Group Disability and Life Insurance
Cigna’s (CI) Group Disability and Life Insurance business accounts for about 15% of the company’s earnings. This segment offers group long- and short-term disability insurance, group life insurance, accident, and specialty insurance. Cigna markets these products in all 50 states in the US, the District of Columbia, Puerto Rico, the US Virgin Islands, and Canada.
The above graph shows that earnings from this business segment declined between 2010 and 2013, only to rise again in 2014. Most US private health insurance companies (IYH) were originally incorporated as life insurance companies. With the advent of managed care, these companies gradually increased their focus on health insurance through a series of mergers and acquisitions and joint ventures.
Long- and short-term disability insurance products are generally sponsored by employers or through a combination of funds paid by both employer and employee. These products offer a fixed level of wages to the enrollee to replace a portion of wages lost due to disability.
Most of Cigna’s disability products are offered on a fully insured basis, meaning it assumes responsibility for future claims. Disability accounts for about 49% of the company’s Group Disability and Life Business revenues. It covers over 7.5 million people with 13,800 products on offer.
Group Life Insurance
Insurance companies such as Aetna (AET), Cigna, MetLife (MET), and Prudential Financial (PRU) offer term life and universal life products. Term life insurance is a policy that provides coverage for a specified time period. Nominees are reimbursed if the insured dies within that time frame.
Universal life insurance, also called permanent life insurance, is a combination of term life insurance and savings policy. Here, the insurance company divides the premiums collected into insurance and savings components. While the former is used to bear the cost of insurance, the latter may be returned to members along with predetermined returns. The savings portion may also be used to pay premiums for the policy.