Short answer: Because the group benefit is a percentage of pay up to a monthly maximum, and many plans count only base salary. A high earner can end up replacing well under half of real income, especially after tax on an employer-paid benefit.
Take an example. On a $250,000 salary, 60% is $12,500 per month. With a $6,000 monthly maximum, the plan replaces under 30% of salary. If the employer pays the premium, that $6,000 is also taxable (IRC 105(a)).
Common fixes are a higher group maximum, which raises the premium for everyone; a separate LTD class for executives with a richer benefit; or individual disability policies layered over the group benefit for the people above the maximum. Also check how the policy defines covered earnings. Many count base pay only, so commissions and bonuses are not insured unless the contract says so.
Run the comparison on after-tax income. Making the executive’s LTD premium taxable, so benefits are tax-free (IRC 104(a)(3)), can close part of the gap at little cost.