Maureen Kirschhofer, CLU, ChFC, Principal, Kirschhofer & Associates
Raymond Phillips, Jr., CLU, LTCP, President, The Brokers Source, Ltd.
Kenneth Sapon, CLU, CLTC, LUTCF, RPh, President, Champion Agency, Inc.
Q: What led you to specialize in the DI market?
Maureen Kirschhofer: I began my insurance career more than 30 years ago in the disability market with a major carrier. I was an art teacher who was tired of seeing art departments downsized and closed. I was encouraged to get into sales, but with an art background there wasn’t much opportunity within my major, so I chose insurance. Reflecting back on that choice, my timing was lucky, because today I am not aware of any company with DI as its primary focus for training agents.
Back then, we had to calculate our rates from a rate book, which was a major challenge for me. More importantly, we were taught how to sell the need for income protection rather than merely peddling rates. Back to basics has always been the best approach!
Raymond Phillips: We’ve been marketing DI in some shape, size or form since the late 1980s. We’ve always offered many different product lines: inexpensive term life insurance; impaired risk life insurance, long term care insurance, fixed annuities, group life and long term disability.
In our model, multiple products have led to opportunities to not have to say “no” to a broker. We have expertise in all facets of the fixed insurance marketplace, which allows us to constantly update messages for our brokers, as well as multiple opportunities for educating, building relationships and encouraging brokers to cross-sell. When a life producer comes to us for DI, it is because he is used to talking to us and he doesn’t have to learn a new phone number or the quirks and idiosyncrasies of working with a new agency.
So DI has been one of our specialties from day one because it allows for a better “one-stop shop” experience for a broker or firm doing business with us.
Kenneth Sapon: I studied and graduated as a pharmacist working in hospitals. My natural market became pharmacists, nurses and, of course, physicians. They would rather talk insurance needs than drug therapy! Can’t help it if I am lucky.
Q: What are the most challenging issues for a disability insurance specialist today?
Phillips: Today’s topsy-turvy economy has led to a kind of “personal DI paradox.” Many workers have been displaced and are working at firms that don’t have benefit packages that are as rich as their previous ones, or they are starting out in their own business venture. Their exposure and individual DI need is perhaps greater than it ever has been, yet the uncertainty of their new situation leads to the fear of spending for no more than just the most essential of life’s survival needs.
Further exacerbating this dynamic is the naiveté that many have regarding corporate benefit packages and the cost involved. Someone who has always had corporate benefits is generally unaware of the cost of coverage. Thus the cost of an individual DI plan seems extremely expensive to someone who has never purchased one before.
In the physician market, more and more practices are owned by health plans or hospitals. At one time, working with a medical practice was a given for a DI planner. Today it is just not as easy to prospect individual doctors, when often many of their financial decisions are provided by and/or decided on at a corporate level rather than at the individual practice level.
Sapon: Today’s DI specialist has fewer issues than ever before. Products, pricing, full underwriting, simplified underwriting and guaranteed issue have never been better.
Kirschhofer: DI specialists have many challenges. First we must assist our clients in seeing the need for income protection and, just as important, we must become a major part of the underwriting process. Convincing clients who have been given exclusions or ratings for medical conditions that they are lucky to be insured for everything else is not an easy task; however, advising clients that a rating is a possibility during the application process makes delivering a policy with an exclusion much simpler. Another important point to mention is that there is a possibility of having the exclusions removed if their health has improved—and you will call each year for a review of their situation.
Disability insurance is so undersold and those of us in the DI business must share our knowledge. Too many agents today would rather give up a disability sale than ask for help. I have mentored other agents that I have met through NAIFA and SFSP and it is very rewarding to assist them. My suggestion to agents who haven’t sold DI is find an experienced DI broker and learn everything you can about this rewarding market.
Q: When selling DI insurance, a common challenge brokers face is a client’s “it won’t happen to me” attitude. What is the best way to get beyond such objections?
Sapon: DI is important to the person buying it—but what is more important is that person’s family having the ability to maintain their standard of living.
Kirschhofer: Through the years I have seen many of my clients use their disability policies—most of whom were not very old when they did. As I go through an illustration to explain the various options for the policies, I relate how my clients have used them. From a permanently disabled emergency room physician who was attacked by a prisoner being treated at an area hospital to pregnancy related claims, I use my words to paint a visual picture of clients who are disabled and using their policies.
Then I go back to the question: If you were sick or injured and couldn’t work, how long could you go without an income? Listening to their answers is just as important as explaining the benefits. I ask them to picture themselves disabled—what would they like to have?
Phillips: This is always a difficult objection to overcome. First, I’d suggest you point out to the client the opportunity to calculate their own “personal disability quotient” from the Council for Disability Awareness website (www.whatsmypdq.org). In fact, it would be great to pull the website and calculator up on screen when with your client. The calculator shows what the chances of disability are and what the length of the average disability would be, based on the client’s occupational duties, overall health, etc. The Council’s “Disability Counter” shows in real time the number of disabilities happening by day, month or year (www.disabilitycounter.org). Great material to illustrate that disabilities are for real and happening “before your eyes.”
It can also be helpful to point out the many ways DI can happen. Again the Council’s site has a very helpful tool (www.disabilitiescanhappen.org). The “Life Stories” section shows how many different forms DI claims can take. It is helpful to identify what the client’s perception is of what will lead to a disability. My bet is that their perception is that it’s going to be a major accident or catastrophic illness. While those situations can lead to disability, often clients lose sight of the fact that for a good DI policy to pay, it does not have to be a cataclysmic event.
Q: What advice do you have for a producer who is just entering the disability insurance market?
Kirschhofer: As president of the International DI Society, I highly recommend that anyone in the DI market join the organization and attend the annual conference. Not only will you hear the stories of disabled people and how they were able to cope, but will have an opportunity to be with people from all aspects of the industry—producers, brokerage representatives, home office staff and claims representatives. I don’t know anywhere else that this would be available with such an intense immersion into the market. Every month members have available to them a study group with various lessons covering all areas of DI business. Discussions range from Council for Disability Awareness statistics to how to market DI from the experts in the industry. One session is free, but to continue an agent must be a member. Check out www.internationaldisociety.com.
Phillips: The first piece of advice I have is: Ask your prospects if they have DI insurance. There are really only three potential answers that they can give—and there are selling opportunities for each.
Answer 1: Yes, I have it at work. Most producers would stop there, thinking there is no opportunity. But that’s wrong—the follow-up question should be: How much and what does it cover? Very seldom will a client know much about his DI benefits from work. Ask to see a copy of the benefit book and explain you want to make sure there is not a coverage gap. A client making $125,000 who has a group LTD plan at work that covers 60 percent to a maximum of $5,000 has an “income gap” that is not insured—and he probably doesn’t even realize it.
Likewise, confirm the definitions and the coverage to make sure of the exact definitions of disability and, especially, what income is covered. Often a group LTD contract does not cover bonuses and/or commissions, making for an even wider gap in covered income to insurance.
Answer 2: Yes, I purchased my own. This provides an opportunity to do a DI policy audit. Ask for a copy of the policy to see exactly what it covers. My bet is that the client won’t have a great understanding of what he has.
If the policy has been in force for a number of years, chances are it hasn’t kept pace with his current income. Also, confirm that the definitions are appropriate for the client’s occupation and compare to what might be available currently in the market.
Answer 3: No, I don’t have any. You’ll be surprised at how many individuals will provide this answer. The opportunity is there for the taking.
Another piece of advice I’d give is to pay attention to young professionals. Most carriers will provide some amount of coverage for young professionals, based on the probability that they will end up in a solid income situation in the very near future. Many may recognize industries such as medical, dental and law. But realize there are opportunities for accounting students and those new in practice as well as engineers, information technology professionals, architects, physician’s assistants, pharmacists and others.
Getting young professionals as clients forms the foundation of a future relationship and sales. Placing a future purchase option for those individuals ensures the opportunity to increase DI benefits as income increases, providing the insurance professional future sales opportunities.
Which brings one last piece of advice: Always put a future purchase option on a policy when available. Make it a standard of your sale. The fact is, even the most blue collar of clients is apt to have future income increases. While many will not have health issues emerge that would impact the underwriting of a new policy to match increases in income, the reality is that clients will be more apt to exercise a future increase rider opportunity than to submit to the full underwriting process of a new application. It’s more convenient for the client and for the broker.
Sapon: Work with a consulting BGA who has had experience working directly with clients and is willing to educate. Another approach is to partner with a senior agent who is willing to split cases and give you priceless on-the-job training. Learn and get paid! Maybe if things work out, you can become a part of his business continuation plan.
Q: What advice would you give to a producer who has been in the disability insurance market for awhile?
Phillips: The advice I’d give for someone who has been in the DI market for awhile is the same I’d give to a producer who has been in any market for awhile. Talk to your in-force clients! Meet with in-force clients to perform a policy review to see where it fits compared to their current situation—as well as to ask for referrals.
One of the old adages of marketing that works is: Who is going to do business with you? Those who have done business with you! The fact of the matter is that approaching an existing client is much easier than building a new relationship from the ground up. It seems that many in the insurance business have forgotten this adage, because I deal with many brokers in all product lines who’ve not updated their clients’ plans. Chances are a client has increased income and/or received a new job title and duties since his policy was purchased. He’s probably underinsured and may qualify for a better occupational class.
Likewise, other products can be offered if appropriate—business loan DI, pension DI, business overhead coverage, even critical illness coverage to complement the in-force DI, etc. While there is a chance a client will not purchase the amount of coverage you recommend, there is a 100 percent chance of a non-purchase if the subject is not brought up to him at all.
Or, the other opportunity when doing a policy review with an in-force client is to ask for referrals. There is no doubt that technology is becoming more and more a part of society’s fabric. Maybe I’m looking at this market through old-fashioned lenses, but I believe DI is more of an old-fashioned sale. I think a face-to-face interaction is vital to an appropriate understanding and purchase of DI. It is not a commodity. For that reason, I think it is ripe for the old-fashioned business building technique of getting referrals.
Sapon: Pay it forward—find a young agent to train. You will revisit the skills you had that brought you such success. You will then start selling again, what a concept. Synergy, it’s one plus one equals 10.
Kirschhofer: Several years ago I met a local agent and we found out that we were pursuing the same clients. Instead of competing with each other, we decided that we could complement each other and we joined forces. While we share some strengths, each of us has areas where we are strong. It is much more fun to work together, especially for me, since I work out of my home—this gives me time for idea sharing. Between the two of us, we have almost 60 years of experience in selling DI protection.
Our clients know that they get two for the price of one. We share the commissions 50/50. We have designed a website for our company which includes DI training that we get from the Council for Disability Awareness. We also focus on a specific market doing seminars, working at trade shows and getting endorsements for that market
Q: What disability product innovations should producers know about?
Sapon: Some really exciting and updated products are available today: unlimited mental and nervous coverage; pure own occupation for all occupations; residual riders that can be triggered with no income loss, no time or duties requirement, and no recovery benefit period, allowing the client to return to work full time and still remain on claim until they build their business back to what it was. There are also DI benefits that pay if a family member needs the insured’s care, survivor benefits, COBRA benefits and more. Now is the time to be in the disability insurance business! [KS]
Kirschhofer: I wish that I could say that the companies in Florida were offering the return of premium products that I sold about 10 years ago. For those of you in other states who have that option today, calculate the actual return on the extra money for the benefit; with guaranteed interest rates minimal, it is a great benefit.
Beginning in 1981, DI products changed dramatically. I used to compare them to Avis and Hertz. When one company added a benefit or decreased their prices, the others would follow. Then with the claims problems in the early 1990s, companies started taking everything away.
Another dramatic change in our industry is that now we are down to about 17 major carriers—but the good news is that benefits are changing for the better. For the first time ever, some of my carriers have improved their classifications and decreased their rates at the same time, plus they are adding benefits.
A benefit period to age 70, while not a major change, does not cost that much more for younger clients and adds five years of benefits.
Catastrophic illness benefits are not very expensive but can be viewed by your clients as something that will assist them should something really serious happen.
Presumptive disability that begins at time of claim and can become a lifetime benefit is also attractive. Depending on the occupation of the client, some innovations can be really attractive, others not so much. An obstetrician in a sole practice who is disabled for several months may never get back to the same pre-disability earnings, even if he returns to work, so a recovery benefit will be an excellent option to consider.
As I mentioned earlier, selling DI is simple—paint a picture so each client is able to understand how he could use DI benefits. [MK]
Phillips: There are products that I would not necessarily refer to as “innovations,” but they definitely don’t seem to be viewed as mainstream DI opportunities.
DI Buyout. I’m not sure there is a more undersold product in the DI industry. A strong buy-sell agreement will have disability language in its buyout trigger. The discussion of funding this with insurance (very similar to funding the death trigger with life insurance) should occur with all business entities with a buy-sell.
Pension DI. Products exist now that allow insureds to protect their ability to fund a retirement plan. Think about it. When a disability occurs, very often saving is cut off completely or curtailed, whether it is via an existing pension plan or on a non-qualified basis. This coverage allows contributions to continue. Benefits are paid out at age 65, just when the individual DI plan reaches the end of its benefit payout. It can help buoy an individual’s lifestyle through the retirement years.
Business Loan DI. As the name implies, a business owner’s loan payback can be protected should there be a disability. The product works great if working with a lending institution, the business owner directly, or where a young partner has an ongoing obligation to buy out a senior partner.
Key Person DI. Another undersold risk is that of a business’ key person becoming disabled. On the life side of the coin, we get applications in every week for a key person life on behalf of a business. Yet the same companies buying the life coverage are frequently not informed about insuring key employees for disability. [RP]
