In Defense of Disability

Voluntary DI offers income protection for policy and agents

There is a silver lining to our recent economic storm: The shifting economy has created opportunities for agents to offer voluntary insurance policies to companies of all sizes. Businesses are hiring again, but many are still counting every dollar. This means they need to offer the benefits people want without overextending themselves financially.

Many of these prospective employees, still shell-shocked by the economic meltdown, are looking for security. They can’t count on the financial stability they once took for granted — and so they want to prepare for the unexpected.

Disabilities rank alarmingly high on the list of possible setbacks. In a study conducted by the Life and Health Insurance Foundation for Education, more than a quarter of Americans said that if they became disabled, they would immediately have difficulty supporting themselves financially. An additional 49 percent said they would reach that point within a month. In this unstable environment, offering voluntary plans — disability insurance in particular — makes good economic sense for both employers and employees.

Building employee trust

For employers, offering disability insurance positions their company as one that cares about its employees, enhancing their reputation and making it easier to attract and retain top talent.
Right now, reputation is an important issue for human resources departments as they focus on rebuilding staff and goodwill. According to a 2009 Deloitte study, 47 percent of HR executives believe that employee trust has declined due to company decisions in managing recession-influenced cost reductions.

Offering more comprehensive benefits options may be one way to mend a damaged employer-employee relationship. Nearly nine out of 10 employees say they like to be prepared for emergencies and unexpected events, according to the 2011 Aflac WorkForces Report — so it would seem that they would be eager to apply for disability insurance.

But there is still a major disconnect between wanting protection and obtaining protection: Among the 61 percent of companies that offer disability insurance, only 37 percent of workers are enrolled, according to the Aflac study. This gap is one that agents, as trusted financial advisors, are best suited to help bridge.

A large, untapped market

Examining this disconnect offers several takeaways for agents. First and foremost is the knowledge that there is a large, untapped market ready to purchase coverage. In order to take advantage of this, agents should think of themselves as educators first and salespeople second. To start, they must deliver the right information to employers.

Because voluntary disability insurance plans are designed to be user-friendly for human resources departments, this is not as hard as it may sound. Voluntary programs are customizable to meet the employer’s specific needs, and they offer low participation minimums. In fact, many group short-term disability plans can be offered to accounts with just five applications or 15 percent participation, whichever is greater. Some plans also offer a guaranteed-issue feature that allows all active, full-time employees (subject to age and income requirements) to qualify for coverage without having to pass underwriting. All of these advantages add value to a company’s benefits portfolio.

An essential protection

Once agents have sold the idea to employers, they must convince employees that disability insurance is an essential protection. To do this, it is important to stress that DI not only gives direct assistance if a disability occurs; it also provides long-term benefits people may not have considered.

Craig Gussin, president of the International Disability Insurance Society, noted that a key benefit of DI is that it enables people to keep their health insurance. “[The] real reason for most people going bankrupt is because they became disabled and [cannot] afford to keep their health insurance with no income coming in,” he said. “If they had disability insurance … the disability policy would have replaced a portion of their income.”

Alongside the immediate cost impact, becoming disabled without insurance can significantly impact retirement savings, an area where many Americans already fall short. Losses of income, as well as the cost of living with a disability, make it difficult to build retirement savings, and to leave current savings untouched.

The future looks bright

All of this means that agents are in a good position to expand their disability insurance sales. Companies are actively looking for low-cost or no-cost benefit options, people are seeking the financial stability that seems more elusive than ever and the market is still wide open. By becoming educators and advocates, agents can sell disability insurance as necessary protection.   «

Tom Morey, a 16-year insurance industry veteran, is Aflac’s vice president of product development. He oversees designs, pricing and execution to include product development, product positioning and corporate bids.

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