Choosing A Disability Carrier? Consider These Pointers
By Douglas T. Maines
Insurance is a product that is only as good as the promise behind it. At its core, group disability insurance is a promise to pay benefits when an employers disabled employees need financial support because they are unable to work.
Recently, the disability insurance industry has come under scrutiny for some carriers financial strength and reported claims practices. And employers may be questioning whether disability insurers have the ability and intent to keep their promises over the long term.
Thankfully, stable carriers that are dedicated to the group disability market do exist. The challenge for the broker and the employer is finding them and recognizing the characteristics to use in evaluating them. Following are some suggestions.
It is a given that employers must always evaluate price. But its not just price that matters in selecting a group disability carrier. There are many other factors to consider.
Remember, disability insurance is a specialty product, not a commodity. The advisors role, then, is to help the employer make an informed selection based on all the factors that define an effective disability offering.
Producers can build lasting relationships with their clients by recommending carriers that can be trusted to pay claims many years from now and that wont give their clients headaches and surprises.
When requesting proposals for clients, producers should research carriers and look for the characteristics that can be signs of strength and stability. Here are some characteristics to consider:
Substantial investment in claims management. Dedicated carriers have a commitment to evaluating and paying claims quickly.
They should have skilled resources, such as nurse case managers or vocational case managers that focus on helping employees return to work. They can assist employers in developing practices that encourage and support an early return to work, and reducing expenses and lost productivity.
Often, these experts early intervention services can help employees avoid a claim altogether by enabling them to stay at work. These services help clients save money and keep their valued and experienced employees in the workplace.
Underwriting expertise and disciplined pricing. A carriers underwriters should design a plan that meets the employers specific needs and is based on sound actuarial assumptions.
Poor underwriting leads to rate volatility and unwelcome surprises at renewal. By contrast, expert underwriting enables employers to budget insurance expenses more accurately and helps producers avoid shopping their clients insurance on a regular basis. Staying with a carrier also benefits employers since they avoid the costs and disruption associated with moving coverage.
A low price with a multi-year guarantee from a carrier may initially seem attractive, but consider what could happen at renewal. If a policy is underpriced, rates are likely to jump dramatically after the rate guarantee expires. A plan that is sensibly priced at the outset is more likely to provide rate stability.
Responsible reserving. An experienced disability carrier should build claims reserves based on realistic expectations and not on what will generate favorable short-term financial results.
By contrast, emergency reserve strengthening adversely affects a carriers financial health and stability. As a result, financial strength ratings–often important factors when employers evaluate insurers–may suffer.
The above are just a few areas producers can evaluate when helping clients choose a disability carrier.
Carriers sales representatives are a good starting point for getting specific information, but producers can also find valuable information in a companys annual and quarterly financial reports, as well as from rating agencies. Often, these reports are readily available on carriers Web sites.
Of course, there are primary considerations such as the level of personalized service offered, a companys long-term commitment to the disability market, and a carriers integrity and dedication to doing what is right for employers and their employees. Each of these is critical to ensuring that clients will be serviced well by the carrier a producer recommends.
The key to a producers success is developing and maintaining good relationships with clients. Dependability, honesty and knowledgeable service all help strengthen those relationships. Carriers that share these ideals and that are committed to long-term associations with their customers can help producers build upon the trust they have with their clients.
Douglas T. Maines, LLIF, is president of the Employee Benefits Division at Standard Insurance Company, Portland, Ore.
Reproduced from National Underwriter Edition, June 16, 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.