Brokers look to combat PPACA with disability sales

An “amazing” opportunity is open to insurance brokers — at least according to one industry veteran.

Despite widespread industry fears of shrinking revenues, Steve Brady, second vice president of individual disability insurance sales for Portland, Ore.-based Standard Insurance Co., says that with a slight shift in focus, the future can still be bright for brokers. Long-term disability policies can help replace the revenue stream from health sales that could be dammed by the implementation of certain provisions of the Patient Protection and Affordable Care Act, he says.

“With all the turmoil that’s happening in health care right now, brokers are being pushed against the wall,” Brady says. “What are they going to do to create revenue they’re losing with the health care [market]?”

According to Daniel Steenerson, president of Disability Insurance Services, in San Diego, the National Association of Health Underwriters said last month in Atlanta that agents can expect a 25 percent to 30 percent drop in revenue once PPACA is fully implemented. But he sees the real impact being even greater.

“Previously up to health reform, the agent would work with a decision maker, whether the owner of the business, or vice president of human resources, some c-suite individual who would make a decision on actually purchasing health insurance. Well the exchanges are going to mandate now not only is the agent going to have to deal with that gatekeeper, but…that they are going to have to sit down with each and every plan participant. Their income’s dropping by 30 percent and they’re working harder, or longer, or exerting more energy in order to make that 70 percent of what they were making before,” Steenerson says.

But that’s where disability sales can combat those threats, he says.

Despite the importance of DI, many still court disaster by remaining uninsured — which leaves a big market behind.

According to information compiled by the Council for Disability Awareness, about one in four of today’s 20-year-olds will become disabled during their working years. And though claims statistics indicate disability incidences last between two-and-a-half to three years, “65 percent of working Americans say they couldn’t cover normal living expenses even for a year if their employment income was lost, and 38 percent could not pay their bills for more than three months.”

“Medical problems” contribute to nearly two-thirds of personal bankruptcies and half of all home foreclosures, according to CDA’s statistics.

Brady says he’s found workers of all ages are receptive to the need for long-term disability coverage.

“It’s easier with the 50-year-old,” he says. “Most disabilities occur between 50 and 55, so they’re living that, and they probably have some medical history."

But young people are becoming a more prominent market.

“The 28-year-old is actually a more satisfying sale because they usually haven’t thought about disability insurance; they’re sometimes still single, and this income replacement need they have is a selfish purchase," Brady says.

"It’s not like life insurance, where I love somebody else so I’m going to give them some money if I die. Disability is a selfish purchase. So we talk about, what is your standard of living? What are your needs if something were to happen to you? As active as a 28-year-old is, there’s lots of things they can picture that might slow them down, or stop them from being able to work. So you talk about, ‘What are you worth?” Well, if you’re making $50,000 a year now and you’re 28, [during the working years] even without a raise you’re going to make a few million dollars. Have you thought about that before? And if you can’t make that few million dollars because of a disability, we’re here.

“It’s not a difficult sale,” Brady says. “Usually they can picture disability more than they can picture death.”

According to research earlier this year from The Guardian Life Insurance Company of America most adults in their 20s and 30s do not have disability insurance, leaving ample opportunity from brokers and agents.

Steenerson sees similar receptiveness to DI from clients considering health coverage.

“You’ve got a captive audience that’s already thinking about taking care of their health,” he says.

Individual long-term disability policy applications involve a two-month underwriting process, and applicants can be rejected for not meeting medical or financial standards. But Brady is enthusiastic about the advantages of selling group coverage. Employers set up time for all their group members to meet individually with a broker.

Though the offering is on a group chassis with its attendant advantages, each employee receives a proposal for individualized coverage based on their particular financial need. Each individual application does still undergo financial underwriting.

“Group LTD is uniform, everybody gets the same thing [in that] there can’t be any deviation or separation between classes; group underwriting has to accept everybody [medically],” Brady says.

At the same time, “It’s individually sold, it's individually tailored to fit their needs, but because a bunch of them are doing it at once, we’re able to waive that medical underwriting part … , as well as we’re able to give that discount that we’re not able to do with individual [policies], so it’s very attractive.”

Potential buyers also like the reliability and portability of group long-term policies.

“You own the policy, the premiums can never change, and you can take it with you [if you change jobs],” Brady says.

Really, once inside the door, the selling takes on a momentum of its own, Brady says.

“The employer has opened up for everybody to talk to the broker. Their peers at work are having these discussions. ‘Did you meet with them yet? Yeah I met with him or her.’ And all of a sudden the synergy is taking place. They talk to each other and they sell each other on it. It becomes a cascading effect,” he says.

“It’s an amazing marketplace that’s evolved in the last few years as a main source of revenue for disability insurance carriers,” Brady says. “The opportunities because of Obamacare and everything else taking place have really opened up this marketplace. The timing couldn’t be better for a broker or an employer to think about disability insurance.”

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