Disability Insurance Forum: Disability Insurance Knowledge = Disability Insurance Sales

By Eugene  Cohen,  Ellen M. Crowe,  Jack B. Schmitz & Michael A. Sileo, Jr.
for the October 2012 Issue of BrokerWorld Magazine

Q: What led you to specialize in the DI market?

Jack Schmitz: Other than being born into the business and wanting to continue by dad’s vision, the focus on helping business owners protect their financial lives seemed like a noble cause. Since then I have seen and heard how disability income insurance payments have saved many lives, hopes and dreams. What a great product to own, make people aware of, and sell. [JBS]

Eugene Cohen: After graduating from Ohio State University with a major in finance and searching for a career, I interviewed with a company that specialized in disability income protection. The appeal to me was that this concept made sense. Everyone who works depends on an income and the need to protect their income was obvious—for most people—because their greatest asset is their future income. This was a concept that I believed in, and I knew that I would be able to relate to potential clients with sincerity and pride. I also knew that I would not be dependent on friends and family for sales. [EC]

Ellen Crowe: I enjoy the challenge of promoting disability income, so more producers will feel comfortable introducing and selling the product to their clients. Early in my career, it became quite clear to me that all financial planning rested on the client’s ability to earn an income. A long term sickness or accident could easily destroy a family’s financial welfare.

Even though statistics show that people in their working years are more likely to become too sick or injured to work than to die, disability income is not an easy sale. Many producers shy away from selling the product because the premiums can be high, clients do not understand the need, and the underwriting is more meticulous than life insurance.

By training, I am a communicator and a teacher. Through phone conferences, continuing education seminars and webinars, I am able to use my communication and teaching skills to help producers understand the product, sell the need for disability income protection to their clients, assist them with sales ideas and help them design disability plans that are the best fit for the client. I receive a lot of satisfaction from seeing brokers grow more comfortable with the product and, as a result, sell more disability income to their clients. [EMC]

Michael Sileo, Jr.: I followed my father Michael Sileo, Sr., into the disability insurance brokerage business. His passionate belief that disability insurance was for all occupations is what our company is built on. He was a champion for the working man and challenged carriers he represented to develop DI products for the blue and gray collar markets. He was a true trailblazer in the disability insurance brokerage industry.

General Agent Center, Inc., has specialized in disability insurance brokerage exclusively since 1996. We are a family-owned and operated business built on the relationships we have with our family of insurance producers and financial advisors, most of whom have known me since I was a teenager because they have been doing business with my company for decades.

I love disability insurance! It is our niche in the insurance marketplace. Most independent insurance producers and financial advisors offer their clients numerous products, but DI can be a difficult sale, especially if a producer/advisor isn’t completely knowledgeable or confident in his ability to present and sell the product. That’s where we come in. Our sales support, industry knowledge, product expertise and the relationships we have built with our carriers help producers/advisors increase their disability insurance sales.

The DI market is constantly evolving, and the products are complex. We are now able to offer DI coverage to almost all occupational classes. There is more competition among the carriers in the blue/gray collar marketplace, and consumers are becoming increasingly aware of the need to protect their paychecks. It’s a great time to be in the disability insurance brokerage business. [MAS]

Q: What are the most challenging issues for disability insurance specialists today?

Cohen: In the past, companies taught disability income protection to their agents. Because there are fewer companies offering disability income insurance today, fewer companies are teaching it, leaving a smaller pool of agents with disability insurance knowledge. The major challenge we have ahead of us is that we have to teach brokers about this vital product. It is not only enough to have brokers aware of the great need that their clients have for disability protection­—they must be able to present that need to their clients.

The problem, I believe, is that many brokers are uncomfortable with disability insurance because of their lack of knowledge. Therefore, our challenge is to make them comfortable with the uncomfortable. The priority must be to educate brokers and encourage them to ask their clients about disability income protection. Just as important, brokers must be educated on how to ask the right questions.

Our firm, the Eugene Cohen Insurance Agency, Inc., is a brokerage agency and our clients are brokers and financial planners. They are independent agents as well as advisors referred by broker/dealers, general agencies and brokerage agencies that do not specialize in disability insurance.

Once a broker/advisor asks us for a proposal, we spend as much time as needed going over the illustration and preparing him for the appointment. We are not satisfied until we have done our job—making the broker comfortable with the previously uncomfortable. [EC]

Crowe: Motivating producers to share a disability income illustration with each client for whom they write a life application is the most challenging issue for this disability income specialist.

Studies show that people are concerned about protecting their incomes but that their financial advisors do not discuss disability income protection with them. In fact, only 18 percent of consumers recall being approached for disability income protection—less than half as many as those being approached for life insurance (Facts from LIMRA, May 2010, Multimedia Fact Sheet). However, 3 out of 10 workers between the ages of 25 and 65 will be too sick or injured to work for 90 days or longer (Social Security Administration, Fact Sheet, 2007).

Financial plans are seriously deficient if they do not include disability income insurance, because everything rests on a client’s ability to earn an income. If producers were in the habit of always presenting life and disability insurance illustrations to their clients, a lot more people would have adequate disability income protection. [EMC]

Sileo: Finding and retaining insurance producers and financial advisors focused on DI is at the top of my list, especially when you take into consideration that the average age of an insurance producer in the United States is 62. The aging producer population also means that the best and most knowledgeable insurance producers and financial advisors are going to be retiring soon, taking with them the expertise they have learned from years of experience. Most of these veterans received extensive training from the insurance carriers.

It’s my job as a disability insurance broker to recruit, educate and build long-lasting relationships with insurance producers and financial advisors interested in becoming DI specialists.

Overcoming the lack of interest or fear that some insurance producers and financial advisors have about selling disability insurance is also a challenge: It’s too difficult to sell. I’ve tried selling disability insurance in the past. Some of my clients were declined. Some clients were offered a modified policy with exclusions. I have my reputation to protect!

Not everyone who applies for disability insurance will medically or financially qualify. You have to disclose all medical issues and medications prescribed on the application. Nondisclosure of medical information on an application will result in a decline. An application that discloses all medical conditions and current medications will be underwritten and any offer of coverage from an insurance carrier will be modified to exclude that condition or medical issue.

Most insurance carriers will review these exclusions or modifications within one to five years of the client being treatment, symptom and medication free. Clients with a medical history of surgeries, broken bones or long term medical issues will be underwritten with offers of coverage with modifications or exclusions that are permanent. Even with exclusions for a known medical condition the value of a disability insurance policy is priceless paycheck protection.

The truth is that disability insurance is an easy sale if you have confidence in your ability to educate your clients about the importance of paycheck protection. Disability insurance sounds like you are trying to sell a policy that can be used if the policyholder is hit by a bus. Instead, disability insurance is a policy that protects paychecks and the ability to earn a living and provide for a family. Disability insurance specialists must show clients the value of their paycheck and the need to protect it! [MAS]

Schmitz: Our biggest challenge today is underwriting. Financial advisors find that it is easier to make money offering securities, with no underwriting, and health insurance agents in California haven’t had to deal with underwriting as much since “guarantee issue for groups of two” was legislated. Verifying incomes and getting brokers to ask all the difficult lifestyle and health history questions completely is a problem. Plus, the average age of a broker is close to 60, and many can’t or don’t want to work as hard anymore. [JBS]

Q: What is the best way to get beyond a client’s “it won’t happen to me” objection?

Crowe: Many clients are not aware of the financial risk of a long term sickness or illness. When producers mention disability, clients see a wheelchair. Producers must educate clients. Preparing a strong disability income PowerPoint presentation or a binder is critical, and it should contain the following information:

• Statistics that illustrate the likelihood of a disability during working years versus dying during working years.

• A chart that illustrates the percentage of claims associated with common causes of disabilities for people in their working years (e.g., musculoskeletal and connective tissue issues, cardiovascular problems and cancer). With a chart such as this, it quickly becomes apparent that the majority of disability claims are not from catastrophic injuries that leave a client wheelchair-bound, but from chronic sickness and muscle and joint issues.

• A chart that shows a client’s potential loss of income based on his current age and salary.

• A list of possible alternatives a client may be considering to supplement his lost income in the event of a long term sickness or illness, along with the inherent pitfalls associated with each alternative. For example, clients might believe they can easily collect Social Security disability benefits or simply make do on the salary of the working spouse, but both have serious shortcomings.

• Disability articles that you can leave with the client that reinforce the need for disability income.

After going through the presentation, if the client still has objections, go back to the place in the presentation that responds to the particular objection. For instance, “it won’t happen to me,” can be approached with reviewing the disability statistics again along with a discussion that might go something like this:

“Insurance protects the insured from a possible risk that may have grave financial penalties. The statistics we just reviewed indicate that becoming too sick or injured to work is at the top of that list. Everything rests on your ability to earn an income. Isn’t that worth protecting?” [EMC]

Sileo: People know and understand that someday they will die; yet few people believe they will ever become disabled. I like to use the Counsel for Disability Awareness for information and tools that I find useful to assist producers and financial advisors in educating their clients about disability insurance and the chances of something happening to them. It’s our responsibility to make sure our clients understand the need for disability insurance.

Here are a few statistics I like to use.

• Just more than one in four of today’s 20-year-olds will become disabled before they retire (Social Security Administration, Fact Sheet, March 18, 2011).

• More than 36 million Americans are classified as disabled—about 12 percent of the total population. More than 50 percent of those disabled Americans are in their working years, from ages 18 to 64 (U.S. Census Bureau).

• More than 5 percent of U.S. workers (8.3 million disabled wage earners) were receiving Social Security Disability Insurance (SSDI) benefits at the conclusion of March 2011 (Social Security Administration, Disabled Worker Beneficiary Statistics, http://www.ssa.gov).

• In December of 2010, there were more than 2.5 million disabled workers in their twenties, thirties and forties receiving SSDI benefits (Social Security Administration, Disabled Worker Beneficiary Statistics, http://www.ssa.gov).

By knowing and sharing such information with your clients, you can help them better understand that it might happen to them. Encourage your clients to check out the Counsel for Disability Awareness’s website at http://www.disabilitycanhappen.org. There you will find a great deal of information you can use to help express the need to protect a paycheck and the chances of a disability happening. There is a DI calculator that your clients can use on the website that will show their personalized chances of becoming disabled during their working lifetime.

It’s your responsibility to help clients understand. You have to show your clients they need disability insurance, you can’t make them buy it. By giving your clients the tools to better understand the purpose of paycheck protection, a seed is planted with your clients. It takes days, weeks and sometimes months for it to grow; sometimes it takes something to happen to a close friend or family member for them to remember the disability insurance seed you planted with them. Other times it’s local or national events that make them want to protect their paychecks.

Don’t give up on disability insurance. It’s a long sales process. Just keep in mind that an informed and properly advised client is a disability insurance buyer. [MAS]

Schmitz: It’s not about them. It’s about the ones they love and the consequences for those loved ones if a disability strikes. For most people, a 3 percent risk of devastating their family’s dreams would be too much. The risk of disability is so much greater, and it doesn’t have to cost more than 1 to 3 percent of income to do something. All a healthy prospect needs is L-O-V-E: Love, Obligation, and Verifiable Earnings! [JBS]

Cohen: The “it won’t happen to me” objection is not a real objection. There are only four basic objections in selling: (1) no need, (2) no hurry, (3) no money, or (4) no confidence. All other objections are not the real reasons why the client is not buying.

The “no need” objection is overcome by asking questions. For example, consider the following conversation:

Broker: What is the longest vacation you have ever taken?

Client: (most will likely answer) Two or three weeks.

Broker: Why only two or three weeks?

Client: I have to work…Who can afford to take a longer vacation?

Broker: If you were to have an accident or illness that disabled you for two or three years, would you have an income problem?

Client: (most will likely answer) Yes.

Now you have established the need for income disability insurance. Asking questions enables the client to see the need. One of my favorite client questions to teach a broker is: If you had a money machine—one that produced X amount of dollars every month—would you insure that machine against a breakdown? Of course you would—you are the money machine!

After the client has been educated on the policy—especially what it can do for him—only then should you address the “no money” objection. Ask the client if the company were to deduct X amount of dollars from his checking account each month for this policy, would that create a financial problem. The answer is either yes or no. If it is no, you are done—you have established that the client has the means for a policy, thereby countering the “no money” objection. If the answer is yes, you still have more work to do.

Over the years, I developed an approach that I found to be successful. When I sold directly to consumers, I would tell my clients that I didn’t come to create a financial problem—I came to solve one. This approach only worked because of its sincerity. I simply put the current proposal aside, rolled up my sleeves and sat down with my client to design a policy which was more affordable.

In regard to the other two objections—“no hurry” and “no confidence”—I have found that these are easily overcome if I have done my job well to educate a client. [EC]

Q: What advice do you have for a producer who is just entering the disability insurance market?

Sileo: Learn all you can about disability insurance. Get a sample disability insurance policy and a product guide from the insurance companies you are going to be representing. Know and understand the definitions of disability and key features for each of the policies.

Build a strong relationship with an established and experienced disability insurance brokerage. One that will support you with marketing and sales materials, product illustrations and advice to help you serve your clients’ disability insurance needs.

Don’t be afraid to ask questions. It’s the only way you’re going to learn. Your disability insurance broker is there to help you become a disability insurance specialist.

The more you know about disability insurance, the more confidence you will have in selling it. You must be enthusiastic! Your clients need to know that you believe in paycheck protection! [MAS]

Schmitz: This is important work. The product offered must be the best for the client. The decision you help them make will be remembered and reviewed for many years. A client will probably keep his policy for his entire working life! Also, work with a disability expert to get it done right. [JBS]

Cohen: The following is my four-point advice to agents starting in the disability income protection business:

 1. Knowledge is power. You should know your product. Read and understand the company’s disability policy and all the accompanying brochures.

 2. Believe in the need for disability income protection. If you qualify for disability income protection, you should own it.

 3. Disability income protection is the best kept secret. You must discuss it with prospects. You will be surprised at the interest your clients will have when they realize that their future income is their greatest asset. Also, disability income protection is a great way to gain new clients.

 4. Understand the real objections. As I mentioned earlier—no need, no hurry, no money and no confidence—are the real reasons people don’t buy disability insurance. [EC]

Crowe: Purchase disability protection for yourself. You cannot sell the need for disability income protection to your clients if you have not purchased it for yourself.

Work with a disability income specialist. It will increase your success ratio and your confidence. A specialist can help you understand the disability income contracts, assist you with case design and answer any questions so you are well-prepared when you meet with the client.

Create a strong disability income PowerPoint presentation or a binder. Go through the presentation every time you meet with a new client. Eventually, you will become at ease with the presentation and responding to clients’ questions and objections.

When you develop a financial plan for a new client, present a disability income quote every time you present a life insurance quote.

Consider specializing in occupations that are good disability income prospects. For example, carriers provide discounts and special monthly benefits to resident physician programs. Working with a professional organization devoted to a specific occupation such as veterinarians or attorneys will open the door to multiple clients. Develop association discounts for these professional groups so the discount is exclusive to you only.

By working with clients in the same occupation, you develop a strong reputation within the profession because you understand and know their compensation packages and can easily fit them with the best disability carriers for their situation. In addition, if you have an exclusive association discount in place, you can provide discounts and benefit amounts other producers cannot match.

Don’t become discouraged. It may take several visits over a period of time. A disability income specialist can coach you on how to approach clients and assist you in answering clients’ objections and questions. [EMC]

Q: What advice would you give to a producer who has been in the disability insurance market for a while?

Schmitz: Take another look at DI products. Be willing to be flexible in product choice in order to persuade a client to buy instead of walking away. Maybe a good residual/partial feature is more important than pure own occ for most occupations. Maybe guaranteed renewable is okay for those who will invest the difference in a LTC insurance policy. Try selling a group plan for lower rates and easier underwriting. Take another look at processes: teleapp, e-delivery, scrip check, fillable apps and guarantee standard issue are here to make it easier for brokers. [JBS]

Cohen: My advice to producers who have been in the business for awhile is to visit your clients on a regular basis. This will enable you to review their coverage with them, be knowledgeable about any life changes which would necessitate any new coverage, and help you to obtain referrals.

But I am also curious about long-time producers who do not offer disability income protection to their clients. I wonder why—are they too busy? Do they lack knowledge? Is it the underwriting? In most cases, I believe, it is the lack of knowledge which makes brokers uncomfortable.

But this doesn’t have to be the case. Opportunities to become educated come from a variety of different sources. The companies that offer disability income protection have created a tremendous amount of material to help brokers understand the concept. I myself hold regular DI training sessions for brokers who are affiliated with our agency. I feel it is our job to help them become more comfortable putting disability income protection into their portfolios. [EC]

Crowe: The best opportunity for producers to grow their disability income business is with their existing disability insurance clients. Introduce business owner clients to disability products that will protect their business operations, such as business overhead expense (BOE), buy/sell, business loan protection and key person disability protection.

There are also retirement protection products that will pay a contribution of up to $4,250 into a trust in the event that a disabling injury or sickness prevents the policyowner from working. Such products can be written in addition to any individual disability income policy the client may own. It insures that your clients will be able to continue to save for their retirement in the event they become too sick or injured to work.

In addition, talk with your employer groups about providing guarantee standard issue individual disability income (GSI) for their key employees to supplement the group long term disability (LTD) plan. Group LTD plans often fall short when it comes to providing disability income benefit to key executives.

Supplementing the group LTD with individual coverage on a guaranteed issue basis (no medical underwriting and limited financial underwriting) is an excellent solution to providing adequate coverage for key executives. Nearly any industry with at least five key employees who are white collar could be a good prospect. [EMC]

Sileo: Share your disability insurance expertise! Teach others the sales techniques and marketing strategies that have made you successful. Help the next generation of insurance producers and financial advisors. Knowledge and experience are your legacy. [MAS]

Q: What disability product innovations should producers know about?

Crowe: One company has a business overhead expense product with an optional business loan protection rider. The rider can be written as a stand-alone policy as well. Many business owners have business loan obligations that they would have to continue to pay even if they became too sick or injured to work. This product will pay up to $10,000 a month for 10 years, with a maximum payout of $1 million.

Guarantee standard issue (GSI) individual disability income is one of the most innovative disability sales opportunities available for producers today. While employer-paid benefits are valuable, the typical group disability benefit is only about 60 percent of regular income. The group LTD usually has a maximum benefit cap, and it is taxable if employer-paid, so it replaces about 42 percent of regular income. Layering GSI on top of group LTD can help cover a greater percentage of key executives’ income.

Key GSI features include no medical underwriting, financial documentation limited to an employee census, unisex rates, premium discounts, portable policies and carve-outs.

GSI plans are available to as few as five key executives, when mandatory, and 15 employees when voluntary. They can be employer-paid or employee-paid. GSI plans will separate you from the crowd and grow your disability business. [EMC]

Sileo: One company is offering a compassionate care benefit as part of an individual disability income policy. This benefit pays if a policyholder works at least 20 percent fewer hours and loses at least 20 percent in income in order to care for a loved one with a serious health condition.

Having a loved one with a serious medical condition is both emotionally and financially stressful. You want to take care of them but you have career commitments as well. I know firsthand how stressful and financially destructive it is to care for someone you love with a terminal illness. The time I spent racing between my job and the hospital caused me to lose a lot of time at work. The loss of income I experienced was significant and took months of working overtime to replace. I can truly appreciate the incredible peace of mind provided by the compassionate care benefit.

Time is priceless! You can’t take it back and it can’t be replaced. The compassionate care benefit gives policyowners the time they need to care for the person they love. [MAS]

Schmitz: The most impactful innovation in DI this century is the introduction of guarantee standard issue individual disability income products. The next most important development would probably be retirement DI plans that make contributions to qualified retirement plans when policyowners are disabled. Other product innovations producers should know about are compassionate care, recovery benefits, extended residual and catastrophic DI riders.

I would like to see more brokers actually know the difference between “own occ,” “modified own occ,” “your occ,” “transitional occ,” and “any occ” and understand residual/partial disability definitions. You would be surprised how many brokers cannot explain the difference between non-cancellable and guaranteed renewable. The broker who knows these basic concepts can move up to being a more effective DI producer, help a lot of clients and earn substantial commissions. [JBS]

Author’s Bio Eugene  Cohen After receiving a BS degree from Ohio State University in 1962, Eugene Cohen began his insurance industry career in Cleveland, OH, with a company that specialized in disability income protection. In 1981, when the company he had represented for nearly 20 years exited the disability market, Cohen founded Eugene Cohen Insurance Agency, Inc., which specializes in disability, life and long term care insurance; fixed annuities; and impaired risk cases.

Ellen M. Crowe joined Source Brokerage as disability income specialist in 2003. In addition to disability income sales and case design, she focuses on marketing efforts through outside sales, continuing education and web seminars. Prior to joining Source Brokerage, Crowe worked in marketing and communications.

Jack B. Schmitz, CLU, ChFC, CASL and his wife, Diana, are the principals of Bay Area Disability Insurance Services, Inc., dba DI & LTC Insurance Services. The business was established in 1978 and Schmitz joined the company in 1981. He handles marketing and finance. In 2002 Schmitz became the Northern California partner of The Plus Group. He is immediate past president of The Plus Group. He is a past president of the North Bay Society of Financial Service Professionals and currently sits on their board. Schmitz currently serves on the Standard Insurance Company’s field advisory board. He is a past president and member of the Marin chapter of the National Association of Insurance and Financial Advisors.

Michael A. Sileo, Jr., DIA, DHP, EHBA, HIA is vice president and chief marketing officer at General Agent Center Inc. The Sileo family is recognized as a leading disability brokerage company in New England with more than 30 years of experience in the insurance industry.

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