Low-cost supplemental accident products may not be part of your portfolio now — but now is an appropriate time to consider including them. Not only do clients need supplemental accident coverage more than ever, the sale of these products is a chance to offset recent agent commission losses.

The full impact of health care reform won’t be felt until 2014 — but as many of us know all too well, major carriers have already dropped commissions to counter the increase in minimum loss ratio requirements that took effect for certain products on Jan. 1, 2011.

The good news is that supplemental products are not subject to the minimum loss ratio requirements and therefore, for the most part, commissions for these products haven’t been cut.

Health care costs continue to rise and end-user clients — American families — continue to struggle with how to pay for them. As a result, many clients have turned to policies with higher deductibles to secure reduced monthly premiums. Policies have become stingier, too. In some instances, I’ve noticed that a health care expense or prescription drug that was covered five years ago isn’t always covered under policies today, or covered to the extent it formerly was.

Added protection at affordable prices

Now more than ever, accidents can be a significant financial burden. Supplemental accident products can provide protection and peace of mind at an affordable price point. That’s important to share with clients, because while many consider themselves to be in good health, they worry about the cost of accidents, especially if they have active children. If a kid falls off a bike, it’s easy to incur a pricey emergency room bill.

But medical costs aren’t the only expense associated with accidents. Let me share an anecdote from a friend. He has a 13-year-old son. Like many adolescent boys, this kid doesn’t necessarily listen. Call it a “teenage phase,” raging hormones or whatever — but tell him not to do something and he’s probably going to do it. Recently, he was in a physical education class led by a substitute teacher who instructed the group not to take off their tennis shoes and not to run in the gym. This young man immediately shed his shoes and initiated a foot race across the gym with a classmate — and (going too fast to stop, considering he was in socks, but no shoes), slid right through the wall of the building.

He fractured three bones in his foot and his parents were stuck with nearly $3,000 in expenses given that they had not previously met their health plan deductible.

Coverage that makes $ense

Supplemental accident coverage could have saved the day for my friend, serving as an affordable way to close the gap in protection. So what should savvy agents look for in supplemental accident products?

  • Payment structure. Look for a product that reimburses clients directly for actual expenses incurred, up to the benefit limit, regardless of other coverage held. For example, in the case of the fall off the bike, a direct-pay plan that doesn’t coordinate with other coverage would eliminate any haggle between primary/secondary payers and could help fund repairs to the bike, travel to and from the doctor, etc.
  • Coverage options. Some supplemental products can be selected to protect just one individual, while others are available to an entire family (with the medical expenses of each member contributing to a common deductible).
  • Flexibility. Some products that provide simple reimbursement of covered expenses enable clients to select benefit amounts or medical providers that suit their individual needs.
  • Riders. Some low-cost supplement products offer a critical illness rider that provides a lump sum upon initial diagnosis of a covered condition.
  • Expedited enrollment. Some supplemental products now offer secure, expedited online application processes so you can sign clients up for them at the same time as major medical policies and help reduce the risk of errors.

The bottom line is that while medical costs continue to rise, low-cost supplemental accident products are an attractive companion to clients’ high-deductible health care plans. In this era of health care reform fallout and reduced commissions, they can also serve as a smart supplement to agent income.

Jay Drucker is vice president at American General Life Companies, where he is primarily responsible for accident and health products, including supplemental accident products. He can be reached at jay.drucker@americangeneral.com.

For more exclusive health insurance coverage, visit ASJ’s Health Insurance Resource Center.

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