Producers Need To Retool To Sell In The New DI Market
Disability income coverage–the Montreal Expos of the insurance industry, long ago slated for contraction–has risen from the ashes of controversy, burgeoning loss ratios and a sales slump.
Now, DI is poised to ride a strong resurgence and return to profitability.
Of course, the market (and the need) never really went away. In the 1990s, it was the disappearing acts of agents and insurers that took this product line out of the positive limelight. Then came reduced benefit levels, questionable claims practices, higher rates, tighter underwriting, and ultimately working consumers vulnerable to a loss of earning power.
Before, in the “Greed is Good” decade, it was cool to sell DI. There were plenty of high indemnity, benefit-rich policies. And it seemed one “own-occupation” claim could pay out more than the total assets of the national treasury of Argentina.
More accurately, it was good to sell DI until policyholders started filing claims in significant numbers. The resulting meltdown touched off a flurry of industry exits, drastic policy changes and finally a run-in with CBS “60 Minutes.”
Ironically, leading the way in the DI market today are several carriers who chose not to follow Alice down the rabbit hole in the previous game of competitive product enhancement. They chose not to create too-good-to-be-true policies.
Mocked at the time, even by their own field forces, these insurers chose to stay a practical course. They maintained their DI portfolios throughout the lean years of 1986 to 2000, when the individual non-cancelable industry lost money year after year. They kept benefit amounts at reasonable–and thus insurable–levels. They relied on disability definitions that were fair and underwrote the risk properly, enabling the companies to grow even through the market downturn.
Finally, these companies explored new ways to write business, including providing coverage for the new at-home worker.
Now, suddenly, these companies are no longer a few. More players are in the DI market and more products are available for sale than at any time in the past decade.
One carrier has even re-introduced a pure “own-occupation” policy for physicians. This companys argument is that todays physicians are different than doctors a decade ago. They are more managed-care oriented. Further, the monthly benefits offered to them are far lower than at any time during the 1980s and early 1990s, thus further reducing potential risk.
Despite this comeback, many of todays workers in their 20s, 30s and 40s have likely not heard about DI insurance. This is the industrys new opportunity.
After all, the 20s-to-40s age group definitely understands vulnerability. Most of its members have absorbed change after change in their own lives, to the extent that they understand nothing stays the same. They are not yet interested in long term care, but would likely look favorably at the opportunity to protect their income, if this opportunity were offered to them.
Therein lies the real challenge for the next few years. When the DI market hit its slump in the 1990s, a number of DI agents moved over to selling LTC insurance. That meant fewer producers were out there sending the DI message–and DI sales plummeted. This needs to change.
Right now, there are signs indicating such change is under way. For one thing, the LTC industry is doing its own strutting and fretting on the claims stage. This, plus the agents need for financial survival and the rising curiosity about the “New DI” market, is bringing the former-DI-now-LTC agents back into selling DI insurance.
Newer agents, unaware of DIs previous history, are also interested. They are looking for education and training so they can sell this coverage to their clients, perhaps for the first time ever.
Some agents are even hosting seminars for business clients that cover not only LTC insurance but also DI.
All this spells good news for the insurers that stayed front and center with DI through the tough times. Its even better news for consumers whose incomes have gone unprotected from the threat of injury or illness.
Working families today are living close to the edge, and college education expenses for the kids loom in front of them like white water on a canoe trip. They deserve to hear the DI story and, with more producers telling it, they might have the opportunity to add this important protection to their financial portfolios.
That doesnt mean this New DI environment is a free ride for agents. Producers still need to do the homework on product features and insurers. They still need to be prepared to explain benefits like residual disability–not just the present language but also the type of accounting the insurer will do at claim time to verify income loss. They still need to address the clients need.
Still, the DI opportunity is here. Those quick to realize it will have the greatest potential to capitalize on it.
is a professional trainer in disability income and long term care insurance sales. He is also author of Disability Income: The Sale, The Product, The Market published by The National Underwriter Company, Cincinnati, Ohio. His e-mail address is email@example.com.
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.