Workplace Benefits Forecast: Life And Disability In Force

Workplace Benefits Forecast: Life and Disability In Force

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Authors

Anita Potter
Assistant Vice President, Workplace Benefits
LIMRA and LOMA

Lucian J. Lombardi
Workplace Benefits
LIMRA and LOMA

February 2025

Over the past three years, various economic and noneconomic factors have contributed to the growth of workplace life and disability benefits. The primary economic drivers include employment growth, increases in wages and salaries, and overall economic activity. On the noneconomic side, a significant factor has been employers' recognition of the need to offer competitive benefits in order to attract and retain talent in a tight labor market. Furthermore, awareness among employees regarding the financial protection provided by life and disability benefits has increased due to the pandemic, and this awareness has persisted. However, two key questions remain: Will the economy continue to defy expectations, and how much further can the life and disability market grow?

Outlook for 2024 to 2027

While 2024 results are defying earlier economic expectations with stronger-than-expected growth in the gross domestic product (GDP), there are signs that the economy is slowing, according to Moody's Analytics, July 2024. After three years of accelerated job growth, the labor market is trending toward a more balanced economic environment, ending the year with a better balance between labor supply and demand. Additionally, even though wage growth remains elevated, it is trending lower.

Looking ahead, the outlook for these economic drivers of growth is more tempered. Employment growth is expected to continue, but at a slower pace compared to previous years. Wage and salary growth is projected to slow down due to a combination of factors, including easing inflation and a gradual increase in unemployment. A similar slowdown is also expected for GDP.

Based on those economic factors, LIMRA forecasts in-force premium growth to trend lower from 2024 through 2027 (Figure 1). The growth in life insurance in-force premiums through 2027 will trend to below-average historical growth rates. Long-term disability (LTD) premiums are also expected to slow but stay above recent average historical growth, while short-term disability (STD) premiums are expected to gradually slow and revert to more recent average historical growth rates. Of course, it is important to keep in mind that these forecasts are based on recent economic projections, and any changes to economic conditions or Federal Reserve policies could see premium growth be more in line with the lower or upper projected ranges.

Figure 1. 2023 – 2027 In-Force Growth Forecast for Life and Disability Benefits

Benefit	In-Force Growth Rate for 2023	In-Force Growth Forecast for 2024*	In-Force Growth Forecast for 2025*	In-Force Growth Forecast for 2026*	I-Force Growth Forecast for 2027*
Life insurance	2.8%	3.3%	3.0%	2.5%	2.6%
Projected range		2.3% to 4.3%	1.5% to 4.5%	1.0% to 4.0%	1.1% to 4.1%
Long-term disability	5.7%	4.8%	3.8%	3.4%	3.2%
Projected range		3.3% to 6.3%	1.8% to 5.8%	1.4% to 5.4%	1.2% to 5.2%
Short-term disability	6.2%	5.4%	4.0%	3.8%	3.7%
Projected range		3.9% to 6.9%	1.0% to 7.0%	0.8% to 6.8%	0.7% to 6.7%

* Based on collected premium

Reasons for Optimism

Several factors contribute to a more positive outlook for the workplace life and disability benefits market. In the short term, the labor market, despite signs of a slowdown, is expected to remain tighter relative to historical measures. However, with an aging workforce contributing to a smaller workforce relative to employment needs, this trend may continue past 2025. Consequently, employers will need to continue to offer competitive benefit packages to attract and retain employees, despite escalating compensation costs, for the foreseeable future. Furthermore, despite the growing list of benefits made available to employees, life and disability insurance remain a priority for the majority of employees, according to LIMRA’s 2023 BEAT Study: Benefits and Employee Attitude Tracker.

Longer-Term Challenges

Despite the optimistic outlook, several longer-term challenges could impact the growth of life and disability in-force premiums. Among them are a projected slowdown in economic growth, healthcare inflation, and subsequent employer and employee budget constraints. All of which will no doubt negatively impact employers’ ability to maintain or enhance their benefits offerings as well as workers’ ability to afford benefits.

While the economy is currently strong, employment and wage growth are expected to soften due to a slowdown in demand for goods and services. Longer term, the national debt will pressure long-term interest rates, possibly slowing economic growth further. This slowdown, however, does not extend to healthcare spending, with costs expected to increase at rates significantly greater than general inflation or wages (Figure 2).

Figure 2. Change in Medical Cost Trends Compared to the Consumer Price Index (CPI)

Filter the data in this chart by clicking on a color in the chart legend.

*Inflation and cost trends for 2024 and 2025 are projected rates.

Sources — Medical cost trends: Behind the numbers 2025, PwC, Federal Reserve Bank of Minneapolis, and Moody’s Analytics.

All of which are placing increasing pressure on employees’ budgets as they have yet to recover from the cumulative effects of pandemic-era inflation.

Conclusion

The forecast for workplace life and disability in-force premiums, specifically, is expected to grow over the next several years; however, it faces certain challenges. Factors such as employment growth, increasing wages and salaries, and overall economic activity will drive premium growth. Conversely, longer-term issues like slowing economic growth, healthcare cost inflation and wallet share concerns may hinder overall growth opportunities. To counter these challenges, the industry can embrace innovations such as incorporating wellness programs into disability benefit services and personalizing benefits. By doing so, it can enhance the appeal and effectiveness of life and disability benefits, ensuring sustained growth in the years to come.