Question: What is your view of the state of the disability income protection market today?
Cohen: The need for this product is tremendous. There are so many people who are not protecting their income. It would certainly be advantageous if we had more companies manufacturing this important product-that is where there is a shortage. The market is wide open and our job is to get more financial advisors to offer this product.
I went to a wedding recently and was talking to another guest. He asked me what I did for a living. I told him I was in the insurance business and my main job is working with financial advisors getting them to offer disability income protection to their clients.
He proceeded to tell me his story. He said, “Your product is extremely important. When I was 26, I began my dental practice. At 31, I asked a friend if he knew anybody who could offer me disability income protection as no one had ever called me about this product. At 32, I sought out and bought my first policy for $5000/month with benefits to age 65. At 51 I sought out an agent and bought additional income protection for another $5000/month. At 53, I was driving home and noticed that the vision in my left eye was impaired. I found out I had Central Retinal Vein Occlusion in my left eye. My vision became so badly impaired that I was forced out of my dental practice. I began a new career teaching. While I was getting a teaching salary, my disability income protection policies were paying me $10,000/month because I was insured in my occupation of dentistry.”
When we talk about the state of the industry I find it amazing that this dentist had to seek out an agent in order to buy disability income protection. He should have been approached by his life agent or casualty agent.
When it comes to your most important asset—your ability to earn an income—and your ability to protect that asset, there is a drastic shortage of individuals who are educating consumers about this product.
On DI Day in May 2016, we had over 95 financial advisors attending our event. We also had a speaker—an individual who did not check the box for disability income protection. He proceeded to tell us his story about the most tragic mistake he made, and how his mission is to keep others from making the same one he did.
Periodically, I go to the website (lifehappens.org) to read the Real Life Stories about the individuals that disability income protection has helped. I encourage everyone to go read these stories and to see just how important and crucial this product really is.
I believe the industry is making great strides. I foresee more manufacturers getting into the market for disability income protection.
Bloch: The state of the industry is fine. The remaining carriers writing disability income protection have been adjusting rates, products, underwriting techniques, and systems to enhance results. The carriers are working hard to increase market share and making it easier for the targeted consumer to purchase this important coverage. I am surprised, however, that additional carriers have not entered the market with new exciting products. The industry needs a new bold approach with basic benefits at affordable rates with a streamlined underwriting process to attract new policyholders who cannot appreciate or afford today’s high quality products.
Chittenden: It remains an under-penetrated market, yet remains as vital to the financial well-being of every working person as it always has been. Those of us in this market have been screaming, promoting, teaching, pleading and explaining this fact for years. Resistance from many financial advisors, as well as traditional insurance agents, to embrace the income protection products, however, seems to remain fairly strong. This is a double-edged sword. Because of this lack of penetration, consumers are hurt. They are not made aware of the need or the solution to protect their income. On the other side of that sword, those brokers that do promote income protection products have a fairly untapped market. The problem is not availability of product. Even with the recent exit of a leading major carrier from the individual market, there is still a plethora of very good products available from excellent carriers to meet both the individual and business income protection needs. The under-penetration comes from the lack of client education and promotion on the part of the advisor community.
Phillips: I’m confused and concerned by this market but also very optimistic.
With the recent departure from IDI by a major carrier in the white collar space, there are a very limited number of carriers who distribute their product through independent brokerage agencies. And, like IDI’s sister product long term care insurance, there just don’t seem to be many carriers clamoring to get into this space. This confuses me, as the little information I get on returns on investment for IDI seem to be solid for insurance companies. Maybe my perception is wrong on that.
We are in an environment where it is costly for carriers to put business on the books, and carriers must maintain their inforce blocks that were priced and underwritten in a totally different market environment. I think we underestimate the herculean effort it must take these carriers to juggle this dynamic.
So we have very few outlets for white collar business, we’ve got a tenuous market environment, and yet there is still excitement in the DI business. Product enhancements, technological advancements and marketing programs still abound. Almost daily I’m presented with an exciting case or opportunity. It’s like some sort of paradox.
Also, it seems that more producers and planners are looking to expand efforts into the IDI market. I suppose that’s a function of the likely regulatory changes in the investment and annuity markets, as well as the changes that have occurred in the health insurance business. While it’s a little disappointing that it has taken upheaval for this product that is so fundamentally important to a client’s financial well-being to be brought up as part of the conversation, it’s apparent that it is being brought up more and more. That has to be a good thing for the market over the long run.
Petersen: The market for disability insurance is the most robust we have seen in well over a decade. Yes, MetLife stepped out of the individual disability markets, but that should have little impact on the market as a whole. The key players are still in there. There has become more awareness of GSI plans which are being used as primary as well as secondary and excess disability coverages.
Bottom line is there are more opportunities in the Disability market than ever.
Schnittker: The marketplace is better than it has ever been with so many income protection solutions—key man, business loan completion, retirement completion, one person buy-out, and student loan, in addition to the traditional personal disability, business overhead expense and buy/sell. Great time to be in this marketplace.
Mohr: We are very pleased with our disability insurance sales production this year. Disability sales continue to be a big part of our overall sales and revenue. Retirement planning products are certainly increasing in popularity due to the baby boomers, but there will always be a huge population of working professionals and business owners that need income protection. Most insurance agents just still do not realize the importance of selling disability insurance and the impact on their income both first year and renewals. Disability insurance is not just critical for their client’s financial security, but for the agent as well. What financial planner can say he did a financial plan for a client if he did not guarantee his client an income whether they can work or not?
Some consumers think that they are covered at work. We train our producers to advise these prospects properly by telling them that most employer plans only provide about 50 percent of what you are eligible for, so you have half a plan through work. That is great, because now you just need to buy the other half!
The market has never been better for disability insurance sales. There are plenty of great products and underwriting programs. Whether selling to individuals or executive groups, pricing, discounts and underwriting are all aggressive.
Schmitz: There are fewer advisors being trained by carriers, so financial education is not happening like it used to. High schools should be requiring at least a rudimentary level of financial education and include the concept of insurance in the curriculum.
The market needs more carriers, and Met Life leaving was a big blow, but not a nail. There is a huge number of self-employed people and small businesses that have not pursued protection for their largest asset. The number of employers hiring employees at 30 hours per week so that they are not required to offer benefits continues to increase. Getting the word out that disability insurance exists is our challenge.
Carriers offer more flexibility in underwriting, including guarantee issue individual policies for small groups. Home offices are genuinely proactive in seeking information from the field to take back and develop new products and processes.
Question: What advice do you have for brokers who don’t spend much time pursuing DI sales to their clients?
Cohen: Roger Sweeney spoke at my agency’s DI day in May, 2016. He said the biggest mistake of his life was not checking the box for DI protection when the corporation he worked for offered it to him. He is a young man and is disabled due to a series of severe health issues . He stated, “I was the All-American guy. Perfect job, beautiful family, great income and then it was all gone.”
My advice is for every broker to know Roger Sweeney’s story and to take the time to read Real Life Stories at www.lifehappens.org.
Once a broker understands how DI protection can save a person’s financial life, that broker should never feel that he does not have the time to pursue a DI sale.
My advice to financial advisors, agents and brokers: You have the responsibility of being entrusted with your clients well being. You must explain the need for disability income protection. As you read Real Life Stories, you will become aware of the thorough and responsible job brokers did for their clients.
Bloch: My advice to producers who are reluctant to discuss income protection with their clients is to pursue a partnership or other relationship with another producer who specializes in income protection insurance. We have a number of producers who realize the importance of this coverage and split cases with income protection experts. Their clients truly appreciate their professionalism. On larger or more complicated situations, our agency is asked to develop strategies and implement them.
Chittenden: Make sure they have a strong E&O policy. It has always amazed me that brokers will spend all the time and effort to build an amazing financial plan to meet the hearts and dreams of their clients. They will make sure retirement is funded. College education for the kids is funded. Maybe the dream vacation home or the travel dreamed about is funded. For sure they address the catastrophe an early and unexpected death might cause. But, they refuse to address the risk their client faces if their ability to fund the entire plan is interrupted by an illness or injury that prevents them from continuing to work and earn a paycheck. Some brokers have a million excuses. They don’t want to be a “policy peddler”, or there is only “so much” premium to go around. They are worried a “complicated” IDI sale will ruin all their other sales, etc. All are simply invalid excuses. To not evaluate the risk management part of the financial plan fully, meaning to protect the funds (income) that makes the complete plan work, is simply bordering on negligence. My advice to all of our brokers not promoting income protection is to make sure their E&O plan is in place and strong, and that they very clearly inform their clients what services they do provide and which ones they do not provide. If there are parts of the total financial plan they are not going to address then they should be identified, and an alternate avenue should be presented to get those aspects addressed. Not many people can be proficient in all aspects of financial security but everybody can be part of a team that covers all the bases.
Phillips: My first piece of advice would be to make sure they understand their own situation and exposure for disability, and, if they don’t already own coverage or if it hasn’t been updated in years, to get an appropriate IDI policy for themselves. Work with an agency that specializes in DI to really understand the differences in definitions and the many types of DI products that are available (ID, BOE, Loan DI, Retirement DI, etc.) as a consumer first, then take that knowledge to their own clients.
I’d also simply announce to inforce clients that DI is now a product that they will be pursuing, and then “just do it”. Ask inforce clients if they have DI coverage (they probably don’t). If they have coverage , ask if they understand it (they probably won’t). If they have had it for awhile ask if it’s been updated with their increased income (it probably hasn’t). I’ve always been a proponent of learning by doing. Do it by picking up the phone or meeting with a client and simply asking about their situation.
Petersen: There are several things:
To life and medical sales professionals who do not also promote disability insurance I have one thing to say—shame on you!
People are relying on us as professionals in the insurance industry to advise. If we spend our time saying things like “protect your assets”, “estate planning in case you die”, “business protection”, we better be including not just if you die—but if you live! Protecting your assets begins with income planning. You cannot have income planning without a program to protect the income. This is just as true if you live as if you die.
If we spend our time saying things like, “cover large bills from doctors and hospitals” we better be including some mechanism to cover all the bills, not just the hospital. People worry about medical insurance because they fear large bills from the hospital and doctors. Think about this: In most people’s lives, the largest purchase they ever make is their home. Do they have $500,000, $1 million or more to buy a house outright? Not usually. However, thanks to a mortgage, they can make payments. The caveat in all of this is that they have some sort of cash flow that allows them the ability to pay these big bills and big debts. If a person did not have medical insurance and the bill was $1 million, they could still pay it provided there was some source of cash flow.
Professional insurance producers who neglect disability sales when they actively sell life and/or medical insurance are not helping their client 100 percent. Could this be considered malpractice?
From a personal perspective, these producers are leaving thousands of dollars of commissions on the table.
Lastly, they are setting themselves up for another producer to take over the case and do a better “full service” approach.
Schnittker: You owe it to your client to at least ask them what would happen to them if they became sick or hurt and could not work. There are numerous income protection specialists that a broker can affiliate with to provide the best solutions for their client’s needs/wants.
Mohr: Pretty simple—you are missing the boat or should I say yacht!
Schmitz: Be careful. Fiduciary liability/responsibility is a hot topic. You must address the issue of income protection within the financial plan or risk management plan. If you are not comfortable addressing the income or asset protection need, find someone to work with who can help you without disrupting the relationship you have developed with the client. Several MGAs now offer “in house” experts who are able to work directly with your client and pay you a referral fee.
Question: How have hybrid/combo products affected the income protection market?
Cohen: From my observation hybrid/combo products have not affected the disability market. An individual policy is more comprehensive and will do a better job protecting one’s income.
Bloch: Over the past five or so years, our agency has developed a number of income protection specialty products to solve unique situations for producers who work with our agency. A couple have had mixed results and others have generated incredible enthusiasm and sales. I do feel that the the income protection industry will be changed as we target unique specialty solutions, consumers, and other industry professionals.
Chittenden: I do not see much impact within our market, unlike the LTCI market where the Life/LTC or even the annuity/LTC products have made a big impact. For the most part, the advancement in the products in the income protection marketplace have focused on improvements for meeting evolving societal needs—such as older issue ages and riders for student loans—or product design to allow maximum flexibility.
Phillips: In my experience, I have not seen much impact of hybrid products on the income protection market. But we’re just at the start of this evolutionary use of death benefits helping address living needs. At one time, acceleration of death benefit was limited to a terminal illness situation. Recently carriers have expanded into access being granted for chronic illness/long term care situations. More recently there has been liberalization to allow access for critical illness situations. It certainly seems that the natural progression might lead to accessibility due to a disability (that might not be because of a chronic or critical illness).
I’m not sure how the market would accept such a structure. It seems to me that the acceptance of the ubiquitous chronic illness/LTC design is as much a result of the tumult in the long term care insurance markets as anything else.
And while critical illness sales are on the upswing, it is not a mature market—there haven’t been generations of planners dedicated to the sale of CI. There aren’t as many firms with roots as deep in the critical illness market as in the DI market, so it seems that acceptance of CI as a linked benefit opportunity might have less of a barrier than a DI design might.
Call me old fashioned, I can rationalize the linked benefit design as a strategy in some long term care planning situations or as a way to get something for critical illness exposure. But the risk of death, the risk of long term care need and the risk of disability are three entirely different exposures. In a perfect world, insurance to address these with individual products specific to those risks would be most efficient. Especially, it seems to me, the risk of losing one’s ability to earn a paycheck.
Petersen: We haven’t noticed any significant changes. Ultimately combos, like GSI, may just help the sales and underwriting process.
Schnittker: We have not seen much affect. There are products like critical illness which are excellent supplements to income protection that can be really beneficial for the client, and can make your broker’s recommendation to his client more meaningful.
Mohr: Most hybrid products have to do with Life and LTC combination coverages. I do not see where these impact disability insurance sales at all.
Schmitz: I would like to see a hybrid/combo product that includes DI. I would like to see a simplified issue hybrid CI/Accident-Only DI with cash value to market to millennials.
Question: What can agents, BGAs and/or carriers do to increase consumers’ acceptance of disability income protection solutions?
Cohen: Being a BGA, my job is to make every day disability income protection awareness day.
We make our brokers comfortable with the uncomfortable and we teach our brokers the questions to ask their clients to uncover the need for this important product; selling disability income protection is accomplished by asking questions.
I believe that the way to increase more consumer acceptance of disability income protection is for BGAs to educate the agents on the importance of this product. The more agents that are educated, the more consumers will be educated.
The carriers who are manufacturing the products have developed good sales material which, if used, will result in more consumer awareness. It is out there for the taking. Every BGA and agent should familiarize themselves with the wealth of material that is available from the carriers.
Bloch: Over the years, the carriers and producers have jointly developed incredible income protection policies geared mostly to the professional as they have been the preferred target market. They demand Incredibly high quality definitions and protection guarantees. Business owners and executive types may have different needs including disability business solutions. I recently visited a physician’s practice and noticed their parking lot looked like a Mercedes dealership. The patient’s parking lot, however, was filled with less expensive, practical transportation. Our challenge is to educate the consumer and producer that an affordable solution is a better choice than one they cannot afford.
Chittenden: The biggest thing is for brokers to talk to their clients and educate them about the need. Start a conversation with them. Talk about it as income protection, not disability. Ask some very simple questions to introduce the subject of protecting their income. There are many easy transitions and opportunities to raise the subject. For example, when delivering a life policy after placement, congratulate the client on their selfless action to protect the family he loves, but ask what happens if they don’t die but instead get sick or injured. What would their plan be if they were simply too ill or hurt to continue to work and earn a paycheck? The life insurance is of limited help to the family at this point. Another example for financial planners was mentioned in an early question. What happens to the great financial plan if there is no income to fuel it? There is no reason for the broker to get into policy definitions and technical jargon. Simply, the issue is educating the client on the risk of not protecting their ability to earn a living and, as with life insurance which protects the family financially from a premature death, income protection policies protect the family financially from the premature loss of work based income. Both are needed!
Phillips: I was taught a good lesson years ago by an “old DI warhorse”. He lived in the northern tier of Pennsylvania and had a team of producers spread across the mountains and woodlands that sold only DI—primarily to blue collar clients.
I was bemoaning the fact that our business overhead expense sales were lacking. He listened as I griped about how I couldn’t get any broker to even quote—let alone sell—BOE.
He looked at me and slowly spoke, “Well, Ray…it’s been my experience that if you don’t talk about something nothing will happen with it…have you been talking to brokers about BOE?”
“Uh…come to think of it, Jim,” I said, “I guess I haven’t.” I went back to my office, started talking up BOE to anyone who’d listen, and guess what happened? We made some sales. What a concept! Talk about it!
I think simply a BGA needs to talk it up. Discuss IDI more and more. Consumers suffer from less than stellar financial literacy on the whole. Within that context, understanding of the exposures to disability, understanding the design of DI plans, understanding of the claims process and what triggers a claim is woefully lacking.
BGAs must educate the broker populace that this should not be viewed as a niche opportunity. It should be a foundation product. It should be understood for what it is—the basis of every good insurance and financial plan. It funds every other part of an efficient plan, allowing for continued timely payment of all other insurances in force from life insurance to homeowners insurance.
BGAs must educate planners to not settle for their clients providing them with the old, “Oh, I have that at work” response. Group LTD plans must be vetted. Shortcomings of the group plan definitions must be discovered and pointed out. For high-income earners the potential shortfall of the group plan’s maximums must be realized. Is the group plan enough on its own or should it be supplemented by IDI to cover the income gap?
DI is sold. This is not a commoditized process. It takes thoughtful discussion, planning and education to help a client navigate the decision to purchase (or not to purchase) a DI policy. An informed, educated and conscientious broker is needed for a client to decide the proper fit of an income protection product.
Petersen: BGAs and carriers primarily interact with the retail producer and not the consumers. Thus the message and education needs to transmit to the insurance producer and motivate the producer to take action with the consumer.
Constant and consistent messaging is important. Many marketing pieces designed by carriers are “sales” focused. Today’s consumers often see this. What helps them most in considering the products is education information.
“What would I do without an income for three months?” does not impact me. I can easily rationalize and justify any response and then I am turned off by any further attempt. “Let me tell you about Joe, who is working today and looks pretty good. But did you know Joe lost his entire business 10 years ago because of being out of work for six months?” Now you have my attention!
The potential to lose some or all is what is at stake—not just “time off work”.
Bottom line is this: There is no magic bullet. It’s not quick and at times not easy, but that is how most things start!
Schnittker: The broker needs to ask the client what they would like to happen to their income stream, or their business, if they were sick or hurt and could not work. Consumers don’t want to be sold. They want to understand the need, find the best solution and be able to sleep at night.
Mohr: Keep talking about the importance of income protection. I think that the carriers could do a much better job of communicating to the field and the public about the disability claims that they are paying. We have very little information on our claimants. From time to time I will hear from an agent about a claim that we paid or are paying. On one hand it is good, because I am not hearing about problems with claims. They seem to be handled and go smoothly. It would be nice to have more real life stories to help motivate people to own and producers to sell more disability insurance.
Schmitz: Disability awareness. More claims stories. Salespeople need stories to make it real and to keep the prospect’s attention. Believe it or not, DI is not an exciting subject to most people. They really do not want to talk about it, and they are in denial about the probability of incurring a long term disability and the inability to access social/community benefits. Sales increase when consumers have real stories about nice people, who are grateful, and who have been paid large sums by friendly insurance companies.
