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City of Los Angeles JLMBC Meeting Standard Insurance Presentation Overview November 7, 2019

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Standard Insurance Company (“Standard”) has partnered with the City of Los Angeles for over 20 years

Short and Long-Term Disability Coverage (1998) Basic and Supplemental Life Coverages (2011) Voluntary Accidental Death & Dismemberment Coverage (2013) Telephonic Claims Intake for Disability Coverage (2018)

Observations

Participation

Life Insurance

• All benefit eligible employees receive Basic Life coverage paid for by the City

• Approximately 60% of benefit eligible employees purchase Supplemental Life and/or Voluntary Accidental Death & Dismemberment coverage

Disability Insurance

• All benefit eligible employees receive Base Disability coverage paid for by the City

• Approximately 20% of benefit eligible employees purchase Buy-Up Disability coverage

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Claims Experience

Observations

1 How Much Life Insurance Do I Really Need? https://www.forbes.com/advisor/insurance/how-much-life-insurance-do-you-really-need/ 2 “Only 20% of Consumers Own Disability Insurance Despite Almost half Saying They Need It,” LIMRA, May 8, 2019

https://www.limra.com/en/newsroom/industry-trends/2019/disability-insurance-awareness-month--only-20-of-consumers-own-disability-insurance-despite-almost-half-saying-they-need-it/

Education could help more employees take advantage of the Supplemental Life and Buy-Up Disability benefits • Financial Planners recommend consumers have five to ten times their income

in life insurance1 • Research shows only 1 in 5 consumers own disability insurance despite

almost half (48%) saying they believe they need it2

Opportunities

Life Insurance Short-Term Disability

Long-Term Disability

Top Claim Diagnostic Categories Cancers and Circulatory

conditions Musculoskeletal and

Mental Health conditions Musculoskeletal conditions,

Accidents, and Cancers

City of Los Angeles November 7, 2019

Plan Details • Summary • History • Participation

Life Claims Overview Disability Claims Overview • Short Term Disability (STD) • Long Term Disability (LTD)

Agenda

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Plan Details

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• The City provides employees a Basic Life & Disability benefit • Employees may enhance coverage by purchasing Supplemental (Life),

Voluntary (AD&D), and/or Buy-Up (Disability) coverages, and – in line with previous years – in 2018:

• Approximately 60% of employees purchased Supplemental Life and/or Voluntary AD&D coverage

• 21% of employees purchased Buy-Up Disability coverage

• Despite a one-time spike in Life claims during the 2016 plan year, there is no discernible trend, which is typical for Life coverage

• The City’s Disability plans have performed consistently overtime • Compared to The Standard’s public sector book of business in California, the City

has a higher incidence of disability claims – Departments with the highest incidence of disability claims include Police, Sanitation, and

Recreation and Parks – Musculoskeletal conditions represent the majority of all disability claims

Summary

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Plan History

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1998 2011 2013 2018 STD and LTD plans are implemented

Basic and Supplemental Life plans are added

Standalone Voluntary AD&D plan is added

Telephonic Claim Intake added for STD and LTD

STD 180 day non-occupational maximum benefit period • Base: 50% to $777 weekly

benefit • Buy-up: 66 2/3% to $2,771

weekly benefit LTD 18 month maximum benefit period for base, to age 65 for buy-up • Base: 50% to $3,367

monthly benefit • Buy-up: 66 2/3% to

$12,000 monthly benefit

Basic Life Benefit is dependent upon policy class with most eligible City employees receiving a $10,000 employer-paid benefit Supplemental Life Employees have the choice of electing coverage between 1-5 times annual earnings to a maximum of $1,000,000 Employees may also insure dependents: • Spouse: $10,000, $25,000,

$50,000, $75,000, or $100,000

• Children: $5,000 per child Supplemental Life enrollment options which may not require evidence of insurability are available during annual enrollment

Voluntary AD&D Employees can elect coverage in multiples of $50,000 to a maximum of $500,000 Death benefits paid under this policy are in addition to any other life insurance coverages Employees may also insure dependents: • Spouse only: 60% • Children only: 20% each child • Spouse and children: 50%

for spouse, 10% for each child

Telephonic Claim Intake The Standard created a dedicated toll free line specific for City employees with dedicated representatives familiar with the City’s benefits and plan options

Plan Participation

6

25,1

64

25,9

94

26,3

39

23%

22%

21%

0%10%20%30%40%50%60%70%80%90%100%

0

5,000

10,000

15,000

20,000

25,000

30,000

2016 2017 2018

% o

f Bas

e M

embe

rs

Ele

ctin

g B

uy-U

p

Bas

e N

umbe

r of M

embe

rs

Short Term Disability and Long Term Disability

Base Disability Buy-Up Disability

25,1

44

25,9

62

26,3

39

63%

62%

61%

60%

59%

58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

5,000

10,000

15,000

20,000

25,000

30,000

2016 2017 2018

% o

f Bas

ic L

ife M

embe

rs

Ele

ctin

g S

upp.

/Vol

.

Bas

ic L

ife N

umbe

r of M

embe

rs

Life and AD&D

Basic Life Supplemental Life Voluntary AD&D

Enrollment numbers by coverage

• In 2018, 61% and 58% respectively of City employees purchased Supplemental Life and/or Voluntary AD&D • In 2018, approximately 21% of City employees purchased the Buy-Up Disability coverage

Life Claims Overview

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Life Claims Overview Term Life Claims and Benefits Paid by Year

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2016 2017 2018Total Claims 104 68 74Total Paid $10,250,950 $5,677,031 $6,052,700

104

68 74

$10,250,950

$5,677,031 $6,052,700

$0

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

0

10

20

30

40

50

60

70

80

90

100

110

• Between 2016–2018, the top three diagnostic categories for life insurance claims were: 1. Cancer 2. Circulatory 3. Accidents/Violence

• In 2016, there were 45 Life claims due to cancer, a 27% increase compared to the three-year average. • The increased benefits paid in 2016 reflect a greater number of claimants that elected Supplemental Life.

This data includes Basic and Supplemental Life

Life Claims Overview Top Diagnostic Categories by Year

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Accidents &Violence Cancer Circulatory

Endocrine /Metabolic /Immunity

Genitourinary Ill-DefinedConditions Others Respiratory

2016 15 45 27 4 4 2 5 22017 14 17 25 4 2 0 5 12018 10 24 21 0 12 3 3 1

0

10

20

30

40

50

60

This data includes Basic and Supplemental Life

Disability Claims Overview

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2016 2017 2018Total Claims 504 482 511Total Paid $3,756,623 $3,446,675 $3,397,517

504 482 511

$3,756,623 $3,446,675

$3,397,517

$1,000,000

$1,500,000

$2,000,000

$2,500,000

$3,000,000

$3,500,000

$4,000,000

100

200

300

400

500

600

Disability Claims Overview Short-Term Disability Claims and Benefits Paid by Year

• While there is a small fluctuation in the number of claims and paid dollar amounts, the plan is considered stable from an underwriting perspective.

• The top three City Departmental groups (by admin unit) based on claims volume are: 1. Police (4302) 2. Airports (101) 3. Sanitation (7001)

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4302 Police

101 Airports

7001 Sanitation

7901 Recreation

& Parks

8501 Transportation

3301 General Services

8601 Finance

1201 City Attorney

3201 Harbor

2001 Personnel

Total Paid $1,851,678 $1,522,590 $954,828 $620,914 $612,884 $451,723 $394,487 $337,065 $314,256 $305,572

Claim Count 199 196 103 107 66 62 43 47 32 37

Short-Term Disability Claims – Top Diagnostic Categories January 1, 2016 – December 31, 2018

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• Compared to The Standard’s public sector book of business in California, the City has a higher incidence of musculoskeletal and accidents/violence claims, and an equal incidence of mental disorder claims

• The City employees’ above average age is a contributing factor to its higher incidence of musculoskeletal claims

21.84%

13.63% 11.76%

16.7%

13.2%

9.7%

0%

5%

10%

15%

20%

25%

Musculoskeletal Mental Accidents/Violence

City of Los Angeles vs. The Standard’s California Public Sector Benchmark

City of LA Benchmark

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15

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2016 2017 2018Total Claims 338 354 326Total Paid $5,706,299 $6,506,172 $7,227,662

338 354 326

$5,706,299 $6,506,172

$7,227,662

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

$6,000,000

$7,000,000

$8,000,000

$9,000,000

$10,000,000

100

200

300

400

Disability Claims Overview Long-Term Disability Claims and Benefits Paid by Year

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• As new claims are submitted and processed, existing claims that remain open can increase the total annual paid amount while the total number of open claims at year-end is reduced.

• The top three City Departmental groups (by admin unit) based on claims volume are: 1. Police (4302) 2. Airports (101) 3. Recreation & Parks (7901)

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4302 Police

101 Airports

7901 Recreation

& Parks

7001 Sanitation

7301 Street

Lighting

8501 Transportation

3301 General Services

8601 Finance

2001 Personnel

1201 City

Attorney

Total Liability $5,609,673 $4,169,989 $3,291,425 $3,130,439 $2,950,870 $2,621,337 $2,023,827 $1,536,980 $1,235,449 $1,194,652

Claim Count 60 96 61 50 19 49 47 11 11 11

Long-Term Disability Claims – Top Diagnostic Categories January 1, 2016 – December 31, 2018

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37.5%

13.8%

9.8%

30.0%

13.1% 10.6%

0%

10%

20%

30%

40%

Musculoskeletal Accidents & Violence Cancer

City of Los Angeles vs. The Standard’s California Public Sector Benchmark

City of LA Benchmark

• Compared to The Standard’s public sector book of business in California, the City has a higher incidence of musculoskeletal claims, a slightly higher incidence of accidents/violence claims, and a lower incidence of cancer claims

• This trend is consistent with the City’s musculoskeletal STD claims

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21

22

43 84 82 78

61 72

391 366 368

0

100

200

300

400

500

600

2016 2017 2018

Short Term Disability

Open Claims

Closed Due to Return to Work

Closed at Maximum BenefitPeriod

Disability Claims Overview Open Claims and Claim Closure Reason

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• Members enrolled in the Base Disability plan may remain disabled after benefits conclude

10 6 11 37 46 48 18 22 8 27

31 22

73 82 122

0

50

100

150

200

250

2016 2017 2018

Long Term Disability

Open Claims

Closed Due to Return to Work

Closed at Maximum Benefit Period - Supplemental Plan

Closed at Maximum Benefit Period - Base Plan

Member Returned to Work During the Benefit Waiting Period

Disability Claims Overview Diagnosis Codes

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