The Westport Group might be relatively young in the benefits business - they've been around in one form or another for less than 20 years - but this upstart firm is making its own brand of history.
And the firm's principals, Gary Terry and Chris Kristian, are making a name for themselves not only in the disability and life insurance markets, but in the rarefied air of executive-level benefits. Why?
"We focus on accessing groups of highly compensated people ... because they all have one thing in common: they can't get easy access to large amounts of life and disability insurance," Terry explains. "Because the traditional group life and disability programs do not provide enough coverage for them and level of compensation they earn."
"Typically what they have is really two problems," Kristian elaborates. "One is in the area of life insurance. The higher up in the food chain you go, the higher up in incomes, and the worse off they are for life insurance. You would think it would be just the opposite. These people have high-quality planners and things like that, but what we found [in one glaring example] is that the top five people in the firm didn't have any of that."
"And they're so busy earning money for the firm that they really don't take care of themselves. They look for the firm or the company to take care of them on their behalf. So we recognized a huge problem as it relates to life insurance and disability insurance and that space," Kristian says. So they designed an affordable product that would include portability and flexibility, and would allow clients to convert the policy. They also wanted it to be a guaranteed issue.
"We're able to go into a firm and provide a very low-cost life insurance alternative that's completely portable. It's a lot less expensive than the group insurance that they may have or some other graded vesting platform," Kristian says.
Benefits Selling: It seems this is a largely untapped market. There should be plenty of demand. It's also interesting that, given the economic climate, you might face some challenges. How has that been for you?
Gary Terry: It may come up more in the disability insurance space. What you find in the economic climate is that companies are trying to figure out ways if we stay with the life insurance before we move over to disability. What they're trying to do is get more with the money they're spending. In the last 18 months, companies didn't want to necessarily spend any more money - they just wanted to get more for what they were spending.
BS: What about the disability component?
GT: What we're finding is when the economy gets bad people actually spend more time thinking about disability insurance. Because, if it's as bad as it is, what happens if they became disabled and they didn't have the right amount of DI? Group long-term disability. Typically those contracts protect 60 percent of base salary, maybe 6 percent of total compensation. Then they're capped out. But, in our world, you've got people who are making far in excess of that. In the bigger law firms, for example, the average partners are making $900,000 to $1 million, with many making upwards of $2 million to $2.5 million.
So we had to find a solution because what they were doing to date was using their group insurance and then they had a supplemental component through the U.S. market. Still they were grossly underinsured. So we were able to go to the London insurance market and negotiate a special program that allows us to provide more protection that sits on top of that group and/or traditional supplemental coverage.
BS: Can you describe that?
GT: That would be issued on a guaranteed basis so no medical underwriting is required. And we can get a specialty own occupation definition included, which is important for most people in those categories.
Chris Kristian: What we try to do is really make it seamless with their existing plan. We try to design something that's going to fit and feel right for the firm and it's not just a one-size-fits-all product. We try to tailor the product to each situation. So there may be very different components, some of which may be voluntary, some of which may be mandatory, but it's an integrated seamless product and it really depends upon each case.
GT: What we've found is this: your highly paid white collar professionals really are operating almost as professional athletes. But they haven't been insured as such. And that's something we've aggressively tried to address by going to the London insurance market. What makes the CEO any different than the pitcher for the Boston Red Sox? I mean these are highly paid, highly skilled professionals who have a lot at stake if they're not protected adequately.
BS: Why can't they get a higher level of coverage from somebody else?
GT: The U.S. marketplace views risk differently. They aggregate what everybody's done and they look at their own issue and participation limits. But the London markets look at things differently. They look at just what their slice is of the aggregate. So they just look at 60 percent of the income and if they happen to protect 15 percent of it and somebody else protects 15 percent it's more of a shared risk over there. So they all get together, hold hands, each take a slice of the risk so they don't feel they're over-insuring somebody if they're only insuring 60 percent.
The U.S. insurance marketplace has basically been frozen in time from what we can see for the last 15 to 20 years. Very little movement has occurred as far as increasing the maximum these insurance companies are willing to write. They've increased it a little, but not a lot. It's almost like the U.S. market wants to write the insurance but they don't want to take risk. The London markets are different. They understand risk. They embrace it. And so they're willing to write the high limits that the U.S. market has no interest in.
BS: So do you see the U.S. market adapting or changing any time soon?
GT: That's a very good question. I would say absolutely not. Their whole mentality is never change. They look at what they are willing to write as a company and they're not interested in participating in conjunction with anyone else to write beyond that.
CK: The U.S. market seems to have an interpretation that people who make a lot of money - if they have a lot of disability insurance - somehow it's going to promote them to go out on disability and stay out on disability. When it's really quite the contrary. These highly paid investment professionals and executives and partners in law firms will come to work very much hurt and sick. Whereas the average person doesn't. They want to play the game. They work too hard to play at that level. And therefore it seems like statistically they're very good risks.
Typically you see the back claims, the neuro-muscular claims in this market space. You see more serious diseases but they stay sick and hurt at their jobs a long time before they go out on disability. Because typically the disabilities are fairly serious and it means in many cases that these people aren't coming back to work at the level they had previously been at.
GT: I think that it's imperative that U.S. insurance brokers think more globally. We're in a global economy now and they need to be thinking about ways to solve their problems globally. Because those few people located outside the United States are going to become more in number and they want to be treated the same way.
BS: So what do you see in the future of this niche, five years from now?
CK: Quite frankly, this is going to be the way that benefits are going be sold in the future. I think a couple of firms are putting it in now and I think there's going be a real demand for this type of service.
It's a perception. In order to be competitive I think these firms are going have to migrate to this type of benefits platform because it's what's going to be attracting and retaining these people at the high levels.
GT: The London insurance markets are accustomed to working internationally. More than half their revenue is generated outside of the United Kingdom and obviously they've been doing this for a long time, and they're used to it. The United States tends to operate in a fish bowl. But things are changing quickly, and I think the markets are expanding very quickly.
