Short-Term Medical Seen As Good Sideline Business For Agents
By Marcella De Simone
While college graduates have many decisions to make, how to guard themselves against potential financial hardship caused by illness typically isnt among them. But this can be a regrettable mistake, according to Fortis Health.
It behooves college graduates to consider how they will protect themselves when they havent yet secured employer-sponsored coverage and they are no longer eligible dependents on their parents plan, or their school-sponsored coverage runs out, the Milwaukee-based company says.
Short-term medical coverage is designed for people generally in good health who might experience a gap in coverage for a variety of reasons, according to information from Fortis.
But how does an agent sell short-term medical coverage to a market that is largely young, healthy and on a limited budget? Through their parents, says John Radovich, national sales director for Fortis.
Agents who have success selling short-term medical insurance to college graduates know how to market the product, Radovich says. Typically, they buy a list of addresses of parents whose children are graduating, then mail product information to the parents with the endorsement of an alumni group.
Going through a college association allows agents to use the schools stationery, which heightens the likelihood that parents will read it, Radovich says, adding that unsolicited agency mailings are often discarded as junk mail.
Radovich says he doesnt mind sharing the companys strategy because the market is so large and virtually untapped.
He estimates there is a potential $2 billion market for short-term medical insurance, which includes not only college graduates but also independent workers; workers who have been laid off or are in between jobs; new employees waiting for their job-sponsored coverage to begin; temporary employees; and early retirees with a short wait for Medicare coverage.
All the carriers combined currently sell about $200 million annually in the short-term medical market, Radovich says.
“So as crazy as it may sound, I welcome competition because there are so many people out there who have a need for temporary health insurance but they dont know these products exist,” Radovich says.
He counts among those people the approximately 100,000 who have been laid off from the major airlines after the Sept. 11 terrorist attacks on the Pentagon and New York Citys World Trade Centers.
“Theyre going to need short-term medical, but they typically dont call their broker,” he says. “They think they have two options: COBRA or being uninsured.”
The Consolidated Omnibus Budget Reconciliation Act of 1985 requires employers to continue to offer health insurance coverage for a certain period of time after an employee leaves the company.
Many consider the cost of COBRA prohibitive. About 80% of people eligible for COBRA benefits dont take them, Radovich says.
“We are typically one-third the cost of COBRA so weve got the perfect alternative for these people,” he says. “About 19% or 20% of people eligible actually elect (COBRA), and those are naturally people who have serious health conditions. We really do have an alternative for people who are basically healthy, but cant afford COBRA and just go without.
“Probably the majority of our short-term medical sales come from divorce or loss of a job,” he says. “We rely on that agent who has a personal relationship with his clients to recognize that his neighbor or associate has just lost a job. It is a more occasional sale.”
Although the market is a big one and largely neglected, an agent might find it difficult to earn a living selling short-term medical insurance and nothing else, Radovich says.
“Agents love it though, because they have a product with which they can service their clients,” he says. “Ultimately when the consumer starts a new business, they come back to the agent who sold them the short-term. It can mean life-long sales.”
Reproduced from National Underwriter Life & Health/Financial Services Edition, October 8, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.