DI: Harnessing the middle market

Solving the product design and pricing issues may be the easy part of capturing the middle income market opportunity for IDI carriers. A bigger challenge may be to simply reach those consumers. Even if it was practical to offer identical products in either the top tier or the middle markets, it is unlikely that the most current IDI producers would pursue business across such market boundaries. Producers tend to focus on specific market segments for many reasons, including market familiarity, financial compensation, personal preferences and even social status. Face-to-face selling remains the predominant means of interaction with potential buyers for the majority of IDI producers. 

There are some IDI carriers that have traditionally been considered to have a middle-market focus. Overall, the sales of these carriers have lagged far behind those of the top-ranked IDI carriers. Known for their willingness to take blue and gray collar business, they capture a small fraction of what may be a big market. Far more robust is the sales activity of carriers focused on worksite products. 

Worksite carriers offer voluntary products to occupation classes and income categories far below that for which IDI carriers may have interest. The typical worksite disability products are hollowed out versions of most IDI offerings and often distinguish between on-the-job or off-the-job disabilities. These policy forms are usually guaranteed or conditionally renewable, which lack the premium guarantees of top tier IDI products. Benefits periods are generally short term and may be offset for benefits payable by government programs such as workers compensation and Social Security. The conditions of renewability may include continuous employment with a sponsoring employer. 

Existing middle market research has demonstrated that many consumers look to employers for access to financial products, including disability coverage. To this point, a number of top tier IDI carriers offer products that target their traditional markets through special employer-sponsored “multilife” programs. Designed to supplement group Long Term Disability (LTD) coverage and targeted at incomes in excess of $75,000, these programs often include guaranteed issue underwriting. It can be argued that these programs may already capture a portion of the upper middle-income consumers. Expanding multilife programs to include somewhat lower-income segments may be one conduit to increased middle-market sales for some IDI carriers.

New era of digital dollars

Given the many changes that are occurring in the insurance marketplace, especially the manner in which consumers interact with carriers, there may be other distribution opportunities for IDI carriers to consider. The creation of state and federal exchanges for the purchase of health insurance has inspired the creation of employer-sponsored “private exchanges,” from which employees can select a range of benefits – including disability insurance.  

While life insurance has had an Internet presence for many years, automobile and health insurers are leading the way to online sales and service. The rapid transition from desktop and laptop computers to mobile devices as another means of engaging with customers will also be transformative. Regardless of the means of engagement, consumer education about the need for IDI coverage will be key to the industry’s success in the middle-income market segment. Top tier IDI marketing and sales narratives tend to be product centric. In the medical and dental markets for instance, buyers tend to be well versed in the purpose and value of the most highly touted product features. This knowledge is acquired through exposure to targeted media such as medical/dental practice journals, professional association publications, as well as the frequent solicitations of IDI producers who work these markets. A product laden market approach may work in the professional markets, but it may not be appropriate for the middle-income market.

In contrast, it is unlikely that the typical middle-market consumer would not be exposed to disability products in any detail, if at all. Very few are solicited for coverage and many who have coverage through an employer may not understand what they have or how it works. Marketing to this segment needs to target different sensibilities and very basic financial priorities, such as covering the expenses of daily living or maintaining home ownership in the event of disability. The focus should be on the benefits of having coverage rather than the nature of the product features. In a phrase: Keep it simple.