Expand Your Practice With Group Disability Insurance
While most financial professionals understand the role of disability insurance in helping protect their clients financial security, many still believe life insurance is more important than disability insurance. The fact is, during the average workers career, he or she is much more likely to be injured and need disability insurance than to die and need life insurance.
Why is this? Disabilities can strike at any time, at any age and can last for years. In fact, recent statistics by the Health Insurance Association of America reveal that about a third of working Americans will become disabled for 90 days or more before reaching age 65, and approximately 1 in 7 can expect to become disabled for 5 years or more.
The need for disability insurance is clear. Sales professionals can reap big rewards in the group disability market, but they need to understand who buys, why they buy and what they buy. Here are some key points to consider:
Its an underserved market. For too long, many sales professionals have operated under the assumption that disability coverage is too expensive and less important than life insurance. Others believe Social Security disability benefits and workers compensation make disability insurance unnecessary. The truth is that state programs often dont provide enough income replacement, and Social Security disability benefits are often difficult to obtain.
This emphasis on life insurance over disability insurance may have contributed to lower overall sales of group disability products. Employers of all sizes are significantly more likely to offer group life insurance to their employees than disability insurance. However, ironically, when asked which products they are most likely to add or augment, group disability insurance came out ahead of life insurance.
Sales professionals can take advantage of their existing clients interest in group disability insurance by suggesting add-ons at renewal. Voluntary coverage, which can be partially or wholly employee-paid, allows employers to offer disability insurance at little or no cost to them. You also can review current disability plans with clients to determine if any enhancements, such as adding or removing new provisions, are necessary.
Why they buy. Studies have shown that employers who offer group disability plans do so to keep pace with the competition in attracting and retaining employees. Larger clients (with more than 1,000 employees) also cite managing the cost of absences as a motivating factor. With the surge in health care expenses and rising claim incidence as our population ages, employers increasingly are looking for ways to save money and increase efficiency.
Sales professionals can make group disability coverage more attractive by positioning it as a product that provides benefits to both clients and their employees. For employers, a proactively managed disability plan can do more than provide disabled employees with benefits. It can be a source of valuable disability and absence management information, which clients can use to control the overall cost of lost time and productivity.
With tools like custom reporting, clients can get exactly the plan data they need to understand and respond to their companys unique disability patterns. By acting on these trends, clients can better manage the ups and downs in their workforce. The result is often higher productivity and reduced expenses.
In recent years, larger employers have shown increased interest in integrated plans, which combine short- and long-term disability insurance, workers compensation administration, Family and Medical Leave Act (FMLA) administration, and other absence management solutions. These plans emphasize unified intake processes and reporting capabilities, managed return-to-work programs, worksite modification, and clinically centered claim processes.
Who buysand what they buy. Access to group disability insurance varies by industry and coverage type. A majority of employers of all sizes tend to offer both short-term disability (STD) and long-term disability (LTD) coverage. In the larger employer market, more than 75% of employers offer disability benefit plans, with slightly more of them offering STD than LTD.
Most employers in the manufacturing, wholesale/retail and financial services industries offer some type of STD coverage. Government organizations and employers in the health care industry are less likely to offer STD coverage. However, employers who dont have STD may offer an alternative arrangement, such as extended illness banks, which allow employees to accrue days for disabilities that extend beyond a certain period.
For sales professionals, opportunities exist in converting self-insured plans to fully insured and administered plans, especially among employers with more than 5,000 lives. Smaller employers and employers in the service, wholesale/retail, health care and financial services industries are most likely to buy fully insured plans. Large employers, those in government and the manufacturing, transportation, communications and utility industries are most likely to self-insure their STD plans and either self-administer or use a third-party administrator. Some employers in the 5,000 lives and more segment still self-insure their LTD benefits, though trends in recent years have shown a movement toward more insured LTD plans in this group.
Service counts. Selling a group disability plan is one thingkeeping clients satisfied is another. Its important to choose a carrier who understands the value of high quality customer service. Carrier personnel responsible for claim and call center service are a critical part of the customer experience. Responsive, knowledgeable staffers can have a positive impact on the lives of disability claimants who are going through a stressful period.
A wide range of technology-based tools, including online and phone-based services, also can help clients work smarter and faster.
Service guarantees and metrics can be used to set client expectations. For example, some carriers have committed to making claim decisions within a certain number of days. Others may provide monthly reports to clients showing which service metrics were met or exceeded. These are critical measures of a carriers ability to service your clients.
Adding a full range of disability and absence management products and services to your portfolio makes good short- and long-term sense. As employers continue to look for ways to cut costs, such programs become more attractive as a way to retain and attract talented employees. Plus, with voluntary products, the cost to employers becomes almost negligible.
is vice president of disability management services, Prudential Insurance Company of America, Newark, N.J. His e-mail is [email protected].
Reproduced from National Underwriter Life & Health/Financial Services Edition, January 2, 2004. Copyright 2004 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.