers
taking over our lives, survey finds – policies to limit job and wage losses Wal-Marts, including several in
closing stores in 2017 – Retail Fox
The Guardian 10/4/17 caused by automation – Pew Arkansas – Arkansas online
Business 9/19/2017
Research Center 10/9/17 10/26/17
•The rise of ecommerce • As Silicon Valley •Americans are •Walmart will begin using
outlets like Amazon has heralds progress on apprehensive about a autonomous devices in
made it harder for self-driving cars and future in which machines about 50 stores next
traditional retailers to robot caregivers, take on more of the work month that are
attract customers to their much of the rest of the now done by humans, programmed to scan
stores and forced and most are supportive store shelves and identify
companies to change their country is worried of policies aimed at things like out-of-stock
sales strategies. about machines cushioning the economic items or products
taking control of impact of widespread incorrectly priced or
human tasks. automation. placed in the wrong
spaces.
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
5
Current state: Recent headlines
Jack in the Box CEO: Swapping
Store closings: 17 retailers on the cashiers for robots 'makes sense' What If Everyone Got a Monthly
The 100 Best Jobs of 2018 –
2018 death watch – USA TODAY due to minimum wage increase – Check From the Government? –
Money US News
12/28/17 Fox News 1/10/2018 Bloomberg 1/11/2018
•Over 20 retail chains -- •Software developer, •"As we see the rising •In an audacious
including Radio Shack, Physician assistant, costs of labor, it just experiment, Finland is
Toys R Us, and Dentist, Nurse makes sense" to swap giving some residents a
HHGregg -- filed for Practitioner and cashiers with kiosks where “basic income” of
bankruptcy, and some Orthodontist are among customers can order their $16,000 for two years, no
were liquidated. Things the top-ranked careers food themselves.” strings attached.
are not likely to get better on the list.
in 2018.
•Sears, Bi-Lo, Barnes &
Noble, J.C. Penny,
Payless, GNC.
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
6
Current state: Recent headlines
The rate at which companies are filing for bankruptcy is spiking – Business Insider 4/10/2017
Early 2016 saw an uptick
in Energy related
bankruptcies while Retail
has taken over at the end
of the year
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
7
Industry outlook
Let’s review three industries based on recent Bureau of Finance, Manufacturing, and
Labor Statistics and Bankruptcy Announcements Retail
Comparing 2011 occupation
numbers to 2015 statistics in two
instances
4-year period, just slightly longer
than most rate guarantees
Which occupations are growing
and shrinking significantly
Types give an insight into
potential future impact
Where is viability for work likely to
be?
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
8
Finance
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9Finance trends
Employment levels in 2015 vs 2011
Increases Decreases
Financial Specialists employed 700K in Financial Clerks (includes Bank Tellers)
2015, up by nearly 10% since 2011 employed nearly 650K, down by 10%
Computer Occupations employed nearly
200K, up by 18% Office and Administrative Support
Business Operations employed around employed around 110K, down nearly 30%
150K, up nearly 11%
Mathematical Sciences employed only 20K, Supervisors and Other Support workers
but up nearly 35% employ relatively fewer, but mostly down
Overall Industry roughly flat overall 3.4M total employed in 2011 versus 2015
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
10Manufacturing
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
11Manufacturing trends
Employment levels in 2015 vs 2011
Increases Decreases
Transportation Equipment employed nearly Computer and Electronic products employed
1.6M workers, up nearly 18% 1.2M, but was down by 5%
Food employed 1.5M workers, up modestly at Printing and related products employed 420K
4% and was down 6%
Fabricated Metal and Machinery, both employ
Paper Mfg. employed 390K, down by 5%
many, up 11% and 9% respectively
Many others employing less, up significantly, Apparel employed around 110K, down by
manufacturing has been robust in general nearly 15%
Industry overall slight increase from 11.5M employed in 2011 versus 12.2 in 2015
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
12Retail
Recent announcements on bankruptcies and store closings tell the tale:
Sears and Kmart announced 150
store closings in 2017, and
Kohls announced it will be
admitted concerns about being a JC Penney store closings total Macy’s closing 68 stores in a HH Gregg closed all 220 stores Many store closings take place at
shrinking store sizes rather than
viable entity moving forward. 72 138 stores in 2017 number of locations in 2017 in April the same malls
closures in 2017
more closings announced in
June, 2017
As a result, related retailers are impacted by less foot traffic:
The Limited announced all 250 stores closing in
Aeropostale filed for bankruptcy and closed all Others included American Eagle, Chicos, Finish Men’s Warehouse and Jos A Banks merged and
January, 2017, Michael Kors 100 – 125 stores
stores around the same timeframe Line and the Children’s Place chain as well store closings occurred as well
closing in May, 2017
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
13Retail trends
From the Atlantic, What in the World Is Causing the Retail Meltdown
Americans are shifting their
Utilization of online purchasing America built too many malls
spending from goods
sites continues to increase,
decreasing business for brick and
mortar stores. Half of US
households are Amazon Prime There are nearly 1,200 malls in the
subscribers Dramatic change in spending habits
U.S. today – in 10 years, that number is
post Great Recession
expected to drop 900
Entire industries have changed as well Spending on clothing is down
– i.e.: Books and Music purchases substantially
Spending has shifted with substantial
increases to Food Services and
Drinking spots
In 2016, more money was spent at food
and drink establishments than grocery
stores for the first time
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
14Looking ahead: What does the future hold?
Google imagesLooking ahead
Already seeing many
Moore’s Law* – compounding
2013 Oxford University study elements of manual labor
effect of technological The Internet of Things (IOT) –
estimates that 47% of jobs in being replaced by machines,
advancements and impact on everything that can be
the US could be automated in but now seeing an increase in
cost of implementing connected, will be connected
the future the use of artificial intelligence
automation
as well
*Moore's law refers to an observation made by Intel co-founder Gordon Moore in 1965. He noticed that the number of transistors per
square inch on integrated circuits had doubled every year since their invention. Moore's law predicts that this trend will continue into the
foreseeable future.
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
16Economic impact
Benefits Concerns
• Increased convenience for • Not everyone will benefit
consumers = more free time equally from automation
• Lower production costs = • Potential for higher
lower prices = more unemployment rates
disposable income to be • Inability to find equivalent
spent elsewhere employment
• New types of jobs will be
created; potentially creating
a more flexible workforce
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
17Occupational shifts: Jobs in danger
Bet You Didn't See This Coming: 10 Jobs
That Will Be Replaced By Robots – Fast
Company – 1/19/2017
• Insurance Underwriters and Claim
Representatives
• Bank Tellers and Representatives
• Financial Analysts
• Construction Workers
• Inventory Managers and Stockers
• Farmers
• Taxi Drivers
• Manufacturing Workers
• Journalists
• Movie Stars
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
Google imagesOccupational Shifts: What new jobs are being created?
Tech/Data/IT Technically Skilled Labor
• Data Scientist • Internet–of–Things
• JavaScript Developer Savvy Electrician
• Network Security Engineer • Wind Technician
• Trading Tech Programmer
Health Care Finance/Sales/Nonprofits
• Tele-Psychiatrist • Sports Sponsorship Consultant
• Tele-Physicians • Development Director
• Nurse Educator
10 in-demand Chicago jobs in 2017 – Crain's 1/14/2017
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19Number of U.S. firms by size segments
Less than 5 3,598,185
Percent change ’14/’06
5-9 998,953
10-19 608,502
20-99 513,179
100-499 87,563
500+ 19,076
Total 5,825,458
Source: LIMRA Dynamics of the Changing Workforce
Statistics of U.S. Businesses, U.S. Census Bureau
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved. 20U.S. Employment by size segments
Less than 5 5,940,248
Percent change ’14/’06
5-9 6,570,776
10-19 8,176,519
20-99 20,121,588
100-499 17,085,461
500+ 63,175,352
Total 121,069,944
Source: LIMRA Dynamics of the Changing Workforce
Statistics of U.S. Businesses, U.S. Census Bureau
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved. 21Projected labor force participation rates
Annual growth rate
Age 2014 2024
2014-2024
20 to 24 70.8 68.2 -0.4
25 to 34 81.2 81.3 0.0
35 to 44 82.2 81.7 -0.1
45 to 54 79.6 81.0 0.2
55 to 59 71.4 74.2 0.4
60 to 64 55.8 58.8 0.5
65 to 69 31.6 36.2 1.4
70 to 74 18.9 22.8 1.9
75 to 79 11.3 14.4 2.5
Source: LIMRA Dynamics of the Changing Workforce
Bureau of Labor Statistics, U.S. Civilian Labor Force (in percent)
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved. 22Contingent and 1099 Workers
Consultant
How to define contingent workers?
Approximately 40% of the workforce is contingent, PT Independent
Worker contractor
including PT workers.
Approximately 16% of workers are employed in
alternative work arrangements.
Outsourced
Freelancer
There are approximately 10 million unincorporated employee
self-employed workers.
Temp
The Industry and InsureTech are all exploring new
opportunities to offer benefit solutions for the gig
economy
Sources: LIMRA Dynamics of the Changing Workforce
GAO, BLS, Katz, Lawrence, and Alan Krueger. The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved. 23Employment projections (Goods-Producing)
Number of Jobs (2024) Average annual rate of
change 2014/2024
Mining 924,000
Construction 6,928,800
Manufacturing 11,374,200
Total 19,227,000
Source: LIMRA Dynamics of the Changing Workforce
Bureau of Labor Statistics
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved. 24Employment projections (Service-Producing)
Number of Jobs (2024) Average annual rate of
change 2014/2024
Wholesale Trade 6,151,400
Retail Trade 16,129,100
Financial Activities 8,486,700
Professional & Business 20,985,500
Health care & Social Asst. 21,852,200
Leisure & Hospitality 15,651,200
Total 129,904,600
Source: LIMRA Dynamics of the Changing Workforce and Bureau of Labor Statistics 25
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.Dynamics of the changing workforce
Three key risk drivers looking into the future
• Account size
• 500 lives + up 6%
• Small groups down 3 to 6%
• Successful small groups being acquired by larger groups
• Growth industries
• Goods
• Services
• Occupational trends
• Employees working multiple Jobs
• Employer Employee relationship changes
Source: LIMRA Dynamics of the Changing Workforce
26
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.Potential effect on disability risk
Will return to work become
more difficult without a
Education needs are As jobs are automated or training component (that
Should the government
changing rapidly, can current phased out, will disability provides additional skills,
intervene or assist?
school norms keep up? incidence levels increase? education and training
required for comparable
positons)?
Negative effects of aging
Will our current contract
Should we be concerned workforce vs. positive effects
language be sufficient to Will LTD as a product
about requests for extended of continuously improving
manage rapidly changing job continue to be viable?
rate guarantees? health treatments and
duties?
outcomes?
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
27Conclusion
• The employment landscape will continue to evolve as a
result of ongoing technological advances and
automation.
• Some existing jobs will become obsolete, but new jobs
will be created, and there will be a shift in the types of
skills that are required to perform these jobs.
• As Disability underwriters, we need to be aware of the
impact these changes will have on the type of work
being performed by the employees we are covering and
continue to demonstrate our value by adapting our
approach to risk assessment accordingly...how else will
we keep the robots from taking our jobs???
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
28Group employment trends resulting from Automation and AI
No one is immune
Some jobs will
go away
completely
Technology
advancements
will create
opportunity for
others
The majority of
jobs will become
partially
automated but
will not eliminate
humans entirely
Source: ATLAS Data US Bureau of Labor Statistics;
McKinsey Global Institute analysis - https://www.theatlas.com/charts/r1HaNCTce 29Enrollment trends resulting from shifting demographics.
How does the group disability industry adapt?
Baby Boomers Millennials
• Living longer and healthier lives • Largest working population in US
• Working longer to save for retirement • Highly tech savvy
• Purchase more insurance benefits • Frequent job changes
• Rising costs • Delays in marriage, children and first time
• Average age increasing into mid/upper home ownership results in less interest in
40’s disability insurance products
• Trending toward more self-employment
and GIG work means less access to group
benefits
• What do they want for benefits
• Student loans
• Mortgage services
30The Tax Cuts and Jobs Act of 2017 “Changes to the tax code allow companies to immediately deduct all of their capital expenditures in equipment and building upgrades from their taxable income, rather than take the deduction over a period of years. The change has industry watchers bracing for a wave of new investments in industrial equipment and especially for automation systems that help companies get more value out of their existing workforce.” https://mibiz.com/item/25651-federal-tax-reform-benefits-manufacturers%E2%80%99-investments-in-automation- equipment
Impact of potential “Trade Wars” on disability risk?
Industries which stand to benefit Industries which stand to lose
Steel Tech companies with
Chinese Factories
Aluminum
US Auto & Airline Makers
Start-up companies
Pharmaceuticals
Small Cap
Clothing apparel
Agriculture/Farmers
Just as the closure of big box stores hurt surrounding business,
we can expect to see surrounding communities impacted by tariff changes.
32Opportunities for group disability growth
Innovation and new industries will develop
Technology - jobs to build or supervise AI
Untapped millennial market
What do they want from their benefits?
How do we market to them?
They are willing to retrain if needed
GIG workers
Healthcare
Other?
Questions?
33Employment Trends Impact on
Individual Disability Insurance
Robert Wade
Consulting Actuary,
The Standard
34 June 21, 2018 Company ConfidentialAgenda
• Scope: Only long term, non-can, level
premium IDI (Traditional IDI). Worksite,
voluntary supplemental or association IDI may
not react the same
• Recap of employment trends
• Other IDI Specific Trends
• How they may impact IDI:
• Product Design
• Markets
• Carriers
35 June 21, 2018 Company ConfidentialRecap: Emerging Employment Issues
• Automation and Artificial Intelligence are reshaping the workplace
• Employers are evolving into
• Fewer, more dominant larger firms, e.g., Yum, Apple, Disney
• With a host of Freelancers (> 50% of Millennial freelancing already)
• Expectations of Future Employers/Employees
• Employers moving to “de-risk” their employment arrangements, e.g.:
– Ending DB pensions, adding CDHP w/High Deductibles
– Moving to voluntary supplemental in addition to core benefits
• Employees contend with more uncertainty and debt (Millennials)
• “Pay for performance”, contingent earnings more volatile than salary
• Careers are being unbundled
• Plug and play vendors of material and substantial duties (Uber, Angie’s List)
• Working under 3rd party intermediaries sometimes with benefit portfolios
36 June 21, 2018 Company ConfidentialOther Issues Specific to IDI
1. Will distribution continue to shrink overall?
Overly reliant on life and annuity carriers – who are moving towards direct distribution
2. Will Millennials buy Traditional IDI products? (Slide #5)
• Traditional IDI sales have been flat. When will they buy?
• Whatever it is, expect it to be yoked to the internet
3. IDI business model presumes long term jobs with stable earnings (Slide #6)
• Based on “occupations”, which in turn, are based on professions w/credentials
• Is this even remotely likely to continue? For which professions?
4. As market developments accelerate, can IDI organizations adapt fast enough?
Can regulations/regulators? What is InsureTech doing in this space?
37 June 21, 2018 Company ConfidentialTraditional Non-Can IDI Sales Over Time
CPI Adjusted US Industry Non-Can IDI Sales
(in 2017 $ in Millions)
1,200
1,000 CPI Adjusted NC
Sales
800
600
400
200
0
1977 1982 1987 1992 1997 2002 2007 2012 2017
38 June 21, 2018 Company ConfidentialPreservation of IDI Insurable Interest
In the recent past for key IDI demographics – e.g., doctors, dentists, lawyers,
executives – insurable earnings tended to:
• Be based on stable jobs with low, long term earnings variance
• Go up monotonically
In the Recent Past? In the Future?
$
$
Expected
Upper Quartile
Lower Quartile
Career life cycle in years Career life cycle in years
• But in the future? 12 jobs per work life? Implies increased earnings volatility
39 June 21, 2018 Company ConfidentialCan fixed value policy forms (IDI) survive another 30 years?
Should they?
1. Do we need to continue “one and done” sales if cost of acquisition is
minimal? If premiums drop, can we open up more markets?
2. If rates can track more precisely the ebb and flow of insurable
earnings and duties, then risk margins and premiums can drop. If
they can’t and risk margins increase due to aforementioned trends,
then premiums rise.
3. Can policies be customized even more through technology and “Big
Data” enhancements?
40 June 21, 2018 Company ConfidentialWill IDI be bought or sold? Rented?
1. What is the optimal pricing point for Millennials & internet based sales? Can much
lower priced products with lower acquisition costs revive market growth
sustainably?
2. Can we unbundle the product to get there? Where are the relevant tradeoffs?
• Shorter coverage or benefit periods
• Re-entry UW
• Expanded benefits, e.g., expanded income protection, medical bankruptcy protection
• Own occ, any occ, no occ and cat benefits all layered together
3. Re-explore IDI business models abandoned before the Doctor Debacle in the
1980s and ‘90s
41 June 21, 2018 Company ConfidentialCan IDI Carriers Adapt Adequately?
1. Can we compete against or partner with InsureTech’s technology?
Is excellence in risk selection and/or claims management enough?
2. Can we do social media?
We can do Sales, can we do Marketing? Over the internet?
3. Running a disability risk pool is hard – long latencies
Can we continue to collect adequate risk charges as its emerging profile shifts?
4. Forget carrier responses, what about the regulators’ responses?
Will only the Group policy form survive?
42 June 21, 2018 Company ConfidentialQuestions ?
43Sources
http://www.economicshelp.org/blog/6717/economics/the-luddite-fallacy/
http://www.foxnews.com/tech/2017/05/06/20-things-dont-do-anymore-because-technology.html
http://www.economist.com/news/special-report/21700758-will-smarter-machines-cause-mass-unemployment-automation-
and-anxiety
https://www.nytimes.com/2017/01/12/technology/robots-will-take-jobs-but-not-as-fast-as-some-fear-new-report-
says.html?_r=0
http://nypost.com/2017/02/27/wendys-to-add-self-ordering-kiosks-to-cut-costs/
http://www.investors.com/politics/policy/wendys-serves-up-kiosks-as-wages-rise-hits-fast-food-group/
https://www.washingtonpost.com/news/business/wp/2017/02/28/the-surprising-reason-some-millennials-may-be-buying-
new-cars/?utm_term=.c1cacb9b5c06
http://blogs.wsj.com/cio/2017/03/10/automation-and-employment-in-the-21st-century/
© Copyright 2018 Munich American Reassurance Company. All Rights Reserved.
44Sources (continued)
https://www.wsj.com/articles/how-ai-is-transforming-the-workplace-1489371060
https://www.nytimes.com/2017/04/15/business/retail-industry.html?_r=0
https://www.theatlantic.com/business/archive/2017/04/retail-meltdown-of-2017/522384/
http://www.businessinsider.com/commercial-bankruptcy-filings-2017-4
www.investopedia.com/terms/m/mooreslaw.asp
https://www.fastcompany.com/3067279/robot-revolution/you-didnt-see-this-coming-10-jobs-that-will-be-replaced-by-robots
http://www.chicagobusiness.com/article/20170114/ISSUE01/170119948/in-demand-chicago-jobs-in-2017
http://www.investors.com/politics/policy/wendys-serves-up-kiosks-as-wages-rise-hits-fast-food-group/
http://www.foxnews.com/tech/2017/05/06/20-things-dont-do-anymore-because-technology.html
https://techcrunch.com/2017/06/16/amazon-wants-to-become-walmart-before-walmart-can-become-
amazon/?ncid=mobilenavtrend
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