Prescription For DI Sales Success In A Down Economy
The economy is down with little hope for a speedy recovery. Consumer confidence is at an all-time low. Unemployment rates are on the rise. As you may expect, this business has hit disability insurers hard with sharp increases in claim rates, flat to decreased earnings, and loss of business caused by clients searching for more affordable plans.
Its rough, but insurance carriers–and producers–can still pull in good profits. Whats needed is for marketers to expand their traditional view of insurance to include disability and their understanding of the characteristics of healthy blocks of business.
The losses in the insurance industry have been a long time coming. Years of profitable business resulted in the proliferation of rich insurance plans at affordable premium levels. Carriers could afford to offer insurance plans that contained plenty of benefits because the likelihood of policyholders filing a claim was much lower than it is today.
With claim rates up, however, these rich disability plans are no longer economical. When carriers need to recoup losses through premium increases, they first look toward these richer plans and also plans with high claims rates. Employers and other policyholders often cannot sustain these price increases, so they seek new plans that are less rich and more affordable.
In such a market, producers and their carriers should be poised to offer appealing, affordable options. This will help retain clients long term.
The question is, how to do this? Here are some suggestions. They are based on common characteristics of the most profitable blocks of business as revealed by recent studies, including the Disability Market Survey from Disability RMS. Keeping these in mind will help you develop the right strategy for the biggest profits.
Focus on return-to-work. When putting together plans for clients, keep in mind that insurance products with a return-to-work focus in claims management result in fewer or shorter claims and premium stability. Using clinically based claims management, employees can return to the workplace more quickly and safely, and no longer rely on insurance payments.
Suggestion: Make sure you understand how the insurer handles claims from both a service and outcome standpoint.
Be sure plan designs are simple and straightforward. When plans are too complex, with policyholders covered by two or three different carriers and programs, the likelihood of abuse increases. In many cases, plans are so rich and the taxability so complex that employees can make more money by not working. That means there is no incentive to return to work, resulting in unnecessary extended absences that cost employers and insurers money.
Spread sales out to nontraditional occupations. Look at any producers book of business and you will probably notice concentrations of policies in certain fields of work: doctors, lawyers and white-collar executives. The danger in concentrated portfolios is obvious. A bad year for doctors means a bad year (or more) for your business. Just as you diversify your personal investments, you should do the same for your book of business. Mix in manufacturing groups, hospitals and nonprofits. You will cushion your earnings during bad economic times and never overexpose yourself in any one industry.
Diversify your client base. Do not concentrate solely on large customers. While they may make for a more efficient sale, they tend to offer smaller profit margins because of higher claims rates. Take a look at smaller companies. The small case market has higher profit margins, lower claims rates and you will have direct access to the decision makers.
Introduce your current clients to disability. Most clients start off with medical insurance, add life and then consider disability insurance later in the relationship. That leaves a wide open market to sell disability insurance. Did you know that only 35% of employees have long term disability coverage? And, did you know the number-one reason why companies do not offer disability insurance is that their brokers have not told them about it? In some cases, you may have talked to your client about disability coverage in the past; it may take a few tries before you get the attention of the buyer.
The economy may be down, but your success in the insurance market does not have to follow the same pattern. Smart selling is the key. By understanding your clients, buying patterns and historical performance, you will be able to keep your block of business healthy and able to weather any economy.
is managing director at Disability RMS, a Portland, Maine, subsidiary of CORE Inc. He is also past chair of the Disability Subcommittee of Health Insurance Association of America. His e-mail is firstname.lastname@example.org.
Reproduced from National Underwriter Edition, February 24, 2003. Copyright 2003 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.