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Group Disability Insurers Beef Up Training

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Group disability insurers and their vendors may be coming back to the idea of offering formal group disability training programs for group disability wholesalers and retail producers.

Major carriers such as UnumProvident Corp., Chattanooga, Tenn., the biggest player in the market, always have offered serious educational programming, even in the lean years when the Disability Insurance Training Council faded into history.

But today UnumProvident executives are talking about beefing up their broker education programs even more as a strategy for coping with new regulatory restrictions on producer compensation arrangements.

Aetna Inc., Hartford, brought in the first class at its new E. E. Cammack Group School in July 2004, and CIGNA Corp., Philadelphia, and other carriers also have been working on new internal training programs.

Independent providers putting more emphasis on group disability training programs include The American College, Bryn Mawr, Pa.; LIMRA International, Windsor, Conn.; the educational services business that BISYS Group Inc., New York, recently sold to Kaplan Professional, Chicago; and JHA, Portland, Maine, a disability insurance, consulting and reinsurance firm that is a unit of General Re Life Corp., Stamford, Conn.

Meanwhile, the disability carriers are organizing a new Council of Disability Insurers, and the retail producers are organizing a new International Society of Disability Income Professionals, says Ron Cohen, a Barker, Texas, disability insurance broker who is helping to set up the SDIP.

Organizers of both groups hope to offer a good selection of forums and seminars, and SDIP organizers want to arrange programs that will give producers varied, candid perspectives on group and individual disability contracts, Cohen says.

The group sales representatives and general agents who act as wholesalers and the retail producers all need more training because “the products have changed so drastically and so quickly,” Cohen says.

Other retail producers agree with Cohen that more effective training programs could make a difference in the market.

Deborah Yelton is one producer who understands why telling small and midsize employers about group disability insurance really matters.

Yelton works for Webb Insurance Inc., Asheville, N.C., an agency that began developing relationships with western North Carolina business owners in 1925, 4 years before Asheville’s best-known son, Thomas Wolfe, published “Look Homeward, Angel,” a novel haunted by cases of disability and death caused by tuberculosis.

For the many blue-collar workers in western North Carolina, group disability “may be the only disability they have,” Yelton says. “What happens if they don’t have it, and they get hurt or sick? They can’t pay the bills.”

Yelton emphasizes that she is happy with the group reps she works with and very pleased with the group reps’ support personnel. But, at many other agencies, “group disability is a very undersold product,” Yelton says.

Many competing brokers “don’t take the time to learn about the contracts,” says George Wladis, president of The Wladis Companies Inc., Syracuse, N.Y., who founded his firm 45 years ago.

Like Yelton, Wladis says he is happy with group reps he works with, but he says improvements in broker training might lead to increased sales of a different, better type of policy.

Even today, U.S. workers over the age of 30 face a 30% chance of becoming disabled for 90 days or more before they reach 65, according to America’s Health Insurance Plans, Washington.

Although workers under age 50 are about 50% to 100% more likely to become disabled than to die, and 62% of full-time U.S. workers have employer-sponsored life insurance, only 38% of full-time U.S. workers have employer-sponsored LTD insurance, according to the federal Bureau of Labor Statistics.

Group disability penetration remains low even though group LTD costs the equivalent of about 1 candy bar per employee per day.

Some group disability insurance executives joke that “LTD stands for ‘last thing discussed,’” says JHA President Drew King.

Right now, because of the typical retail producer’s ignorance about group disability, “disability is commoditized,” says Shannon Eaton of Strategic Directions Consultancy, Boston, a consulting firm that helps insurers develop distribution networks. “There is an auction mentality out there.”

Insurers who focus on winning price-based auctions may end up offering prospects weak, oversimplified policies, and a business that is willing to buy such a policy may be a bad risk, King says.

King has been arguing for years at JHA’s group disability conferences that group disability insurers could increase persistency rates, penetration rates and profitability levels by improving wholesaler and retailer training programs.

“Disability insurance is the type of product where the quality of the distribution throughout the chain can directly impact the profitability of the business,” King says.

Anita Potter, a product research specialist at LIMRA, emphasizes that in the group disability market, details count.

“A lot of people have general knowledge” about group disability, Potter says. “But you have to get beyond that general knowledge.”

For the group disability insurers, one of the obstacles to improving training programs is figuring out which people to train.

Roughly 2,900 group sales reps sell at least some “non-medical group insurance,” and as many as 100,000 agents and brokers may be selling some “group insurance,” LIMRA estimates.

But JHA analysts suggest that there may be no more than a few thousand retail producers who sell much group disability.

Low-volume producers may not want to spend time on group disability training, and insurers may not want to spend money to train them.

Another problem has been some carriers’ frustration about the difficulty of keeping graduates of the group disability training programs they ran years ago.

Back in 1993, “I think the training was excellent,” says Jim Coyle, who is now regional group manager of the Dallas office at American United Life Insurance Company, a unit of OneAmerica Financial Partners, Indianapolis.

The New England carrier Coyle joined put him through a rigorous 6-month training program that explained every aspect of the group disability market and tested the trainees on product knowledge.

But, within 2 years after Coyle completed the program, most of his classmates had left for higher pay at other carriers, Coyle says.

Today, Potter and Eaton see signs that insurers are tiring of hunting for heads in competitors’ tents.

Because compensation levels for good, experienced group reps are so high, “there are a lot of companies looking for new blood,” Potter says.

Eaton is running into more carriers that are hiring recent college graduates and people with more general work experience than group disability experience.

Ultimately, “your training is only as good as who you’ve selected,” Eaton says. “You’re looking for group reps who are socially engaging, well-rounded and analytical. They can’t be one or the other. That doesn’t work.”

Coyle also sees signs of a change at his company.

American United let its training program shut down for a few years, but it started a comprehensive Group University program in 2004 and now requires all incoming reps to go through the program, Coyle says.

For group disability insurers, one of the obstacles to improving training programs is figuring out which people to train