Disability
Get Employers to Think about Disability Risks
by Making it Personal
by Joe Sevcik

   With the following statistics, why is it so hard to sell disability insurance to an employer?
According to the American Council of Life Insurers, one in three workers between 35 and 65 will suffer a serious disability.
   A Harvard University study reveals that the financial strain associated with a disabling medical condition leads to nearly half of all bankruptcies.
According to the Disability Insurance Marketing Center, disability is 16 times more likely than death to cause a foreclosure.
Employers’ misconceptions are to blame:
   They don’t understand the impact of a disability on a personal level; they don’t think their employees want the disability insurance they could provide and they think that disability insurance is too expensive to incorporate into their employee benefit packages.
   To sell disability insurance coverage, you need to change these perceptions. For starters, asking a few key questions can help an employer realize their own need for disability coverage, such as, “How long could you live on $840 a week before you would have to make some serious financial and lifestyle compromises?” That is the maximum benefit of California’s state-sponsored disability plan. Many people would get a smaller benefit based on their pre-disability income. In addition, the state benefit only lasts 52 weeks.
   Then ask, “How confident are you that you will never experience a chronic, debilitating disease or have an injury that would keep you from returning to your job for more than a year, such as a serious head or spinal injury?” You make that risk far more personal by saying “you” instead of “your employees.”
   Next, industry research can help you demonstrate employees are far more interested in disability insurance than many employers believe. For example, only 52% of employers say disability protection is important compared to 83% of employees who say it is, according to a recent survey of U.S. businesses by the international market research firm GfK NOP. If an employer is hesitant to add disability insurance despite the research findings, offer to survey employees about feelings.
   For employers who think disability insurance is too expensive, you can explain the benefits of offering disability coverage in the workplace on a voluntary basis. The employer’s costs are minimal because the employee pays the entire premium. Yet, employees appreciate the opportunity to purchase benefits in the workplace because they get access to convenient payroll deduction, affordable group rates, and guaranteed issue for timely applicants, and possible tax advantages depending on a variety of factors. Be sure to tell the small business owner that they can benefit from this opportunity. That alone can be a powerful purchasing incentive for a voluntary disability benefit.
   In addition, independent financial advisors strongly recommend disability income protection, which drives demand and is an effective selling tool.

Not All Policies Are Created Equal
   Don’t assume that any disability policy will protect a person with a high-income career that requires specialized knowledge or skills. Some policies pay benefits if claimants are unable to perform their “own occupation” – the one they had when they purchased the policy. Other policies deny benefits if the claimant is able to perform any occupation.
These “any occupation” policies often have lower premiums, but may not provide the coverage your clients and their employees expect. Nothing is worse than selling a disability contract that does not pay a benefit at claim time for something that the employer and the employee thinks should be paid.
   On the other side of the coin, whole classes of employees have been excluded from valuable supplemental disability coverage because the cost is too high or their jobs entail too much risk. Today, products that enhance affordability and access are based on new definitions of disability. They focus on truly serious, life-changing disabling events. An example is a definition that uses impairment ratings based on widely accepted guidelines, such as those published by the American Medical Association. That concept is so innovative it has been granted patent-pending status.
   Another answer is to combine coverages into a single product that requires only one enrollment and payroll deduction. One product is based on a short-term disability platform, which extends to a long-term benefit lasting from a full year up to age 65 if specific conditions are diagnosed. It combines popular elements of short-term and long-term disability and critical illness policies into one product.
   These innovations have been designed to meet the needs of the small business prospect. The percentage of hourly positions is higher in the 500-lives-and-under segment, so rates need to be brought to an entirely different level to put them within reach. At the same time, a lot of these businesses do not employ full-time HR professionals, so they need simplified products with user-friendly support and without time-consuming administrative burdens.
   This is a good time to go back to prospects who have turned down voluntary disability benefits. Employees are more knowledgeable about the risks, which is driving demand. Product innovation has made coverage more affordable and available. Also, carriers are more focused on solutions for small business customers – the segment in which penetration is lowest and opportunity is greatest. You will have good odds of success if you are armed with a few key questions and products that fit your prospects’ needs.
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Joe Sevcik is second vice president for Voluntary Segment Marketing at Assurant Employee Benefits, Kansas City, Mo. He can be reached at joe.sevcik@assurant.com.