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Retire? At 65? Disability insurers get the joke

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Northwestern Mutual is known for taking the kind of comprehensive approach to planning that starts somewhere in the womb and extends several incarnations into the future.

Steve Sperka, a vice president at the company, is looking at ways to protect clients’ ability to earn an income during this incarnation. The actuary directed the company’s disability benefits division for several years, then ran the company’s long-term care department, and now has come back into the disability unit.

He’s one of the executives who’s been out promoting the Disability Insurance Awareness Month (DIAM) consumer outreach campaign that’s now under way.

See also: Plan designer: Mind the productivity gaps

Sperka said his main priority is bridging the age-old gap between the kind of protection workers should have and what they actually have.

“Penetration still remains pretty low,” Sperka said.

But Sperka has also given some thought to how the market for income protection products is changing, and the factors driving that change. For a look at some of what Sperka said about the market, read on.

Skeptical Goth woman

1. Today’s workers are different.

Northwestern Mutual planners would like to help clients get ready to retire when they want to retire, but, in the real world, even for the planners’ clients, life happens. Clients get started planning late, lose jobs, run into unexpected expenses, and, these days, face low yields on the kinds of investment and savings products that appeal to people with a low tolerance for risk.

“For many people,” Sperka said, “their answer is working longer.”

Northwestern Mutual has found that about three-quarters of younger workers hope to work past age 65. Many of the company’s standard disability products can protect the ability to earn an income up to age 70.

Is Northwestern Mutual thinking about products that can protect workers ages 75 to 80? “Yes,” Sperka said. “Definitely.”

Northwestern Mutual is still studying the risk profile of older workers, but the general feeling is that today’s 65-year-olds are different from the 65-year-olds of 1995, Sperka said.

“Medical technology is helping them work longer,” Sperka said.

Older workers are having children later, buying homes later, and taking on payment obligations later. Seeing why workers have a need to generate income can help underwriters see why insuring those workers’ ability to earn income may make business sense, Sperka said. 

See also: Retire? Older Americans plan to work until they drop

Workers at the starting blocks at a race track.

2. Learning to sell disability insurance seems to be good for new agents.

Getting started in selling life and health products is notoriously hard. New agents fill the Web with complaints that insurers seem more interested in mining their friend lists than in preparing them to advise clients.

Northwestern Mutual has found that retention rates are about five times higher for agents who learn how to sell disability insurance early in their careers, Sperka said.

“It’s not a transactional sale,” Sperka said. “There’re deeper relationships being formed.”

See also: As the need for retirement-minded advisors grows, differentiation is critical

Blurry supermarket shelves

3. Insurers are ready to roll.

Sperka came to the disability market from a market that’s going through a capacity-reducing shakeout.

The individual disability market went through its shakeout in the 1980s and 1990s and now has about eight strong surviving carriers, Sperka said.

“I think the same will happen in long-term care,” Sperka said.

Today, Sperka said, capacity in the individual disability market is strong. Sales have been flat, but profitability has been solid, Sperka said.

In part because of the solid profitability of the individual disability products already sold, “it’s getting more interesting,” Sperka said. He sees insurers designing new types of products, such as products aimed at workers who expect to go through career changes, who may want to be able to pay more for higher levels of benefits when they are working full-time, and less for lower levels of benefits when they are working part-time.

See also: Aging America: Seeking softer retirement landing