CI Insurance Producers On A Mission
“Agents have not been adequately trained to help their clients face up to the financial quagmire that many encounter as a result of critical illness,” contends Robert Littell, principal of Littell Consulting Services and Second Opinion Insurance Services LLP, Atlanta, Ga.
He is referring to the quagmire caused when clients are so deeply in debt that they have no means of paying all the expenses that go with a critical illness.
These are individuals who stand to benefit from owning stand-alone critical illness insurance, says Littell, who is a broker. “They can afford it, and they need it.”
But first, someone needs to bring the product to the customers attention, he says.
Littell and other CI insurance experts believe there are several things agents and insurance companies can do to accomplish that purpose.
The personal debt that some people carry is so high, Littell says, that “many are but one heart attack, stroke, life-threatening cancer, or organ transplant away from bankruptcy.”
Affluent people are particularly at risk, he says.
“They have a mortgage on their home, perhaps a home equity loan, too, or a second mortgage, an auto loan or auto lease obligation, college loans for their children, and thousands of dollars in credit card debt.”
The problem is, people seldom, if ever, take the time to add it all up, Littell contends. “This may be due to fear, denial, or procrastination, but in any case, the problem needs to be confronted.
“This mounting debt is a crisis thats on the doorstep of millions of people, particularly if a critical illness occurs,” he says.
Delivering the message can be the mission of the critical illness insurance producer, says Littell.
“Ask clients about their outstanding debt,” he suggests, “and then consolidate it. Show them how much they owe now, and then ask how they will pay for their expenses if a heart attack or some other serious illness should strike.”
Some people have misconceptions, he says. “They may answer that their life insurance or medical insurance will pay for the medical expenses.
“But the producer can point out the reality–that life, health and disability insurance, if the client has all three, wont pay for everything.”
He is referring to the out-of-pocket costs, the travel expenses to see specialists, the extra charges for using out-of-network specialists, the special equipment or experimental medications, and so on. A lump-sum payment from a CI policy could help the client manage all that and more, he says.
Before agents can reach very many customers effectively, however, they need to get an education, say experts.
For instance, “they need to be educated on the products that are available and how they fit into the financial plan,” says Alphonso Franco. A top CI agent in Canada who has been selling the product since 1996, Franco has authored a CI selling system.
To be successful in this market, Franco maintains, agents have to own the insurance themselves.
“They must be passionate about what they are selling. They have to live it, breathe it and own it. Then, they can go sell it.”
Agents can always start out by offering the product to their existing clients, says Franco, who is president of Trenton Financial, a CI insurance specialty firm in Victoria, British Columbia, Canada. He is also CEO of Critical Illness Insurance Centre, also of Victoria.
Such agents may choose to include the product in the full line of products they offer. They will function as generalists, calling in CI experts as need arises.
But agents can specialize in CI insurance, too, Franco says. To do that, producers will need to study the data on occupational classes and their likelihood of suffering certain kinds of critical illnesses. They will need to understand the treatments of various diseases and the financial consequences of surviving diseases. They should study medical textbooks and take courses.
For instance, pilots, leather tanners, gardeners and hairdressers are all subject to certain types of critical illnesses. The CI specialist would know that and know how to explain the exposure to the client.
“To acquire this knowledge, agents need to be willing to invest in their own education,” Franco maintains. This entails spending the time and money to attend meetings on the subject as well as purchasing literature on critical illnesses.
Agents need to learn about CI insurance and how to sell it from experts, he insists. “Unless we spend money to make money, we wont get anywhere.”
Some companies have decided to stay out of the CI market for now, despite the early CI success in Canada, “because they say there is no demand for the product on the part of producers,” points out Hank George, president of Hank George Inc., a Greendale, Wis., consulting firm.
“But agents are saying they arent selling it because no one (they are licensed with) is selling it.”
George, who has become a CI activist in the U.S. in the past few years, believes both sides need to take some initiative to make the market take off.
Right now, he says, “many people still dont know what CI insurance is or what a critical illness is, and if they do know about it, they think it is some sort of scam on the consumer. This perception needs to change.”
Franco agrees. “People who have no knowledge about the product tend to knock it. That is why is it so important for producers and company executives to become educated about it.”
Insurance companies can help, he says, by offering agents an incentive to get the education. “They could, for example, tell agents that if they sell so many CI policies, the company will pay for the agents education.”
And they need to support CI insurance education on an ongoing basis, not just one time, Franco adds.
The problem in the U.S. CI market, says Littell, the Atlanta broker, is that “not enough people here are selling CI insurance and not enough companies are offering it.” That is why some players are reluctant to give much attention to the education effort, he says.
Littells message is: Go ahead and get the education anyhow. There are enough products already available to sell, and more are on the way. And consumers need it.
Speaking of products, Franco notes Canadian sales have benefited from product designs that consumers like. In particular, he says the large majority of products he sells have a return of premium feature. “This is a huge seller in Canada. People like the fact that, if they never go out on claim after a set number of years, they get their money back.”
The price guarantees are also attractive in Canada, he says. Some guarantees go out 20 or 30 years.
By contrast, in the U.S., the CI price guarantees tend to be much shorter, he says. “The products might be offered as a 10-year plan with the first five years guaranteed to be level, for instance.”
But people like having options, he says. “They want to choose whether to take the return of premium, for instance, and they want a choice in guarantee periods.” These choices function as incentives to buy, he maintains.
U.S. developers can come up with their own incentives, he suggests, so as to make their products more attractive to consumers.
Selling CI insurance “needs to be a coordinated effort, between agents and insurance companies,” he adds. And the companies need to stay flexible in their design. “If one approach does not sell, then change it or drop it.”
George has another design suggestion: “Dont load up the policies with large face amounts.”
That creates too much financial exposure for insurers, should there be a claim, he explains. Instead, focus on selling a large number of small face amount policies, not ones in the seven-figure range.
CI face amounts in the range of $25,000 to $100,000 would be good to focus on, he says. “This will reduce the morbidity foibles the CI products could otherwise produce.”
In assessing the marketplace, George observes that the nations largest insurers are not yet at the CI table.
But this year, George says, CI will be vetted at some key national meetings for the insurance industry, and other CI meetings are being planned for next year. He takes this as a sign the subject is starting to sprout wings.
Thats good, he says. “This is a product you can teach to a broad segment of the industry. It is easy to understand–what it does and does not do is straightforward–and specialists will be able to gather the data they need to work with it at expert levels.”
With payouts from a CI policy, George adds, consumers who survive a critical illness “will be able to move outside the vast managed care networks. If they want to, insureds will be able to afford to travel to the best hospitals and doctors in the country to receive their care. Or, they will be able to pay for items they need that are not already covered by the other insurance they have.”
In the U.S., there is a wide open market for CI insurance, stresses Franco, the Canadian producer. “It is virtually untapped,” so the industry has plenty of room to grow.
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.