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Jack B. Schmitz, CLU, ChFC, CASL

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Jack B. Schmitz, CLU, ChFC, CASL, is the president and CFO of Bay Area Disability Insurance Services, Inc., dba: DI & LTC Insurance Services. Since 1983, DI & LTC Insurance Services has distributed income protection products to the Northern California financial services industry. They provide training, marketing, sales and underwriting support to insurance and financial advisors throughout the bay area. Schmitz is a graduate of CSUC with a B.S. in Ag Business. He received his Chartered Life Underwriter (CLU), Chartered Financial Consultant (ChFC), and the Certified Advisor for Senior Living (CASL) designations from the American College in Bryn Mawr, Pennsylvania. In 2002 Schmitz became the Northern California partner of The Plus Group, a national DI and LTC marketing organization with 25 offices nationwide. He is a past president of The Plus Group, NAIFA Marin, and the North Bay Society of Financial Service Professionals. He has served on the board of the Dixie Youth Soccer Association, the board of Senior Access, the board of Mission San Rafael Rotary Club, and the Field Advisory Board of Standard Insurance Company. He has numerous articles published in several insurance trade magazines and websites. In October, 2015, Schmitz became the 11th recipient of the W. Harold Petersen Lifetime Achievement Award presented by the International DI Society (IDIS). Schmitz can be reached at DI & LTC Insurance Services, 4302 Redwood Highway, #400, San Rafael CA 94903. Telephone: 800-924-2294. Email: jack@di-ltc.com.

DI Forum—September 2019

A Panel Of DI Experts Looks At The Disability Income Market And What Can Be Done To Increase Agent Involvement In DI Protection Solutions

Q.What are your assessments of the individual, group, business, and excess disability markets today?

Cohen
There are very few companies that write disability income protection. And there are very few advisors who offer it.

So, if there are very few advisors who offer it and the product is needed by many people, it’s a great way to grow your book of business. Wouldn’t you agree?

The products in the individual market are so versatile. They cover so many different needs. And as I always say, “Need motivates action.” There are business disability products to fund a buy/sell agreement. There are disability products to fund business loans—if an individual is disabled and can’t pay a particular loan. There are key employee policies to help an individual cover the needs of the business when an employee is disabled.

And the limits of individual coverage that the individual companies are writing today are high. When I started in the business the amount of coverage I could offer a client was much more limited. The limits were low. The underwriting was very strict. And the products were not as creative as they are today. Yes, my assessment of the individual disability market today is that it is exciting.

Group disability coverage (also known as Group LTD) for many individuals is important. It’s great when a company can offer group coverage. Group LTD insurance is good for people who don’t have disability insurance. It’s better than nothing. It’s better to have something than to not have a policy.

But I want you to understand that group LTD coverage can be limited for individuals who are making a high income. We can run into something we call “reverse discrimination.” These higher income earners are discriminated against because a small portion of their income is covered with that group LTD policy.

Let’s take a typical group LTD policy…it insures a percentage of a person’s income, let’s say 60 percent, up to a limit of say $10,000 per month. Let’s take an individual making $300,000 a year. That person can have a particular problem. They earn $25,000 per month. But the individual is only getting $10,000 per month in benefits with their group LTD plan. With the group LTD plan alone, this person is insuring 40 percent of their income. Well, they need more coverage. So, let’s take an individual disability insurance policy and layer it on top of that group LTD coverage.

And let’s have that person self-pay their individual disability policy premiums so their benefits may be tax free. (Just a reminder, when the employer pays a group LTD policyholder’s premium, the benefits may be taxed.)

There are often other limitations with group LTD coverage. Many of the group LTD policies are only covering mental and nervous disorders for a limited amount of time. For example, some of the group LTD policies only cover mental and nervous disorders for two years unless you’re in a hospital.

Also, some group LTD plans may not cover bonuses and excess income an individual may receive. And the definitions of a “disability” in group LTD policies may not be as comprehensive as the definitions in individual policies. Also, many group LTD policies may not be portable if you leave your job.

Both group LTD products and individual disability insurance products are important in protecting income. When a client tells an advisor, “Oh I don’t need individual disability insurance, I have group LTD coverage,” remember that this is not necessarily an objection. If the client has group LTD coverage, this person likely understands the need. And that is often the perfect start to a conversation regarding the need for individual disability insurance as well!

Phillips
Without looking at any statistics from LIMRA, or other authority, and only from my little corner of the world, my view is that the group LTD market is recognized and stable. The individual, business and excess markets are not overly recognized and are underpenetrated.

Group LTD (and short term DI, STD) is a product that is widely sold in the group benefits realm. It’s an offering that many employers recognize as an offering to their employees to enhance their competitive stance via an overall benefit package (I’m not sure that many understand the underlying definitions very often however!). While many employees may not know exactly what it is, they know they have “DI at work.”

Other DI offerings seem ignored by consumers and employers. Sadly, we’ve run into many, many instances where company group reps themselves don’t know about, or don’t seem to care about, their own carrier’s non-group offerings. So much for a synergistic, strategic relationship with a company rep in this arena!

However, that lack of recognition begets tremendous opportunities for planners, advisors and agents to enhance their practices and prospect for new clients. The disability income market is staid, and historic…and yet still offers, effectively, a ground floor opportunity. Especially in the lesser penetrated industries and markets. Doctors, dentists, even attorneys, to a great extent recognize and embrace the consideration of income protection relatively speaking. Think of all the other industries out there!

Schmitz
Underpenetrated due to lack of communication, marketing, and incentive.

Petersen
The specialty and high-limit DI market is strong, but we have seen a relative plateau in IDI business and a greater focus of DI advisors on the burgeoning GSI sector of group DI, especially among physician groups and law firms. Employers get tired of wrestling with medical insurance and see disability plans as great group benefits.

The business disability markets continue to be strong as there is always a business deal taking place.

Bloch
The individual disability income marketplace remains on a steady path. There is a fantastic opportunity, however, for carriers to re-energize the marketplace with exciting and creative solutions. The challenge is to create a product and premium structure that the consumer will understand and want to purchase. The group LTD marketplace is becoming more of a commodity product with a “race to zero” mentality. There is limited interest in provision quality today perhaps due the medical care cost issue that has become so time consuming and expensive. The excess disability markets are exploding with new ideas, coverages, and new premium. Product creativity and underwriting enhancements have provided unique solutions for the business and high-income markets.

Q.What needs to change to get producers who shy away from selling DI to embrace these markets?

Cohen
I believe the saying, “Knowledge is power.” The problem that we have in the industry is that we are often dealing with advisors who haven’t specialized in disability income protection. They don’t know a lot about it, so therefore they shy away from it.

Most folks will shy away from something to sell if they don’t understand it. He or she doesn’t want to present it because they won’t be able to handle the questions the clients would ask.

Many advisors have worked very hard to earn their clients’ confidence. Often advisors don’t want to jeopardize that confidence by offering a product that the advisor knows nothing about.

So, my suggestion is that we have to educate the advisors. First of all they have to understand the need for disability income protection. It’s very simple. Many times advisors just want to insure the golden eggs. We have to insure the goose that lays those golden eggs.

The insured’s greatest asset, many times, is their ability to earn an income. If you take an individual who is 35 years old, who’s earning $100,000 per year through age 65, that future income is worth $3,000,000. That’s if he or she doesn’t have any raises, bonuses, or any additional compensation. So that could be their most valuable asset. All of the insured’s hopes and dreams are based on that asset—future income.

Why doesn’t an advisor talk about business overhead expense for a small business or a small professional person? The advisor may not even know it’s available. So, naturally, they’re not going to bring it up.

How about an individual who funds a buy/sell agreement for life insurance and their advisor never brings up the fact that there is a policy for disability that will help fund that buy/sell agreement if one of the owners has a serious disability and can’t work for a long period of time?

So, this is our job. Our job as a brokerage agency is to educate and to help the advisor. I hear many times an advisor say to me, “This client got a million dollars of life insurance, best class. But they’re putting a rider on my client’s disability policy that’s excluding coverage on his back. And my client says he’s only been going to the chiropractor for preventive adjustments.”

Well there are two points that need to be made regarding this scenario. First of all, with life insurance, a bad back isn’t generally going to affect an individual’s life expectancy. So, the client may get best class.

But a bad back could affect a client’s ability to work and earn an income. The result—the client could be given best class with his life insurance and a back rider on his disability policy.

The second point I’m going to make is going to delve more closely into the back rider itself. In our example the client said he had only been going to the chiropractor for preventive adjustments. Well, that may be the client’s perception. But with disability insurance underwriting, underwriters are almost always going to ask for an Attending Physician’s Statement (APS) regarding an applicant’s back treatment. And in this example, the APS said the client was receiving more than just preventative adjustments.

Here’s another example of a rider that can come up on an individual disability insurance policy. If an individual is going for counseling, or taking anxiety and/or depression medication, there’s a good chance that the individual will have a rider on their policy excluding mental and nervous disorders.

We have to get the advisor to understand the underwriting of disability insurance. It’s completely different many times than life insurance underwriting. We manage the advisor’s expectations, so they can manage their client’s expectations. We always do our best to prepare the advisor. It goes back to giving the advisor the knowledge he or she needs to feel confident providing their clients with disability income protection insurance.

Phillips
One stumbling block is the processing and underwriting of DI business. There’s nothing worse than preaching, prodding, pulling and cajoling a non-DI oriented planner for months and years on end about the power and the glory of income protection planning only to have them submit their first case and be slogged through the mud and dreck that is the processing and underwriting of DI business. Often it creates a one-and-done dynamic.

In this era of ubiquitous preventative medicine, often cumbersome underwriting isn’t something we experience for those who are unhealthy. Tests, procedures and exams are done that perhaps weren’t even here even just a few years ago. Those need to be reviewed and scrutinized by an underwriter, which can make for a lengthy process.

In addition to laborious underwriting itself, the application process has been primitive. Lengthy paper applications. Uncomfortable tax returns. Something that many planners have gotten “un-used” to in their primary practice’s focus.

The good news is that I think the carriers have recognized this—at least the processing aspect—and electronic applications, e-policy delivery, etc., have begun to work their way into the market. That evolution will not stop.

Likewise, seeing the ever-expanding offerings of “accelerated underwriting” on the life insurance side, it’s only a matter of time before such initiatives bleed over to the disability insurance market. I often say to my staff and our constituents, “We are at the beginning of the end of processing and underwriting as we’ve known it.”

Second, I think carriers and agencies like mine (BGAs, MGAs, whatever you want to call us) need to do a better job of spreading the word of this market and the opportunities herein. We need to bludgeon the market with the message.

I’m a humble member of the DI marketing group, The Plus Group, with some of the greatest DI minds and marketing minds in the nation. Each year we collectively rally around the concept of “DI Day,” usually in May to jive with Disability Income Awareness Month (DIAM). Tens of agencies around the country have meetings solely focusing on the abstract and the concrete aspects of income protection, bringing in motivational speakers, company reps, and even consumers who’ve experienced disability income up close and personal.

We’ve had tremendous success in not limiting our efforts to a day, but invoking a “DI Year” concept. Weekly something is sent, posted or otherwise on DI. It is an endlessly evolving educational process. Ours is the notion, “If we build it, they will—eventually—come,” so to speak.

I think with continued educational offerings from those who are in a position to do so, along with the continued technological enhancements to processing and underwriting, we are on the cusp of new players and producers embracing this important insurance. It should be the bulwark of every financial and insurance plan.

Schmitz
Underwriting. Although Guarantee Standard Issue (GSI) and Simplified Issue programs are helping, we could use a more automated process for gathering health information. (Where is that medical ID-card we heard about years ago?) In the meantime, we can make it easier by streamlining the process. With broker training we can get brokers to ask a few important questions:

  • When were you last hospitalized, and why?
  • What prescription drugs are you currently taking?
  • When did you last see a doctor, and why?
  • What does last year’s tax return or W2 show?

Producers who shy away from selling DI should not be able to call themselves financial advisors. If they do not want to sell DI, they should partner with a DI specialist.

Scalability. Easy and accessible e-applications, or outsourcing the application process, like we have done with DINGO.

Petersen
Greater education of the general public, but more important, greater education of life and health insurance agents. General agents and insurance carriers need to take a greater role and responsibility in educating insurance advisors about the importance of DI and how to better market their programs. This is not a new problem or issue. What many carriers and GAs consider education is frequently product education rather than sales education. Yes you need to know your products, but producers are missing many fundamentals of the sales process.

Bloch
Many producers shy away from discussing disability income because they lack the appropriate training and do not understand the risk or the process. Training is the key. I would recommend that the producer partner with a DI expert to gain disability expertise.

Q.What are some tips for agents to overcome objections to buying income replacement protection?

Cohen
When offering individual disability insurance to a client, there are four basic objections an agent may encounter. No need, no hurry, no confidence, and no money. The agent wants to eliminate objections before they become objections.

First you must uncover the need. How do you do that? You ask questions.

The advisor can ask the client, “How important is your earned income?” About nine out of ten times the client will agree that his or her most important asset is their ability to earn an income.

When the client understands and agrees that their ability to earn an income is their most valuable asset, then it becomes very easy. You must get your client to understand they need the policy even before you start your presentation.

To further point out the “need,” I have the client picture a bridge made up of all of his or her financial obligations—the mortgage or rent, car payments, car insurance, kid’s bills, utilities, health insurance, groceries, cell phone bills, etc. And then I ask them to picture the only thing holding up that bridge is their paycheck. I ask the client, “If the paycheck is gone, what particular problems will you have?”

I may also ask, “If you were out of work because of a sickness or accident for three or four years without a paycheck, without an income, without any earned income, would you have an income problem?” And naturally they will say yes. Then I feel I have overcome the no need objection. I won’t go forward with the presentation unless they understand they need the product.

The next objection is, no hurry. I want to eliminate that. But I know one thing. Need motivates action. If someone needs something, they’re going to act very quickly. Years ago, when I was in my early 20s, my friend asked me to stand up at his wedding. Naturally, I said yes. They said everybody was going to be wearing a tuxedo and that I had to go down and get measured for a tux.

Guess where I was within days? Need motivated action. I was in that tux shop getting fitted in that tuxedo.

If your television goes out and there’s an important ball game you want to watch, what happens? You’re getting that TV fixed or you may even buy a new one immediately. It’s amazing, when we need something, how fast we’re going to act.

Need always motivates action. You have to remember that. If the client knows they need to protect their income, they’re going to be in a hurry to get the policy. The no hurry objection won’t come up.

The third objection is, no confidence. I believe you really have to know your product and you have to be prepared. So, before you go out on that appointment, you’re going to go through that illustration. The illustration is going to help you understand the product.

And you’re not going to prepare by going through the illustration just once or twice. You’re going to know that illustration until you could just shut your eyes and see it. I study the illustration. I practice my presentation. I know where I’m going to go in the appointment. If you know and understand the illustration, you’re going to instill confidence in your client.

So, again, you have the need objection overcome, the client is going to act if they need it—which is going to destroy the no hurry objection, and If you know your material you’re not going to have any problem instilling confidence.

The last objection is, no money. It’s interesting. When someone needs something they’re always going to find the money to purchase it. The no money objection will generally come up toward the end of the presentation.

Imagine, you’ve already gone over all the benefits in your presentation with your client, reading right from the illustration. At this point you will summarize the benefits again very quickly, and say to the individual, “If we were to deduct x amount of dollars from your checking account every month for all of these benefits, would that create a financial problem?”

Now you know what the individual is going to say—either yes or no. If they say no, you’ve overcome the objection and then you proceed to fill out the application. If they say yes, my response has always been, “I don’t want you to buy this policy.” I don’t argue with people. I don’t say, “Buy this…sacrifice to buy the policy.”

The client is going to tell me if they can afford the policy. And if premium is an issue, I say, “I didn’t come here to create a financial problem, I came here to solve one. So, if you leave here very uncomfortable, I haven’t really done a good job. So here’s what I want you to do. I want you to think about this. Let’s presume we started off with half the monthly benefit. So, we would be deducting x amount of dollars, which is approximately half the premium for half of the benefits. Would that work for you?” If money is still an objection, reach out to the client next year.

I believe you overcome objections before you get objections. And that’s the way I’ve been handling them. I don’t get a lot of objections when I present a policy.

Phillips
As best as I can tell, there are three major objections to income replacement coverage and they’ve been there forever. I won’t get disabled. I have it at work. I can’t afford it.

I won’t get disabled. Well, let’s hope the client doesn’t. But according to the Council on Disability Awareness website (bookmark that page people!), a 20 year old has a One in four chance of a disability before they retire. Now maybe it’s not a career ending disability, but even a disability of a few months can blow out savings and impact a lifestyle. Are chances better or worse of your house burning down? Anecdotally, there’s never been a house fire in my neighborhood, but I’ve got two neighbors on my block alone who’ve been out of work for months now, one involved in a serious auto accident, the other ravaged by cancer.

I have it at work. Great!! Now what is it? How much? What does it cover? Sadly, if you pose that question to most clients they won’t know and the conscientious planner should ask for the client’s benefit booklet to make sure they aren’t short—and many higher income earners are. Most often group LTD benefits are taxable upon receipt and have a monthly maximum. Even a robust plan might leave a mid- to high-level earner with a small percentage of normal take-home pay if they get disabled. Tough to maintain a high income lifestyle when disabled as it is, let alone with a small percentage of pre-disability income.

We’ve also worked with a number of advisors whose clients have described, “I have it at work,” only to have reviewed their coverages and find out their work plan is a short-term disability plan. One that’s built for coverage of just a few months.

I can’t afford it. Many times the client can afford proper coverage, they just don’t want to afford it. This is where a holistic planner has a tremendous advantage, most often knowing the incomes and assets of the client inherently. And, even if one isn’t, some probing questions can give general insight into how much the burden of the DI premium will really be.

It’s important to point out, too, what it really protects. I think subliminally we send the wrong message as an industry to proposed insureds. A 40-year-old client sees a $3,000 premium, let’s say, and $5,000 monthly benefit. Well, to pay $3,000 to get $5,000 doesn’t sound like that great of a deal! But if we help that client understand that it’s $3,000 per year for $60,000 per year of DI benefits with a potential in this case for well over $1.5 million of total payout in a worst case scenario aspect (early disability)—that might carry more of an impact.

All that said, all the gurus, commentators and articles I’ve read say that the upward percentage of gross income a client will pay for a disability income policy is two percent. When running into a situation where an optimum DI plan exceeds that two percent number, consider tailor-making a plan that hovers around that mark. Longer elimination period. Shorter benefit period. Sacrificing policy riders. All can be effective ways to assure the client some protection. In the income replacement market, something truly is better than nothing and a plan that’s inforce at any level can soften the damage to a client’s lifestyle because of an extended sickness or accident.

Schmitz
Ask questions. What is your backup plan for partially surviving an accident or illness that would’ve killed you 20 years ago, but with modern medical technology, you can now survive with a disability? Listen. Most people that do not have DI were never asked.

Petersen
Disability insurance is the most important financial safeguard an income earner can possess. If you were to become disabled and lose your income, how would you pay bills, kids’ school tuition, all other insurance premiums, mortgage, car loans, groceries, etc.? Even medical bills can be paid, provided there is a source of cash flow! Medical insurance does nothing for your living expenses.

Bloch
At our last three DI Days, speakers have discussed their disability claims experience. All have been different and range from a serious car accident, Achilles tendon rupture and subsequent infections, to a physician with shoulder issues. The discussions are far reaching and include financial, family, personal and other considerations. Our producers hear first-hand experience to better understand the personal and business struggles when a disability moment strikes. This experience also allows them to be more comfortable talking about income protection coverage and the importance of a monthly check to replace lost income. By discussing these claims stories with potential prospects, they can overcome many objections. Not all claims experiences were handled positively by some carriers. As a result, we created a Claims Concierge Service to help our policyholders with the claims process.

Q.Many agents deal with high net worth individuals—what advice can you offer to increase sales in the individual and high-income markets?

Phillips
High net worth clients can be dicey to deal with from an income planning standpoint. Fundamentally, we can provide jumbo DI benefits via specialty markets. No issues or problems there.

However, high net worth clients might end up “outrunning the coverage of disability income protection” due to the nature of their business. Disability income insurance is built to “protect your paycheck” to coin the old DIAM slogan. Many high net worth individuals derive a high percentage of their income in passive income vehicles—rents, dividends, etc. Those passive vehicles will continue to generate income regardless of the clients’ health and involvement. Too high of a percentage of such income will lead to insurability issues.

One could argue that a critical illness policy could be offered to such individuals to address certain morbidity exposures. Disability income’s cousin, critical illness, offers a lump sum payout due to diagnosis of many dread diseases, heart attack, stroke, etc. It doesn’t have an earned/passive income criteria to get underwritten.

Schmitz
High earners are the market in CA. Focus on business owners and those who earn over $80,000. In CA, SDI pays up to $5,425 per month. It can be difficult to motivate lower earners when they have this government benefit. Fortunately, there are plenty of high earners out there. When they are married and have children they are the most motivated to protect their earned income, which provides for their family and maintains their lifestyle.

Petersen
Stress that those with higher incomes have more to lose and covering 40 or 50 or 60 percent of their income is not going to provide enough capital to cover the usual expenses of their affluent lifestyles. Those with higher incomes are not sufficiently covered by one, or even sometimes two, layers of DI. High-limit, excess DI is critical for high-net-worth clientele. The purpose of insurance is to keep what you have, not try and liquidate assets to pay for living expenses following a disability.

Bloch
The high-income market is the perfect market to discuss cash flow and tax liabilities. Many group LTD plans do not cover total income either because the stated monthly maximum is low or the plan covers salary only. To add insult to injury, many plans are employer paid and hence any benefits received are taxable. In the situation of high-income individuals, we provide a Group LTD Insurance Benefit and Tax Analysis identifying the net monthly income loss as well as benefit, tax, and health care premium solutions.

Q.What tips can you offer to ease entry into the business DI market?

Cohen
Tip #1: You should know the business products that are available. Companies have designed many different products for business owners. Below are short highlights of some of the business products out there.

Business Overhead Expense (BOE): You may be working with a business owner who has seven or eight employees and the owner is the main thrust of the business. Without him or her, the business isn’t going to function. In this case, you’d talk about a business overhead expense policy.

An overhead expense insurance policy helps insure the business owner’s business expenses if a disability prevents them from working. It can keep the business afloat. And the list of expenses that are covered is quite extensive.

Disability Buy/Sell (also known as Disability Buy-Out Insurance): You may have sold an owner a life insurance policy to fund their buy/sell agreement. Well, you want to ask them, “How are you going to fund your buy/sell agreement for a disability?” Because disability buy-out insurance helps provide funds needed to purchase a totally disabled business owner’s interest. So, you’re using the insurance company —rather than you acting as the insurance company. That product is extremely important. Why don’t more business owners have it? Simple. Because they just don’t know about it. And why don’t they know about it? Because many advisors aren’t bringing it up.

Key Employee Replacement: There may be a situation where you go into an owner’s business and you uncover that there is a key employee. This key employee could even be the owner if he or she doesn’t own more than 50 percent of the business. (There are additional criteria that defines a key employee that you will need to know as well.)

The purpose of a Key Person Replacement insurance policy is to help protect the business from the total disability of an employee who is extremely important to its success. This coverage helps minimize the disruption to a business if it loses a key person. Benefits are paid to the business and can be used as needed to help with new hiring costs, staffing needs and replacing revenue.

Business Loan Protection: When talking to a business owner, he or she may say, “I have a loan. We purchased more equipment.” Or perhaps the owner reveals they’ve purchased another business. Your response is, “How do you fund that loan if you’re disabled? Because I have a product that will help you pay that loan, per underwriting guidelines.”

Tip #2: It’s important to work with an agency like ours that trains, teaches, and helps you get familiar with the products.

Tip #3: So, how do you bring up business disability products to a business owner? You ask questions. Asking questions uncovers the need.

You can ask a small business owner to tell you the longest vacation they’ve ever taken. They may say two or three weeks. Ask them why they don’t take longer. They’ll tell you. They can’t be gone longer. They have to watch their business. They have to make sure everything is done properly.

Tip #4: Where do you get the names? Where do you get the business people? You get clients through referrals. One business owner can refer you to another business owner. Also, look at your book of business. You know who is a business owner.

Cold calling works. A lot of people aren’t calling business owners about disability income protection. You can buy a list of business owners and call them on the phone. Google the business beforehand to get an idea of how many employees the company has. You may have to make several calls before you get one appointment.

Tip #5: What are the types of businesses to seek out when calling about business disability insurance? These business products are needed by all kinds of different small businesses—law firms, medical practices, architectural firms, accounting firms, engineering firms, small manufacturing companies. We have products for the blue-collar business market and white-collar businesses.

Tip #6: So, what do you say to the business owner? Whether you’re talking to a longtime client or to a business owner on a cold call, you say you’d like to make an appointment to go over disability income protection with them.

During the cold call you tell the business owner that you work in the business market with business owners and you work in the area of disability income protection. You let them know that you have a policy that will provide them with an income if they can’t work due to accident or illness.

Business owners have to protect their investment in that business. If that business goes under, employees can get another job. The owner? Well, he or she has a lot more to lose.

Most owners aren’t working 40 hours per week. It’s more like 60 hours per week. Plus, they never take long periods of time off. Without disability income protection, even a short time away from work due to a disability could be devastating to the life of a business.

So, a business owner’s need for disability income protection is great. Business disability protection is going to protect their standard of living. It’s going to protect their investment.

Tip #7: Remember, the owner may have a group LTD policy for his employees. You want to investigate that group LTD policy because that policy may only cover a small portion of the business owner’s income. So, naturally, we’d have to put another policy on top the group LTD policy to protect the owner.

Phillips
The obvious easy strategy is to bring up the concept to any business owners or group benefit relationships one might have. Have group LTD on an account? Look to see where the max benefits of the group LTD plan leave higher income earners short.

If an advisor works in planning for those who own their own business, simply ask if they have benefits at the workplace.

In addition, one of the adages I adhere to is, “You are what you market yourself as.” So a tip to get into the business market is to market yourself as someone who works in the Business DI Market! This might involve networking with benefits agencies, articles in local publications and websites, or even speaking to business organizations or professional insurance and financial planning associations. If you are seen in your market as an authority—if you bring up the concept to those in your sphere of influence, eventually you will be sought out as someone who can implement a strategy for a sound business DI plan (or even personal DI plan).

Schmitz
If you are already a financial, insurance, or benefits advisor, it is imperative to inform your clients about the existence of products that can help them manage the risk to their portfolios which may include business assets. Contact a DI BGA or DI specialist and have them provide you with training on business products. Start with Business Overhead Expense (BOE) to keep the business running, Disability Buy/Sell to buy out your disabled business partner, Loan Indemnification to pay the bank, and Key Person to pay the business when it loses a key person due to a disability.

Petersen
Use IDI sales as door openers. Once you have earned the trust of your personal DI clients, those that own businesses will hopefully be more open to seeing the importance of also protecting their businesses with buy/sell, key person, BOE and loan indemnification insurance. You have successfully protected their families, now ask them for the chance to equally protect their businesses.

Bloch
Many producers are looking for more daytime activity and the business marketplace is the perfect place to start. The DI marketplace needs more producers to discuss disability insurance and cash flow with business owners. The easy way to gain entry is with guarantee issue coverage. This can be through the implementation of a group LTD plan, which only requires two or more employees. In addition, there are specially designed guarantee issue products to supercharge group LTD plans. Business Overhead Expense coverage is also a very easy topic to discuss as well. From this starting point, it will be a normal progression to implement high quality individual protection.

DI Forum—October 2018

A Panel Of DI Experts Looks At The Disability Income Market And What Can Be Done To Increase Agent Involvement In DI Protection Solutions

Q.What is your view of the state of the disability income protection market today?

Chittenden
Misunderstood and underserved by the sales force! The somewhat earned reputation of the income replacement market is that it is a hard product to sell and a hard product to get through the vigorous medical and financial underwriting. So why bother? If the producer has to spend a significant amount of time “selling” the client on the purchase of the product, then spend even more time trying to convince the carrier to take the client, and then have to go back to the client to explain the changes wanted by the carrier, why bother? Why not just go sell a bunch of drop-ticket, no work, easy-issue term insurance? Of course, from the DI marketer’s point of view, the standard answer is, “Because the client needs it and as a responsible advisor you should be looking out for your client’s best interest.” To which some advisors step up and sell the product but many just say, “I can’t be all things to all people and this is one market I choose not to work in.” However, in doing so these producers walk away from some very easy and profitable sales. Did you know that in many situations guaranteed issue coverage is available? Did you know that there are plans for small businesses that can be set up with no underwriting? Certainly both of these programs require the right set of circumstances, but those circumstances are more common than you might think. Yet many producers throw the baby out with the bathwater and choose to avoid this product line all together. Unfortunately, this leaves their clients exposed to a risk that most likely will be financially devastating should it happen. By working with your local DI wholesale marketer, the producer does not have to be an expert in all aspects of the sale. The producer needs to initiate the questions that discover the need and interest. The expertise can be provided by the DI wholesaler until the producer learns the many different programs and niche markets available (if they want to).

Schmitz
Great products with liberal definitions of eligibility are still available! Business owners and medical professionals are the target markets. Underwriting is an issue due to lack of candor and lack of experienced sales force. Life insurance agents know underwriting the best, and there aren’t as many of them as there used to be. Health insurance agents, having not had to medically underwrite a case in years, are out of practice. Not many financial advisors like asking icky health and lifestyle questions. Flat sales are due to a flat salesforce.

Bloch
The state of the industry continues to be “more of the same” at a steady pace. The carriers continue to refine products, underwriting procedures and administrative systems. There has not been, however, any meaningful product, underwriting or system enhancements to grow new disability income protection markets. From a distribution standpoint, the industry is not doing a good job of cultivating new or future producers. It is also not easy for a new producer to market a product when the industry does not have continuity of terms. There is, however, an incredible opportunity to develop additional sales through product, underwriting, and systems creativity. The industry needs to reach more prospects with products that are easy for the producer to market, easy for the prospect to buy, easy for both the producer and prospect to understand, and easy to afford.

Petersen
I have said this each year for the past few years, but it remains true–It is the best of DI times! We have seen the return of an old strong DI player who went out of DI for a number of years! While there haven’t been more new players, those who are in the markets continue to expand product types, increase limits, and work with previously “undesirable” occupations by adding them or assigning them to better occupation classifications. This all points to an overall strong market in general.

GSI programs continue to expand. Of course GSI plans require multiple people to participate, but it seems this continues to grow.

In our operations, excess GSI continues to explode. Law firms, doctor groups and pilots lead the way with the larger GSI cases. At the same time individual excess disability, in both the personal and business disability markets, remains strong.

Q.What factors should influence producers to enter or step up their efforts in the DI market?

Chittenden
The number one factor should be to take care of the client and protect them from this major catastrophe that would upend every other plan they have made—the loss of a paycheck due to accident or illness. The secondary factor should be potential income to the producer from DI sales. Unlike the no work, easy-issue, drop-ticket term insurance sales, income replacement sales pay significant renewals for years. By selling income replacement, the producer is adding a product that will provide a base income in both up and down years. There are so many different opportunities in this market, producers can identify one or two that naturally work for them and have a significant financial impact for themselves while providing significant financial protection for their clients. One easy example is that one company has just introduced into the market a policy for stay at home spouses. The financial impact on a family if the stay at home spouse gets sick or hurt is significant. Even if the working spouse has full coverage at work, less than one percent of families have coverage on the stay at home spouse. Yet, to understand the potential impact, let that stay at home spouse get the flu and be down for two weeks to get a feel for what the impact would be from an extended incapacity. What an easy add-on product to every family sale with the additional advantage of showing a value in the family of the work done by the stay at home spouse. I know that my spouse would have appreciated this acknowledgement in our relationship.

Schmitz
Guarantee standard issue is available to more and smaller groups. The advisor can direct the client to an online application and thereby avoid asking the questions. General agents specializing in DI are readily available to help with every aspect of the process from prospecting to placing. IDI compensation is up to fifty times greater than health insurance compensation.

Bloch
Producers need to be educated about the importance of income protection and then they should identify their own need first. The producer cannot enter the DI marketplace if they do not believe in the product and own it. They need to learn about simplified issue systems to “get their feet wet” with this system. Carriers are expanding the limits for the simplified issue programs to make it easier for the producer and prospect. If coverage is declined, there are options in the sub-standard DI marketplace to place the case at affordable rates. The producer will learn the long term value of adding income protection products to their practice due to the high persistency of these policies. Almost every single person with a job working 10 or more hours per week, and even a stay at home spouse, is a potential client—so the market is wide open.

Petersen
a. The producer thinks talking about disability insurance will interfere with the higher commission life insurance sale or the group medical program.

b. The producer thinks someone else is protecting the income! In a recent discussion with one of our reps a producer who specializes in employee benefits said he does not do “executive benefits” (they were discussing excess disability benefits). The producer went on to say that they leave that for the client’s financial planner! They think someone else is taking care of the risk. However, we know that many financial planners think their client has enough disability insurance because they have employee benefits! In either case, there is an open door for someone, anyone, to talk the needs of income protection.

Q.What suggestions do you have to help agents find success in the business market?

Chittenden
Often we find the biggest detriment to entry is the perception that income replacement sales must be huge sales on top executives, doctors, and lawyers. If producers had the same perspective on life insurance sales we would have very few life insurance producers. For sure there are huge sales to be made in both the life insurance business and the income replacement business, but that should not be the only or even the majority of the sales made. The real business market is the small business owner. As mentioned previously there are special programs designed to help the small business owner obtain coverage with less or even no underwriting. Learning about these programs and then applying them where they fit is the key. While I know some producers who are DI specialists and are out prospecting for DI-first sales, most of the producers I know sell DI second. Whatever product they sell first establishes them as the trusted advisor and then the DI sale comes as trusted advice to help round out a plan of protection. The original sale helps the producer discover the needs and situations of the client that would make them a candidate for some of the programs available to them. In addition to the guaranteed issue programs and stay at home spouse programs mentioned above, there are zero-income business owner programs that would allow a business owner that is showing $0 taxable income the ability to purchase a significant income replacement policy! The starting point is accessing your current relationships with people in the business market and discussing the need for income replacement coverage. There are many ways to open that conversation that any disability sales manager could share and help a producer develop. Many times we find that business owners want coverage but they think it is not available to them. By knowing of these special programs a producer can open the door to meaningful sales.

Schmitz
Think like a business owner. Protect your income. Have a succession plan. Have a buy/sell agreement. Be insured first. How do you expect to sell income protection products without owning them? Content marketing, social media marketing, and networking activities are essential. Set goals and get to work making calls and seeing people as well.

Bloch
All they need to do is talk to their client about disability business coverages. This could include business overhead expense, business loan, key person, buy/sell or other business needs. Keep the conversation simple–ask questions and listen to the answers. The chances are that no one else has ever mentioned how income protection and business policies can save their business in case of a disability moment. When the case is placed, ask for a referral–indicate that you want to work with like-minded folks like them.

Petersen
The business markets for disability insurance is even more wide open. Every insurer that writes disability insurance promotes the personal use of disability insurance and frequently avoids, or at least under-promotes, the business coverages. Also, there are only a few disability carriers that even offer business coverages which makes the opportunities even greater!

All businesses with partners have a need for a buy/sell agreement. Within the buy/sell there is a provision in the event of a disability. Do they need to insure this risk? No, but in the absence of a disability buy/sell, the company (or other partners) are self-funding the entire risk! Disability insurance plans are pennies on the dollar!
Often businesses who do purchase a disability buy/sell have a need to discuss a key person contract. All businesses have a key person. Sometimes it might not be obvious.

Lastly, business overhead is so frequently overlooked. We hear clients say, “I can use my disability benefits if needed!” Really? The disability benefits are for the personal budget not the business. By using the personal benefits for the business budget the client loses the financial protection they needed to start!

So what are our suggestions? Open your existing client list and talk to them about business coverages. It’s that easy!

Q. What tips do you have for agents to increase success in the individual and high income markets?

Chittenden
The most successful producers in the high income market I know are people that grew up (financially speaking) with their clients. These producers started out with their clients when they were not such high income individuals, took care of their needs, and continued to take care of the clients as their incomes grew. Once established as a trusted advisor with a few high income clients, it is then important to work referrals and get introduced to other high income clients that are not getting the same quality services that your clients receive. The second most successful producers selling income replacement products in the high income market are those that had a natural entrance into the market. This could have been due to other product sales or relationships and income replacement products were added to the mix of services. The high income market is the most established market in income replacement sales, and so is also the hardest one to break into. For most producers, trying to go from not selling in the high income market to selling in that market is a long term proposition. The real opportunity for most producers is to increase income replacement sales in their natural market segment. If a producer markets to people under age 60 then there are income replacement products that should be presented to their clients and prospects.

Schmitz
Educate. Be a teacher. Teach your clients about the differences between group LTD, Social Security DI, and individual DI insurance. Individual DI is portable, guaranteed renewable, and may have guaranteed rates. Eligibility for benefits may require only a loss of income due to disability with no total disability requirement.

High earners are discriminated against by their LTD plan. Sixty percent taxable LTD benefit, up to a limit that might be half or less of the high earner’s salary, is inadequate coverage. They need to know this. You need to expand awareness. Write a book. Do a podcast. Your DI BGA can help.

Teach clients about other business products that may be more attractive to entrepreneurs and small businesses like key person, business overhead expense (BOE), buy/sell (DBS), or loan indemnity coverages. BOE can keep office rent and employees paid. DBS can eliminate the need to find a new partner or having to work with the family of the disabled partner (remember Tommy Boy, the movie?).

Individuals with high incomes have high expenses. They have expensive lifestyles. They have large obligations. They have loved ones. What is their plan for disability—that low frequency, high impact event that can lead to financial ruin? The number one reason people don’t buy DI is because they were never asked.

Bloch
There is an incredible opportunity in high income industries for disability income protection. Issue and participation limits have increased allowing additional coverage. Group LTD plans are a great foundation, but there is a need to add additional coverage when the monthly maximum does not cover all or full income which is normally the situation. Employer paid guarantee standard issue (GSI) plans now start as low as three lives and enrollment systems are now available. Claims experience for employer paid GSI programs has remained outstanding, so multiple carriers are interested in writing this business. The key to success is working with experts to assist in the planning and implementation of GSI plans.

Petersen
Petersen International Underwriters does not write “traditional” types of coverages. Our programs only exist when the standard markets can’t (or won’t) write something. This usually translates into excess coverage where the traditional markets supply the maximum benefits, but based upon the income (or business valuation for bank loan, buy-sell, or business overhead), we layer coverages on top of these plans.

Start with your existing block of customers. Regardless of the area of focus—life insurance, medical insurance, etc.—your existing block of customers all have a need for disability insurance. Remember, financial planning begins with income protection! So reach out to those who know and trust you already. Also remember that financial experts (not just insurance experts) agree that most people need two-thirds of their current income just to stay level. This is regardless of one’s income level.

If your customer is an individual, are they protected for two-thirds with disability insurance? If no, start building up the coverage. The traditional carriers do a great job for the vast majority of situations and occupations, but there are many times a customer needs more. Our firm works with producers and the top brokerage outlets around the country offering excess coverages. A person making $600,000 per year of income has a need for $32,500 per month in disability benefits. This will take two or three carriers. The traditional carriers will secure up to about $20,000-$25,000 per month. The excess is secured as a secondary plan with an additional $7,500/month.

If your customer is involved in a business (ownership or partnership), then there should also be a discussion on the need for a disability buy/sell plan. They most likely already have life insurance to fund a buy/sell, but what if they don’t die? A permanent disability still triggers a buy/sell, and in the absence of a disability buy/sell, they are self-funding! The traditional disability carriers will usually offer up to a maximum of $3 million. A partner whose valuation is higher than this amount (know any companies worth more than $3 million?) can obtain excess disability buy/sell for this purpose.

At Petersen International Underwriters we always work hand-in-hand with the traditional carriers making sure they secure the base coverages before we provide the excess layers. We also work through the top brokerage outlets around the country who are the best resources for producers to find the “right fit” for each case.

DI Forum

Question: What challenges do you see in the DI market for the coming year?

Cohen
The challenges we face are not just in the coming year but extend into the future as well. We have to motivate  advisors to teach their clients the importance of protecting their greatest asset—their income.  A long term disability is devastating to not only afflicted but their family as well.

Another challenge that we are faced with is educating our advisors that disability income policies are underwritten differently than life insurance policies.  Disability policies are often issued with exclusion riders which exclude certain conditions.  This is the nature of the beast.  Advisors need to understand this and be able to explain it to their clients in a positive presentation so that their clients accept the rider knowing that there are a multitude of other medical conditions for which they will be covered.

I find another challenge is exposing the advisors to all the potential clients whose occupation is  not just in the medical market. Tradespeople, salespeople, business owners, etc., need to protect their incomes just as much as the professionals.  When the paycheck stops, everyone’s savings disappears.

My challenge is to educate our advisors that high income clients who have employer-paid group coverage may need individual disability income protection to supplement their group coverage.  This is a situation that many advisors walk away from. 

Mohr
The only challenge is getting agents and advisors to recognize the importance of presenting income protection solutions. Advisors just do not understand the risk until they have a client disabled. There are some very disabling viruses, illnesses and accidents that occur daily. I know of claims where the claimant is collecting on both a disability and long term care insurance policy at the same time. That should be “Priority One” for an advisor, to make sure their clients will have an income whether they can work or not. Promoting the importance of disability insurance will put advisors in front of high income clients and lead to more life insurance sales and other sales of financial products.

Petersen
More carriers, more options! This sounds good, and it really is, but it also adds more to the frustration which some producers feel about which carrier and which options for which client!

Schmitz
A shortage of trained life and disability insurance salespeople.

Baby boomers are getting toward the end of their DI purchasing lives.

Millennials prefer to buy online, which is great when buying a toaster, but maybe not the best option for buying DI. DI needs to be sold. There needs to be education and conversation. 

Phillips
One of the biggest challenges will be the sheer lack of carriers in the market.   Quietly, the number of carriers available to the independent producer has shrunk.    There simply aren’t many carriers to access.   I suppose one could spin that to a positive—there aren’t many carriers to learn! 

In addition, the upcoming year brings the age-old challenge in that it is a market dominated by “dabblers.”   Far too many producers are “one hit wonders.”   They’ll sell one or two, and that will be it.   It’s a market where sales are far too reactionary (client asking for it, or starting the conversation) and far too few that are done in a strategic manner quarterbacked  by producers.  

 

 

Question: What opportunities do you see that could/should attract producers to DI sales?

Cohen
The opportunity to attract advisors to sell disability income protection abounds.  Everyone is selling life insurance and very few are selling disability income protection.  There is very little competition in this arena. If only the advisors would ask their clients how long they can survive without a paycheck, they will see the look of interest and potential for a sale.  

When an advisor opens the disability income protection door, he/she will be amazed at the array of policies that the companies offer: A policy to fund a disability buyout, a policy to pay overhead expenses, and a rider to pay a business loan are but a few examples of what is available.

Some of our best sales have been funding a disability buy/sell agreement.  By asking the question, “If one of the owners were to become disabled, do you have a buy/sell agreement?”  This one question should create enough interest to explore this policy. I believe that this policy is one of the best kept secrets.

Mohr
First, just the desire to help and to do what is best for your client. Many clients are relatives, friends, community leaders and business associates; how would the advisor feel if one of them became disabled and the advisor never brought up the need for disability insurance? Second, income! The commissions and vested renewals that an agent can earn selling disability insurance are unmatched by any other insurance product. Third, referrals. Once you sell a disability policy you have a reason to talk to other business associates or people who work at the same job or in the same profession about income protection. 

Petersen
The same as my last answer—More carriers, more options! This means the value of the brokerage outlets becomes even higher! Brokerage outlets and new products are making the selling and administration of disability insurance easier than ever. GSI is having a record year by all carriers. Excess GSI is through the roof! Business DI programs are the most liberal and easier to use than ever before.

Schmitz
A more streamlined underwriting process. Easy access to medical information and financial documentation would generate tons of new business. In the meantime, lots of great true stories of satisfied claimants. This would be immensely helpful in our endeavors to get people to think about the need, and eventually realize income protection can be the best solution to eliminate some of the risk to their loved ones and/or business partners.

Phillips
A major reality of the DI market that should attract producers to it is that few are in it!  Competition is unusual except in the most developed market space (e.g. medical, high-income).   

Carriers are poised with an abundance of marketing materials and support for those who want to engage.  Brainsharks, pre-approach letters, seminars, mailers, email templates and the like  abound on every carrier’s website.   I don’t recall a time in my career when there have been more resources available for the informed producer to approach this market in a strategic, professional way.  Use them!

Another attraction to this market for brokers is that it can support and lead to other sales in other insurance and investments.      Gain an understanding of the client’s income, and it should  lead to conversations on life insurance and investments.   Have other product lines in-force and it will provide funding to perhaps maintain the insurance and investments that are already in place. 

Likewise, as a client’s income increases—and it will, sometimes substantially—so too will the opportunity to provide additional coverage by way of a new sale or exercising a “future purchase option” on their existing plan. 

Finally, another reality of the DI market is the “R” word.  Renewals.  For the most part, the more premium one does, the higher the renewals earned.   It is great way to build meaningful recurring revenue in an agent’s practice.  

 

Question: What is your view of agent responsibility to present DI and what consequences, if any, do you see affecting agents who continue to avoid this market?

 

Cohen
I believe that it is an advisor’s responsibility to offer disability income protection to all of his/her clients.  An advisor never wants to get a phone call from their client’s spouse with the news that their client has suffered a stroke. The spouse wants you to put in a claim for benefits for the disability. The advisor has three responses that he can make:

1). I am so sorry to get this sad news.  I will report the claim to the company and when you are ready we will review the policy; Or, 

2). I am so sorry to get this sad news. However, your spouse and I never discussed a disability income policy; Or, 

3). I am so sorry to get this sad news.  When your spouse and I discussed disability income protection, your spouse was not interested in purchasing this coverage and, yes, there is a signed form in the file with his/her signature stating that he/she was not interested in pursuing disability income protection.

Mohr
If I had an advisor that I relied on for financial advice, products and protection, and then I became disabled and had no disability insurance, I would be extremely upset—especially when I learned that income protection insurance was available to me and my advisor never suggested it. I believe that the advisor should be morally, ethically and possibly legally liable to present income protection insurance. The financial and emotional consequences are so great that advisors should have clients sign waivers that they have been shown the need for disability and long term care insurance and they chose not to purchase.

Petersen
While there is no legal obligation for a producer to talk about disability insurance, there should be a personal sense of responsibility (moral, ethical, emotional, or whatever you wish to call it) to tell clients about disability insurance. This is coming from a guy whose grandfather literally lost the family farm due to a back injury. This is also coming from a guy who has had two bouts of severe disability mishaps inside my immediate family. The first time, the absence of disability forced the liquidation of a small business. The second time, having disability insurance allowed us to keep the family home!

The consequence of this? Lost sales to the producer and underserved clients! 

By the way, if my grandfather did not lose the farm, my fathers “calling” into the disability insurance world in 1948 might not have ever happened! 

Schmitz
As I observe the aging of the salesforce, I also observe an aging of their client base. A recent inquiry was from an agent whose client was interested in DI for her grown children; both children earning six figure incomes. Many of our agents haven’t had a young client in a long time. The agent is focused on old retired and semiretired clients and their investment portfolios. Unfortunately, many new, seemingly captive advisors are focusing on investment portfolios exclusively as well. Maybe someday some advisor will be sued for not protecting an income, but it hasn’t happened or we would make a big deal out of it, like Chisolm Ice Cream.

Phillips
My view is professional agents need to understand they have clients—not customers.   Walmart has customers.   Much like due care is expected from a doctor by his patients, producers must recognize the obligation of due care to these clients.   

My observation has been that the quality agent is not on a sales call, he’s on a mission.  A mission to make sure that, should the worst case scenario occur, his clients are properly protected within the context of their budgets, needs and goals.  

Imagine having a client becoming disabled, having their income compromised, and the subject of income protection had never been broached. What view of the planner would the disabled client have, let alone the guilt feelings the advisor might have? 

Agents need to save themselves from these uncomfortable possibilities by discussing the need for DI with all of their clients and prospects.

 

 

Question: What tips do you have for agents to find success selling DI?

Cohen
My tip is for advisors is to have an organization behind him/her that is knowledgeable in disability income protection, holds regular teaching classes in disability income protection and keeps their advisors up to date on changes in the market place.  It is also important for advisors to have an organization that can teach advisors how to sell disability income protection.  An advisor needs an organization that can steer him/her through the entire process from taking the application through the placement of disability income protection policies.  Advisors need an organization that has staff that is always available to them and dedicated to their success in selling disability income protection.

Mohr
Bring it up time and time again. Bring it up to the right people, those with high incomes. Everyone needs disability insurance and there are products for all incomes. Have the income protection discussion with everyone. If people say that they are covered at work, let them know that they just have half a plan at work and that they still need a supplemental plan.

Petersen
Every client is a potential sale! Executives and professionals? No problem! Blue collar and gray collar workers? No problem! Athletes, pilots and entertainers? No problem! Also, if you have an established block of business of any sort (life, medical, etc.) you already have DI sales leads! One thing I hear often is, “Where do I find clients?” Existing clients from other sources of sales is a built-in lead system. Just talk to them! It sounds too easy, and it is, but it is amazing how many times I see a producer try to make it difficult.

Schmitz
In CA, State DI can pay $5000 per month ($1,173/week maximum). Look for people who do not have State DI, or those who earn substantially more than the limit. It helps if they are married and/or have children. The best prospect has L.O.V.E. (Love, and/or Obligation, and Verifiable Earnings). It is easier to motivate these people, and the premiums are bigger so you will earn more per case. 

Our top producers get their leads and referrals as members of the Chamber of Commerce, Rotary, Elks, Lions, and Networking groups. They are writing books, and teaching classes and volunteering in the communities where they live and work helping others. 

Phillips
This isn’t that difficult:  Just ask about the client’s current income protection.   It is easily integrated into any fact finder or in-force policy review done for other product lines.   It is a product line that is one of the least commoditized purchases in the fixed insurance markets.   A client needs to be told about the opportunity to protect their most valuable resource—their earnings.   Bringing up the subject in a consistent, methodical way is bound to have positive results.

Disability Insurance Awareness Month Planning Panel

Q: DI Day events are popular with BGAs active in the DI market.  What does your agency do to attract agents to your event and/or aid and encourage them to utilize DIAM to engage their clients in the DI discussion?

Cohen
May is Disability Insurance Awareness Month. The Eugene Cohen Insurance Agency held a disability insurance  event in May, 2016, that attracted over one hundred advisors. Their comments were: “Very informative and motivating.”  The attendees were advisors specializing in life insurance, casuality insurance, health insurance and financial advisors.

In preparation for the event this year, we are giving attendees websites to watch for their benefit as well as for their clients. The Council for Disability Awareness is one and LifeHappens.org is another. Both sites are educational and Informative.

This year’s agency disability insurance awareness event is scheduled for May 12. The theme is The NEED and the IMPORTANCE of Disability Insurance.  Acclaimed and knowledgeable speakers in the field will make presentations.  The keynote is a nationally known speaker who will have the attendees eager to tell their clients about the most well kept secret in the insurance world—disability income protection. They will leave feeling anxious to have discussions about disability insurance with their clients as soon as possible.

Petersen
DI Day is a trademarked name for the Plus Group, a nationwide network of some of the top disability brokerage outlets. There are also other similar programs offered through other brokerage outlets as well as NAIFA and NAHU chapters. Regardless, these educational days are a producer’s single best source for finding out about what is new in the disability markets as well as picking up ideas that work for marketing, sales, field underwriting and even handling a claim. 

As an underwriting company, our role is to provide products and services to BGAs to solve their clients’ (producers) needs. As such we place a lot of resources into print advertising with ideas. We also produce numerous articles and other written communications frequently throughout the year and, lastly, we get in front of insurance professionals with ideas to sell more and strengthen their positions as insurance advisors. 

Mohr
DI Day is a registered disability insurance training event for Plus Group offices across the United States. Plus Group offices such as ours (Diversified Brokerage Specialists) generally conduct a DI Day event during the Disability Insurance Awareness Month of May. Last year we held two, one in May and the other in September. We advertise this event to our existing brokers and also use the event to raise awareness of the importance of disability insurance sales and marketing to a broader agent audience. Attendees are always very complimentary, coming away with knowledge and education that will allow them to better understand disability insurance needs and how to better protect their clients. They also learn how, through disability insurance sales, they can enhance their own income and careers 

Schmitz
Our agency holds a DI Day during DIAM. We look for a variety of speakers in order to develop an agenda which includes education in at least three of the following areas: sales ideas, product knowledge, industry outlook, claims, legal, and tax issues. We emphasize value that can transfer to the client and help make a sale. The event is free and scheduled to avoid traffic.  

Schnittker
Getting advisors/brokers to attend a DI Day event is quite challenging.  It is difficult to get people to take half a day out of their schedule to dedicate to an income protection event.  So, we have a keynote speaker that people will truly enjoy and creates a buzz that people will talk about for months to come.

 

Q: Disability income protection should be a year round focus—how do you build on DIAM interest to help agents develop DI awareness and focus throughout the year?

Cohen
I was introduced to disability income protection insurance in 1963. For the last 54 years I have been making consumers and advisors aware of the need for disability income protection.  I have seen how this product has financially helped people during life’s disruptive unexpected events.  

It is most important that advisors are knowledgeable about the product and that they are comfortable presenting it to their clients.

Sixty-one percent  of Americans say most people need  disability insurance but unfortunately only 26 percent have it. (2015 Insurance Barometer Study, Life Happens and LIMRA).

LifeHappens.org is a professional resource for advisors and consumers. There are many and varied videos showing how disability protection has helped individuals survive financially during a disability.  

Advisors need to be trained to think about what would happen to their clients if an injury or illness rendered them unable to work. They need to ask the right question to their clients: “Is your income protected if you became injured or sick and could not earn an income?”

Advisors need to be able to overcome the four objections that clients give to them: 1) No need; 2) No hurry; 3) No confidence; and 4) No money.

The most important job of the advisor is to uncover the need. The way to do this is by asking questions. The goal is to have the client understand that his/her most important asset is future income. Once the client understands the need for disability income protection they will find the dollars and will be ready to purchase.  Need motivates decisions.

In the Eugene Cohen Insurance Agency we have disability income specialists. It is their job to talk to advisors all day long about disability income.  We are spreading the word and making advisors comfortable with the uncomfortable

Petersen
Disability insurance is a year round need. What DIAM does is add subtle as well as direct information to the general public. This is done through magazines and public service announcements focused on the general public. The key is the awareness!

Throughout May the public is being bombarded with stories about the need for disability insurance. Producers can take advantage of these messages by focusing discussions on this vital topic. Now, since May sets the stage, the remainder of the year makes the discussion of disability insurance a bit easier. 

PIU helps producers realize what DIAM actually does and we try and explain that this is a great time to market these programs harder.

Mohr
We continue to reinforce the concepts presented at DI Day throughout the year. We have a full time staff committed 100 percent to the marketing and selling of disability insurance cases. In addition to new sales and agent training, we follow up all future purchase options and new employee additions to our multi-life accounts. A book of disability insurance is like a freight train rolling down the track. You cannot stop it. Even if you try it will take a long time. We just keep throwing coal on the fire by adding new sales each month and building on our book by growing  our disability producers and our renewals.

Schmitz
Yes, income protection should be a year round focus. We are always reminding advisors that they have clients who do not have enough invested assets to generate an amount of income sufficient to pay all the bills which will continue after a disability. Quite a few advisors seem to be focused on the investing while neglecting the protection. Wealthy clients have larger bills that need larger protection.   

Schnittker
A true challenge—to keep DI on the shelf at all times with advisors/brokers.  DI products pay the very best renewal compensation and most carriers have structured their renewal payout around volume, so it is important to constantly remind the producer what kind of renewal compensation they can earn with volume and persistency.  Some companies provide the ability to demonstrate “what if” models that can be very good motivators to the producer who has committed to writing regular business.

Q; What steps can you recommend for agents to prepare for and take advantage of DIAM to engage clients in the DI discussion?

Cohen
Make the most out of Disability Income Awareness Month!  Put Disability Income Awareness Month on your website. Tell your clients it is Disability Income Awareness Month.  Talk to your clients about disability protection.  Ask questions to find your clients’ needs.  Use all resources available to you to make this year the year you become a disability income protection advisor.

Petersen
The beauty of DIAM is that there is a lot of subtle messaging taking place to the general public on this subject. All producers need to do is talk about it! Insurance producers are frequently reluctant to talk about disability insurance due to fear. Fear of losing a sale on the life insurance. Fear of scaring off a sale by sounding like they are trying to sell too many things. Fear of the lack of expertise on their own part. This is exactly where the professional brokerage outlets come in handy! They can make any producer an expert in a short time. As to the other fears, these are their own self-generated fears and not the reality. As professional insurance advisors they should advise on all aspects of insurance, not just the part that is easy!

Throughout the year producers should take added educational steps in learning more about these essential coverages. I come from a family that lost businesses and even a house because of the lack of disability insurance. I also come from a family in which a home was saved because of having disability insurance. There is no one who can tell me it will never happen!

Business owners today are even more in tune to what happens when a financial impact adversely affects the business. 

Did the rainmaker (keyperson) stop generating cash flow because he or she became disabled? How long will this be before the bottom line is impacted?

Partners frequently set up buy-sell arrangements which account for a death contingency, but what if they don’t die? A disabled partner still has a voice but is more worried about getting money than building a business. Without a disability buy-sell a company will have to self-insure this contingency. Do they have the cash to withstand a multi-million dollar payout without paralyzingly the company? 

Many businesses take added liability with bank loans yet rarely protect against the possibility of severe difficulty paying them off because the owner becomes disabled.  It can, and does, occur in the real world. 

How do you make these types of sales? Listen! A sales call is not a one sided conversation, but an exercise in asking questions about the person, the company and the plans for the future—and then listening! What are their dreams and goals? How can you as the insurance expert make sure those dreams and goals happen? 

Insurance is the only financial assistance available to someone when they need it the most and are in a situation they cannot get it from anywhere else! What an amazing product! You are all superheroes! 

Mohr
Producers should ask, ask, ask and disturb, disturb, disturb! Whether during DIAM or all year long, advisors must ask every client that they work with if they own enough disability insurance. A review of a client’s disability insurance is every bit as important as a life insurance or investment review. I have seen clients’ fire advisors and switch to our broker advisor simply because their existing advisor never approached them about the importance of disability insurance.   

Confidence in the product and knowledge of the business applications for disability insurance can make all the difference. This is why attending DI Day is so important. The education and the sales tools provided, especially when it comes to business disability insurance needs, are invaluable.  DI Day will help advisors understand the many needs for business disability insurance. Most mirror the same needs for life insurance, such as income replacement, key person, overhead expense and buy-sell needs. The fact of the matter is that through disability marketing and discussions, the DI producer will also sell tremendous amounts of life insurance at the same time! The difference is that by leading with disability insurance needs you are setting yourself apart and opening doors to high income earners that a life-only agent will never open.

Schmitz
DIAM is another marketing tool. It is an opportunity to remind brokers and clients that DI exists and may be available to them to protect their largest asset – their ability to earn an income. Take advantage of the nationally recognized month. You have an excuse now to bring up the subject of income protection. The number one reason people don’t buy DI is because they were never asked to buy it. The Council for Disability Awareness (www.disabilitycanhappen.org) and Life Happens (www.lifehappens.org) are excellent resources with links you can use with clients.

Business owners may be the least protected. They often opt out of Worker’s Comp, and are under the delusional impression that the company will continue to pay them indefinitely should they become disabled. Yet, when asked “what is the longest vacation you have taken?”, the answer is usually something like “I rarely take a vacation” or “I took two weeks, but brought my laptop so I could check in regularly.” Some questions to ask the business owner: How long could your business operate if you could no longer perform your role?  What would happen if your partner stopped coming to work? How would you pay for expenses after a life-changing diagnosis or surgery?  What would happen if your business partner could no longer afford the purchase payment? Does your executive team value a stable income and a supportive work environment? How would you pay for your regular expenses if tomorrow was your last day of work? 

Schnittker
It depends on the producer (agent/advisor/planner) as you are tailoring your recommendations around supplementing their regular business approach with income protection.  They need to put income protection in their tool bag and we need to challenge the producer to consider the opportunity for income protection for all of their clients.  

Bottom line—you need to have a broker that is willing to consider and introduce income protection solutions for their clients. Many times the broker is not aware of the business solutions that are available to their clients, so we need to be diligent in our education and training.  We encourage brokers to push the bar and ask very direct questions like, “If you were sick or hurt, what would you like to happen to your business, your employees, your partners, etc.?”

DI Forum: A Panel Of DI Experts Looks At The Disability Income Market And What Can Be Done To Increase Consumer Acceptance Of DI Protection Solutions

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. 

Love, Marriage, And DI And LTCI: Comparing DI, LTC, and a Potential Combination of the Two

Husband: “Hey honey, we need to change our vows.”

Wife: “What?” 

Husband: “Yeah, they say ‘in sickness and in health,’ but what about accident?” 

Wife: “What is your problem?”

Husband: “Well, my DI policy says that a disability is caused by either an accident or sickness.”

Wife: “What’s your point?” 

Husband: “Well, you should love me and stay married to me however I am disabled.” 

Wife: “How disabled? Like you can’t do your job disabled or can’t do Activities of Daily Living disabled?” 

Husband: “I would think that both should be covered—or—included.”

Wife: “What if you are just unemployed?” 

Husband: “That would be temporary.” 

Wife: “You better believe it!”

Husband: “You know…my DI policy is guaranteed renewable to age 67, but conditionally renewable to age 75 if I’m working.” 

Wife: “OK, so what?”

Husband: “Well, in the old days when marriage vows were invented, people only lived to age 50, so you were only married for 30 years. Nowadays, ‘till death do us part’ could be 80 years. Maybe we should have a conditional renewability provision in our marriage contract after, say, 30 years?”

Wife: “You know where the dog sleeps?” 

Husband: “Yes.”

Wife: “Then I know where to find you.”

It’s true: this couple could live a long life together (or separate). When DI was invented, people worked to age 65 and died shortly thereafter. Today, people might work to age 65 or 70, then retire and live another 25 years and have a 70 percent chance of needing long term care services and support at some point.1  Long term care insurance (LTCI) was born to continue where DI ends. 

A person’s largest asset during working years is their potential income; their yet worth. Their largest asset in retirement is investments which provide retirement income, and the biggest threat to retirement income is a long term care event—an extended catastrophic disability. Is it time for a product that combines DI and LTCI into one product that can provide income protection for life? 

Maybe, but it would depend on the design and cost. Combo products may not be priced lower than two separate policies, and the definitions might be lacking as well. Be that as it may, this article is a means to compare and contrast the two lines of coverage and open a discussion about the possibility of Linked Benefit Income Protection (LBIP).

Can DI and LTCI get along in the same policy or are there irreconcilable differences?

The following are policy features found in both DI and LTCI. Can these features be modified to address both DI and LTCI at once? There are differences between DI and LTCI contracts; there are many similarities as well. Which provisions might be able to survive together in our Hypothetical Linked Benefit Income Protection (HLBIP) product?

1. Structure and Renewability

• DI is guaranteed renewable to age 65/67 and then conditionally renewable if still working. LTCI is guaranteed renewable (GR) for life. Some DI is also non-cancellable (NC), with guaranteed rates.

HLBIP structure and renewability: The base policy could be a DI policy with earned income disability benefits payable up to age 70, and long term care costs reimbursed by the catastrophic disability benefit, similar to the CAT riders found today, except guaranteed renewable for life. Lifetime renewability would be the biggest hurdle to overcome in the development of an LBIP product.   

2. The Definition of Disability or Eligibility for Benefits

• DI benefit eligibility requires proof that, due to accident or sickness, you are unable to perform the important duties of your occupation, whereas LTCI benefit eligibility requires proof of loss of ability to perform ADLs or proof of a severe cognitive impairment. This is a big difference, unless you are not working or are not currently employed when you suffer an accident or sickness. If this were to happen, your DI carrier’s claims department may end up looking at ADL deficiency to determine eligibility for benefits. This is a gray area, but it is proof that a DI carrier knows how to adjudicate an LTCI claim.

HLBIP eligibility: The base policy could be a DI policy with benefits for initial disability requiring the inability to perform important duties of one’s own occupation during working years up to age 70. The extended coverage for catastrophic disability would require loss of ADLs or severe cognitive impairment. 

3. Elimination Period or Waiting Period 

• The DI waiting period (WP) is the number of days that you must be disabled before benefits are paid. For DI, it typically must be met within a timeframe, such as two times the WP. For instance, a 90 day WP must be satisfied within 180 days. For disabilities separated by more than 6 months of recovery, a new WP will probably be required. 

• The LTCI elimination period (EP) is either met by service days where you have received care, or calendar days that have gone by after it has been verified that you will be receiving care. In addition, before LTCI benefit eligibility, you must have been certified that you will need care for at least 90 days regardless of the duration of the EP. In most policies, once a day of the LTCI EP is satisfied, it does not need to be satisfied again. 

HLBIP EP and WP: Keeping with tradition, the initial disability WP could be satisfied within three times the WP for each disability occurring before age 70. The extended catastrophic disability EP could be a calendar day EP needing to be satisfied only one time. 

4. Benefit Period and Lifetime Maximum

• The “to age 65” (or to age 67 or 70) DI benefit period essentially turns a DI policy into a decreasing term type policy. With the typical DI policy, multiple disabilities may be covered over your working years, if separated by periods of recovery. 

• LTCI policies, on the other hand, have one pool of money equal to the monthly benefit multiplied by a number of months correlating to what is now called a benefit multiplier. The benefit multiplier label replaced benefit period in the LTCI world to reinforce that you do not need to collect your benefits within a time period. Unused long term care benefits carry forward and extend the perceived benefit period.  

HLBIP benefit period: A new hybrid product might provide two year, three year, five year, and “to age 70” benefit period options for initial disability; and 24 month, 36 month, or 60 month benefit multiplier options for extended catastrophic disability.

5. Inflation Protection/Benefit Increase Options

• The DI COLA is a cost of living increase while you are disabled. DI COLA only increases the monthly benefit after the insured has been disabled and collecting benefits for an entire year, plus the waiting period. A $6,000 per month DI benefit purchased with COLA is still $6,000 per month 24 years later if you were never benefit-eligible.

• The LTCI inflation protection is often called a benefit increase option, and typically increases the potential benefits by an amount every year the policy is in force. A $6,000 per month LTCI benefit with three percent inflation protection would grow to be a $12,000 per month benefit over 24 years, whether or not you were on claim. Huge difference! 

• A future purchase option or guarantee of insurability option is valuable inflation protection, especially on a DI policy. As income increases, you are able to purchase coverage to protect your increased income without evidence of health insurability. The increases that you purchased may allow your benefit to be a substantially higher percentage of your income than buying a COLA rider. 

HLBIP inflation rider: So as not to overly disturb the way things have been approved by insurance departments nationwide, a new LBIP policy might offer the usual DI COLA option on the initial disability benefit, and a CPI benefit increase option on the extended catastrophic disability benefit. 

6. Non-Forfeiture and ROP

• Not many DI carriers offer return of premium benefits. When they do, it might be that they return 50 percent each ten years, or a percentage at death, less any claims. ROP benefits on LTCI policies are now frequently included in the policy, but most only return your premiums if you die before age 65/67.

• Non-forfeiture on an LTCI policy has no DI equivalent. You can pay substantially more (15-50 percent) for your LTCI policy by including the non-forfeiture rider. With this rider, you can stop paying premiums and still have a small policy with a new lifetime maximum pool of money equal to the premiums you previously paid. 

• What could cause people to want to stop paying for LTCI policies? How about a substantial rate increase? Well, built in to LTCI policies these days is a contingent non-forfeiture provision, which is designed to let you walk away and still have access to a pool of money equal to your premiums paid if the carrier raises your rate substantially. The contingent non-forfeiture provision is included in the cost of policies sold today.

HLBIP non-forfeiture: Let’s assume that we must include contingent non-forfeiture or a non-forfeiture option in the provisions of the extended catastrophic disability, and that the portion of the premiums attributed to the extended catastrophic disability benefits could be separated and available to pool for a non-forfeiture benefit. 

7. Indemnity, Cash, or Reimbursement

• DI policies pay a cash benefit to the insured. A cash benefit is sometimes called an indemnity benefit. A long term care insurance policy may have a cash benefit, or a reimbursement type benefit. A cash benefit is given to the insured to spend however they see fit. A reimbursement type benefit will reimburse you for the cost you have incurred for the eligible care. Reimbursement policies have lower premiums. Some LTCI carriers have discontinued offering 100 percent cash products in part due to fraud and abuse involved with the use of relatives providing care. 

HLBIP cash or reimbursement: To keep the premium and risk lower, the LBIP policy could use the reimbursement model for the extended catastrophic disability benefit.   

8. Benefit Amount 

• Both DI and LTCI offer policies with monthly benefit amounts. DI is underwritten for occupation, income, health and lifestyle. LTCI is underwritten for health and lifestyle, and geographic cost of care is a consideration as well. 

HLBIP benefit amount: During the initial disability benefit term, the benefit would need to be tied to traditional income tables. The extended catastrophic disability might be offered with up to an additional $10,000 monthly benefit. 

Income Protection Today

DI and LTCI may never have the opportunity to get married. Not many carriers would even have both of them in the same building. Today’s DI seems old and traditional while LTCI is still trying to find itself, and each product is subject to its own myriad of rules and glossary of terms.

A DI and LTCI marriage, culminating in a linked benefit product, would be a marriage of convenience—to protect income for life with one transaction; to form the base of a plan for living a long life. 

We do not need to wait for insurance carriers to develop LBIP. We can start selling LTCI to younger people as if it is the extended catastrophic disability benefit; a guaranteed renewable CAT rider. Link an individual disability income insurance plan with a long term care insurance plan to make your own Linked Benefit Income Protection plan to protect both the client’s ability to earn income during working years and their ability to perform activities of daily living during their lifetime. 

Footnote:

1. “2015 Medicare & You,” National Medicare Handbook, Centers for Medicare and Medicaid Services (September 2014).

Seven Reasons To Consider Critical Illness Insurance In This New Era

Technological Advances Continue to Change the Insurance Landscape

Long ago, heart attacks, stroke and cancer would always kill you. Not so long ago, heart attacks, stroke and cancer were more likely to disable you than kill you. Today and tomorrow, these major health events might just cost you—they’ll cost you more, and they’ll cost you faster.

We Are Embarking on a Changing System

The Patient Protection and Affordable Care Act (PPACA) is going to change our health care structure and the way we interact within the system. With everybody in the guarantee issue program, it might get a little crowded. We may end up with longer delays and rationing of services. This could result in a boom in medical travel, and it might trigger the creation of boutique private medical centers that cater to the wealthy, or those who can afford to pay for services outside of the PPACA system. PPACA could be the Trojan horse that brings us a single payer system as well, as recently indicated by political leaders.

In some countries with single payer health care systems, critical illness insurance (CII) has become a popular product. Have a CII policy in force when the heart attack, cancer, stroke, paralysis or blindness strikes and your client could be the beneficiary of $50K to $500K, possibly enough to pay for airfare, room and board, and treatment in a foreign country where treatment could be performed without a lengthy wait and for a fraction of the cost.

Critical Illness Protection = Options

CII gives your client options; options now, and options in an unknown future. If he has a heart attack today, and takes an aspirin, and then gets to the hospital fairly quickly, he probably won’t become disabled. What will happen, though, is that bills will continue to come in, and there will be a few more of them, including perhaps a high deductible, and coinsurance up to the out-of-pocket maximum of the health insurance. This doesn’t seem like a big deal if he has money saved or $10,000 in his HSA. The $10,000 or so of additional costs may not be that much of a burden, but wouldn’t it be nice for your client to receive a check that would allow him to take it easier for a few months and maybe even take a vacation to lower his stress level?

Peace of Mind

If your client were to be diagnosed with invasive cancer, or received news that he needed a major organ transplant, it would set him back both financially and emotionally. Wouldn’t it be helpful to have a check for $50K to $500K to allow him to take some time to do research and possibly travel to another county, state or country for treatment that may not be available or covered under PPACA provisions? Your client might not become eligible for disability benefits for 90-180 days, but in the meantime he surely could take time for research, treatments and rest. A check for $50K to $500K would lower stress and offer some peace of mind. PPACA will pay the doctors, DI may eventually pay the mortgage and living expenses, but during the 90-180 day elimination period (EP) there would be these and other unplanned expenses.

Lifestyle Inflation

The DI EP is like an increasing deductible. As income increases, expenses rise to meet new income, thereby making a potential disability more costly each year. It would not be unusual to find someone who twenty years ago lived on $5,000 per month, but now requires $15,000 to meet his monthly expenses. The DI EP plus health insurance deductible and coinsurance is now more than a $50,000 expense for many folks. In most cases a CII policy will be less expensive to purchase than the cost of going from a 90- to a 60-day EP on a DI policy. For example, Mr. Smith, a 50-year-old financial professional earning $15,000 per month, could qualify for about $8,400 monthly DI benefit on a personally paid basis with most traditional DI carriers, with prices ranging from $2,700 to $5,900 annually for a 90-day EP and $3,700 to $7,900 annually for a 60-day EP. A $50,000 benefit CII policy would cost Mr. Smith about $800. This can be less than half the cost of the increase on the $8,400 of coverage he would be buying when going from a 90- to 60-day EP on the DI policy.

CII Pays When DI May Not

Even though new treatments lead to better and faster results, they may cost your client more, both emotionally and financially. My CII benefit check was very helpful to me emotionally and financially. After my recent heart attack, financially, it allowed me to finish the remodel we had started, paid my coinsurance and deductible, and will pay for a nice vacation someday soon, which will be good for my emotional health. I was able to cut back my hours for a few months while I recovered and fine-tuned my new medications until they provided steady, favorable results. I was back to the office 35 hours per week within days of the event. I was back to 40-60 hours within 90 days. Since the heart attack and angioplasty recovery period was only a couple of weeks, I did not incur the 20 percent income loss my DI policy requires to be benefit eligible. I feel very fortunate to have had a mild heart attack and not collect from my DI insurance. CII has become a much more valuable product in my portfolio. I now point out the increasing cost of the DI EP over time, and the possibility of surviving with shorter recovery periods for conditions which used to kill or disable.

What Used to Kill or Disable You May Now Just Cost You

Health insurance will pay the doctors and hospital.

Life insurance will help take care of your loved ones and/or obligations when you die.

DI and/or LTD will pay you when, due to accident or sickness, you incur a long term inability to earn income.

Long term care insurance will protect retirement assets from the high cost of care not covered by Medicare, but which you will likely need before you die.

Critical illness insurance will pay you a welcomed and needed lump sum benefit upon diagnosis of a covered critical illness that might have killed you or disabled you in the past, but now just costs you.

Disability Insurance Knowledge = Disability Insurance Sales

Q: What led you to specialize in the DI market?

Jack Schmitz: Other than being born into the business and wanting to continue by dad’s vision, the focus on helping business owners protect their financial lives seemed like a noble cause. Since then I have seen and heard how disability income insurance payments have saved many lives, hopes, and dreams, after all, a lot of people in this situation find that it is necessary to invest in disability insurance to protect your primary income. Otherwise, you could find yourself in difficult circumstances. What a great product to own, make people aware of, and sell. [JBS]

Eugene Cohen: After graduating from Ohio State University with a major in finance and searching for a career, I interviewed with a company that specialized in disability income protection. The appeal to me was that this concept made sense. Everyone who works depends on an income and the need to protect their income was obvious-for most people-because their greatest asset is their future income. This was a concept that I believed in, and I knew that I would be able to relate to potential clients with sincerity and pride. I also knew that I would not be dependent on friends and family for sales. [EC]

Ellen Crowe: I enjoy the challenge of promoting disability income, so more producers will feel comfortable introducing and selling the product to their clients. Early in my career, it became quite clear to me that all financial planning rested on the client’s ability to earn an income. A long term sickness or accident could easily destroy a family’s financial welfare.

Even though statistics show that people in their working years are more likely to become too sick or injured to work than to die, disability income is not an easy sale. Many producers shy away from selling the product because the premiums can be high, clients do not understand the need, and the underwriting is more meticulous than life insurance.

By training, I am a communicator and a teacher. Through phone conferences, continuing education seminars and webinars, I am able to use my communication and teaching skills to help producers understand the product, sell the need for disability income protection to their clients, assist them with sales ideas and help them design disability plans that are the best fit for the client. I receive a lot of satisfaction from seeing brokers grow more comfortable with the product and, as a result, sell more disability income to their clients. Disability support through insurance is crucial in making these individuals independent in their life. They can use the money for daily assistance or home nursing requirements and many organizations under government schemes like NDIS (disability support Melbourne) aid with these services for the differently-abled.

Michael Sileo, Jr.: I followed my father Michael Sileo, Sr., into the disability insurance brokerage business. His passionate belief that disability insurance was for all occupations is what our company is built on. He was a champion for the working man and challenged carriers he represented to develop DI products for the blue and gray collar markets. He was a true trailblazer in the disability insurance brokerage industry.

General Agent Center, Inc., has specialized in disability insurance brokerage exclusively since 1996. We are a family-owned and operated business built on the relationships we have with our family of insurance producers and financial advisors, most of whom have known me since I was a teenager because they have been doing business with my company for decades.

I love disability insurance! It is our niche in the insurance marketplace. Most independent insurance producers and financial advisors offer their clients numerous products, but DI can be a difficult sale, especially if a producer/advisor isn’t completely knowledgeable or confident in his ability to present and sell the product. That’s where we come in. Our sales support, industry knowledge, product expertise and the relationships we have built with our carriers help producers/advisors increase their disability insurance sales.

The DI market is constantly evolving, and the products are complex. We are now able to offer DI coverage to almost all occupational classes. There is more competition among the carriers in the blue/gray collar marketplace, and consumers are becoming increasingly aware of the need to protect their paychecks. It’s a great time to be in the disability insurance brokerage business. [MAS]

Q: What are the most challenging issues for disability insurance specialists today?

Cohen: In the past, companies taught disability income protection to their agents. Because there are fewer companies offering disability income insurance today, fewer companies are teaching it, leaving a smaller pool of agents with disability insurance knowledge. The major challenge we have ahead of us is that we have to teach brokers about this vital product. It is not only enough to have brokers aware of the great need that their clients have for disability protection –they must be able to present that need to their clients.

The problem, I believe, is that many brokers are uncomfortable with disability insurance because of their lack of knowledge. Therefore, our challenge is to make them comfortable with the uncomfortable. The priority must be to educate brokers and encourage them to ask their clients about disability income protection. Just as important, brokers must be educated on how to ask the right questions.

Our firm, the Eugene Cohen Insurance Agency, Inc., is a brokerage agency and our clients are brokers and financial planners. They are independent agents as well as advisors referred by broker/dealers, general agencies and brokerage agencies that do not specialize in disability insurance.

Once a broker/advisor asks us for a proposal, we spend as much time as needed going over the illustration and preparing him for the appointment. We are not satisfied until we have done our job-making the broker comfortable with the previously uncomfortable. [EC]

Crowe: Motivating producers to share a disability income illustration with each client for whom they write a life application is the most challenging issue for this disability income specialist.

Studies show that people are concerned about protecting their incomes but that their financial advisors do not discuss disability income protection with them. In fact, only 18 percent of consumers recall being approached for disability income protection-less than half as many as those being approached for life insurance (Facts from LIMRA, May 2010, Multimedia Fact Sheet). However, 3 out of 10 workers between the ages of 25 and 65 will be too sick or injured to work for 90 days or longer (Social Security Administration, Fact Sheet, 2007).

Financial plans are seriously deficient if they do not include disability income insurance, because everything rests on a client’s ability to earn an income. If producers were in the habit of always presenting life and disability insurance illustrations to their clients, a lot more people would have adequate disability income protection. [EMC]

Sileo: Finding and retaining insurance producers and financial advisors focused on DI is at the top of my list, especially when you take into consideration that the average age of an insurance producer in the United States is 62. The aging producer population also means that the best and most knowledgeable insurance producers and financial advisors are going to be retiring soon, taking with them the expertise they have learned from years of experience. Most of these veterans received extensive training from the insurance carriers.

It’s my job as a disability insurance broker to recruit, educate and build long-lasting relationships with insurance producers and financial advisors interested in becoming DI specialists.

Overcoming the lack of interest or fear that some insurance producers and financial advisors have about selling disability insurance is also a challenge: It’s too difficult to sell. I’ve tried selling disability insurance in the past. Some of my clients were declined. Some clients were offered a modified policy with exclusions. I have my reputation to protect!

Not everyone who applies for disability insurance will medically or financially qualify. You have to disclose all medical issues and medications prescribed on the application. Nondisclosure of medical information on an application will result in a decline. An application that discloses all medical conditions and current medications will be underwritten and any offer of coverage from an insurance carrier will be modified to exclude that condition or medical issue.

Most insurance carriers will review these exclusions or modifications within one to five years of the client being treatment, symptom and medication free. Clients with a medical history of surgeries, broken bones or long term medical issues will be underwritten with offers of coverage with modifications or exclusions that are permanent. Even with exclusions for a known medical condition the value of a disability insurance policy is priceless paycheck protection. Paycheck protection is known to be the first tier of worker’s compensation coverage, so those who have found themselves needing help might want to look into workers compensation insurance as that might be able to help them get back on their feet.

The truth is that disability insurance is an easy sale if you have confidence in your ability to educate your clients about the importance of paycheck protection. Disability insurance sounds like you are trying to sell a policy that can be used if the policyholder is hit by a bus. Instead, disability insurance is a policy that protects paychecks and the ability to earn a living and provide for a family. Disability insurance specialists must show clients the value of their paycheck and the need to protect it! [MAS]

Schmitz: Our biggest challenge today is underwriting. Financial advisors find that it is easier to make money offering securities, with no underwriting, and health insurance agents in California haven’t had to deal with underwriting as much since “guarantee issue for groups of two” was legislated. Verifying incomes and getting brokers to ask all the difficult lifestyle and health history questions completely is a problem. Plus, the average age of a broker is close to 60, and many can’t or don’t want to work as hard anymore. [JBS]

Q: What is the best way to get beyond a client’s “it won’t happen to me” objection?

Crowe: Many clients are not aware of the financial risk of a long term sickness or illness. When producers mention disability, clients see a wheelchair. Producers must educate clients. Preparing a strong disability income PowerPoint presentation or a binder is critical, and it should contain the following information:

Statistics that illustrate the likelihood of a disability during working years versus dying during working years.

A chart that illustrates the percentage of claims associated with common causes of disabilities for people in their working years (e.g., musculoskeletal and connective tissue issues, cardiovascular problems and cancer). With a chart such as this, it quickly becomes apparent that the majority of disability claims are not from catastrophic injuries that leave a client wheelchair-bound, but from chronic sickness and muscle and joint issues.

A chart that shows a client’s potential loss of income based on his current age and salary.

A list of possible alternatives a client may be considering to supplement his lost income in the event of a long term sickness or illness, along with the inherent pitfalls associated with each alternative. For example, clients might believe they can easily collect social security disability benefits or simply make do on the salary of the working spouse, but both have serious shortcomings.

Disability articles that you can leave with the client that reinforce the need for disability income.

After going through the presentation, if the client still has objections, go back to the place in the presentation that responds to the particular objection. For instance, “it won’t happen to me,” can be approached with reviewing the disability statistics again along with a discussion that might go something like this:

“Insurance protects the insured from a possible risk that may have grave financial penalties. The statistics we just reviewed indicate that becoming too sick or injured to work is at the top of that list. Everything rests on your ability to earn an income. Isn’t that worth protecting?” [EMC]

Sileo: People know and understand that someday they will die; yet few people believe they will ever become disabled. I like to use the Counsel for Disability Awareness for information and tools that I find useful to assist producers and financial advisors in educating their clients about disability insurance and the chances of something happening to them. It’s our responsibility to make sure our clients understand the need for disability insurance.

Here are a few statistics I like to use.

Just more than one in four of today’s 20-year-olds will become disabled before they retire (Social Security Administration, Fact Sheet, March 18, 2011).

More than 36 million Americans are classified as disabled-about 12 percent of the total population. More than 50 percent of those disabled Americans are in their working years, from ages 18 to 64 (U.S. Census Bureau).

More than 5 percent of U.S. workers (8.3 million disabled wage earners) were receiving Social Security Disability Insurance (SSDI) benefits at the conclusion of March 2011 (Social Security Administration, Disabled Worker Beneficiary Statistics, www.ssa.gov).

In December of 2010, there were more than 2.5 million disabled workers in their twenties, thirties and forties receiving SSDI benefits (Social Security Administration, Disabled Worker Beneficiary Statistics, www.ssa.gov).

By knowing and sharing such information with your clients, you can help them better understand that it might happen to them. Encourage your clients to check out the Counsel for Disability Awareness’s website at www.disabilitycanhappen.org. There you will find a great deal of information you can use to help express the need to protect a paycheck and the chances of a disability happening. There is a DI calculator that your clients can use on the website that will show their personalized chances of becoming disabled during their working lifetime.

It’s your responsibility to help clients understand. You have to show your clients they need disability insurance, you can’t make them buy it. By giving your clients the tools to better understand the purpose of paycheck protection, a seed is planted with your clients. It takes days, weeks and sometimes months for it to grow; sometimes it takes something to happen to a close friend or family member for them to remember the disability insurance seed you planted with them. Other times it’s local or national events that make them want to protect their paychecks.

Don’t give up on disability insurance. It’s a long sales process. Just keep in mind that an informed and properly advised client is a disability insurance buyer. [MAS]

Schmitz: It’s not about them. It’s about the ones they love and the consequences for those loved ones if a disability strikes. For most people, a 3 percent risk of devastating their family’s dreams would be too much. The risk of disability is so much greater, and it doesn’t have to cost more than 1 to 3 percent of income to do something. All a healthy prospect needs is L-O-V-E: Love, Obligation, and Verifiable Earnings! [JBS]

Cohen: The “it won’t happen to me” objection is not a real objection. There are only four basic objections in selling: (1) no need, (2) no hurry, (3) no money, or (4) no confidence. All other objections are not the real reasons why the client is not buying.

The “no need” objection is overcome by asking questions. For example, consider the following conversation:

Broker: What is the longest vacation you have ever taken?

Client: (most will likely answer) Two or three weeks.

Broker: Why only two or three weeks?

Client: I have to work…Who can afford to take a longer vacation?

Broker: If you were to have an accident or illness that disabled you for two or three years, would you have an income problem?

Client: (most will likely answer) Yes.

Now you have established the need for income disability insurance. Asking questions enables the client to see the need. One of my favorite client questions to teach a broker is: If you had a money machine-one that produced X amount of dollars every month-would you insure that machine against a breakdown? Of course you would-you are the money machine!

After the client has been educated on the policy-especially what it can do for him-only then should you address the “no money” objection. Ask the client if the company were to deduct X amount of dollars from his checking account each month for this policy, would that create a financial problem. The answer is either yes or no. If it is no, you are done-you have established that the client has the means for a policy, thereby countering the “no money” objection. If the answer is yes, you still have more work to do.

Over the years, I developed an approach that I found to be successful. When I sold directly to consumers, I would tell my clients that I didn’t come to create a financial problem-I came to solve one. This approach only worked because of its sincerity. I simply put the current proposal aside, rolled up my sleeves and sat down with my client to design a policy which was more affordable.

In regard to the other two objections-“no hurry” and “no confidence”-I have found that these are easily overcome if I have done my job well to educate a client. [EC]

Q: What advice do you have for a producer who is just entering the disability insurance market?

Sileo: Learn all you can about disability insurance. Get a sample disability insurance policy and a product guide from the insurance companies you are going to be representing. Know and understand the definitions of disability and key features for each of the policies.

Build a strong relationship with an established and experienced disability insurance brokerage. One that will support you with marketing and sales materials, product illustrations and advice to help you serve your clients’ disability insurance needs.

Don’t be afraid to ask questions. It’s the only way you’re going to learn. Your disability insurance broker is there to help you become a disability insurance specialist.

The more you know about disability insurance, the more confidence you will have in selling it. You must be enthusiastic! Your clients need to know that you believe in paycheck protection! [MAS]

Schmitz: This is important work. The product offered must be the best for the client. The decision you help them make will be remembered and reviewed for many years. A client will probably keep his policy for his entire working life! Also, work with a disability expert to get it done right. [JBS]

Cohen: The following is my four-point advice to agents starting in the disability income protection business:

1.Knowledge is power. You should know your product. Read and understand the company’s disability policy and all the accompanying brochures.

2.Believe in the need for disability income protection. If you qualify for disability income protection, you should own it.

3.Disability income protection is the best kept secret. You must discuss it with prospects. You will be surprised at the interest your clients will have when they realize that their future income is their greatest asset. Also, disability income protection is a great way to gain new clients.

4.Understand the real objections. As I mentioned earlier-no need, no hurry, no money and no confidence-are the real reasons people don’t buy disability insurance. [EC]

Crowe: Purchase disability protection for yourself. You cannot sell the need for disability income protection to your clients if you have not purchased it for yourself.

Work with a disability income specialist. It will increase your success ratio and your confidence. A specialist can help you understand the disability income contracts, assist you with case design and answer any questions so you are well-prepared when you meet with the client.

Create a strong disability income PowerPoint presentation or a binder. Go through the presentation every time you meet with a new client. Eventually, you will become at ease with the presentation and responding to clients’ questions and objections.

When you develop a financial plan for a new client, present a disability income quote every time you present a life insurance quote.

Consider specializing in occupations that are good disability income prospects. For example, carriers provide discounts and special monthly benefits to resident physician programs. Working with a professional organization devoted to a specific occupation such as veterinarians or attorneys will open the door to multiple clients. Develop association discounts for these professional groups so the discount is exclusive to you only.

By working with clients in the same occupation, you develop a strong reputation within the profession because you understand and know their compensation packages and can easily fit them with the best disability carriers for their situation. In addition, if you have an exclusive association discount in place, you can provide discounts and benefit amounts other producers cannot match.

Don’t become discouraged. It may take several visits over a period of time. A disability income specialist can coach you on how to approach clients and assist you in answering clients’ objections and questions. [EMC]

Q: What advice would you give to a producer who has been in the disability insurance market for a while?

Schmitz: Take another look at DI products. Be willing to be flexible in product choice in order to persuade a client to buy instead of walking away. Maybe a good residual/partial feature is more important than pure own occ for most occupations. Maybe guaranteed renewable is okay for those who will invest the difference in a LTC insurance policy. Try selling a group plan for lower rates and easier underwriting. Take another look at processes: teleapp, e-delivery, scrip check, fillable apps and guarantee standard issue are here to make it easier for brokers. [JBS]

Cohen: My advice to producers who have been in the business for awhile is to visit your clients on a regular basis. This will enable you to review their coverage with them, be knowledgeable about any life changes which would necessitate any new coverage, and help you to obtain referrals.

But I am also curious about long-time producers who do not offer disability income protection to their clients. I wonder why-are they too busy? Do they lack knowledge? Is it the underwriting? In most cases, I believe, it is the lack of knowledge which makes brokers uncomfortable.

But this doesn’t have to be the case. Opportunities to become educated come from a variety of different sources. The companies that offer disability income protection have created a tremendous amount of material to help brokers understand the concept. I myself hold regular DI training sessions for brokers who are affiliated with our agency. I feel it is our job to help them become more comfortable putting disability income protection into their portfolios. [EC]

Crowe: The best opportunity for producers to grow their disability income business is with their existing disability insurance clients. Introduce business owner clients to disability products that will protect their business operations, such as business overhead expense (BOE), buy/sell, business loan protection and key person disability protection.

There are also retirement protection products that will pay a contribution of up to $4,250 into a trust in the event that a disabling injury or sickness prevents the policyowner from working. Such products can be written in addition to any individual disability income policy the client may own. It insures that your clients will be able to continue to save for their retirement in the event they become too sick or injured to work.

In addition, talk with your employer groups about providing guarantee standard issue individual disability income (GSI) for their key employees to supplement the group long term disability (LTD) plan. Group LTD plans often fall short when it comes to providing disability income benefit to key executives.

Supplementing the group LTD with individual coverage on a guaranteed issue basis (no medical underwriting and limited financial underwriting) is an excellent solution to providing adequate coverage for key executives. Nearly any industry with at least five key employees who are white collar could be a good prospect. [EMC]

Sileo: Share your disability insurance expertise! Teach others the sales techniques and marketing strategies that have made you successful. Help the next generation of insurance producers and financial advisors. Knowledge and experience are your legacy. [MAS]

Q: What disability product innovations should producers know about?

Crowe: One company has a business overhead expense product with an optional business loan protection rider. The rider can be written as a stand-alone policy as well. Many business owners have business loan obligations that they would have to continue to pay even if they became too sick or injured to work. This product will pay up to $10,000 a month for 10 years, with a maximum payout of $1 million.

Guarantee standard issue (GSI) individual disability income is one of the most innovative disability sales opportunities available for producers today. While employer-paid benefits are valuable, the typical group disability benefit is only about 60 percent of regular income. The group LTD usually has a maximum benefit cap, and it is taxable if employer-paid, so it replaces about 42 percent of regular income. Layering GSI on top of group LTD can help cover a greater percentage of key executives’ income.

Key GSI features include no medical underwriting, financial documentation limited to an employee census, unisex rates, premium discounts, portable policies and carve-outs.

GSI plans are available to as few as five key executives, when mandatory, and 15 employees when voluntary. They can be employer-paid or employee-paid. GSI plans will separate you from the crowd and grow your disability business. [EMC]

Sileo: One company is offering a compassionate care benefit as part of an individual disability income policy. This benefit pays if a policyholder works at least 20 percent fewer hours and loses at least 20 percent in income in order to care for a loved one with a serious health condition.

Having a loved one with a serious medical condition is both emotionally and financially stressful. You want to take care of them but you have career commitments as well. I know firsthand how stressful and financially destructive it is to care for someone you love with a terminal illness. The time I spent racing between my job and the hospital caused me to lose a lot of time at work. The loss of income I experienced was significant and took months of working overtime to replace. I can truly appreciate the incredible peace of mind provided by the compassionate care benefit.

Time is priceless! You can’t take it back and it can’t be replaced. The compassionate care benefit gives policyowners the time they need to care for the person they love. [MAS]

Schmitz: The most impactful innovation in DI this century is the introduction of guarantee standard issue individual disability income products. The next most important development would probably be retirement DI plans that make contributions to qualified retirement plans when policyowners are disabled. Other product innovations producers should know about are compassionate care, recovery benefits, extended residual and catastrophic DI riders.

I would like to see more brokers actually know the difference between “own occ,” “modified own occ,” “your occ,” “transitional occ,” and “any occ” and understand residual/partial disability definitions. You would be surprised how many brokers cannot explain the difference between non-cancellable and guaranteed renewable. The broker who knows these basic concepts can move up to being a more effective DI producer, help a lot of clients and earn substantial commissions. [JBS]