Choose the Perfect Disability Insurance Prospect –
How to Spot the Good, the Bad and the Ugly
In response to the lagging economy and lackluster life sales, many producers are renewing their focus on disability insurance as an income-bolstering strategy. It's a good plan. Because now, more than ever before, American workers understand the serious need for income protection. If you haven't dipped your toe in the DI pool, now's the time! If you're unsure how to get started, here's a quick rundown on how to choose the perfect disability insurance prospect.
What are the four best markets? (aka: The GOOD)
There are several good disability insurance markets and they all have one thing in common – they are high-income earners who have a strong need to protect their paychecks. Before you pick a market, ensure that the market is growing rather than shrinking. Also, take a minute to consider the common personality traits of professionals who work in a given market. For example, doctors tend to be emotional decision makers and DI is an emotional sale, so it's a great match. Engineers tend to be more analytical, and likewise, a much tougher sell.
As you consider your options, here are four top niches to consider:
- White-collar professionals – This is the most lucrative disability insurance market, with an average premium of $4,500, double the industry's average premium of $2,200. This group includes doctors, dentists, attorneys, hospitals, medical schools and other professionals.
One way to efficiently tap this audience is through professional and trade associations and hospital endorsements. Your disability insurance distributor can help you obtain the needed carrier endorsement and subsequently offer significant discounts – up to 47 percent for females and 10 percent for males. The medical market is one of the easiest to sell because medical professionals know firsthand that the DI need is real, based on treating patients with disabling injuries every day. When you sell this market, focus on the bells and whistles – particularly the fine points of the disabling definition. Medical professionals want state-of-the-art protection.
- Business owners – Many in this audience earn very high incomes and do not have access to group insurance. Efficiently reach this group through professional associations, alumni associations, community networking and trade journal lists. If you notice that a business is for sale, it's a good idea to call on the surrounding business owners. They are likely to have a heightened awareness of their vulnerability and are wondering what would happen if they were forced to sell.
Business owners are most interested in two things – minimizing taxation and protecting their livelihoods. If you want to get a business owner's attention, talk about business overhead expense policies, tax deductible premiums and tax free benefits.
- Executives – Corporate executives offer an interesting disability insurance sales opportunity. If you can find a way to insure three or more lives (three executives or an executive with two employees), you can offer significant discounts – up to 47 percent for females and 10 percent for males. Agents do best in this market by forming relationships with centers of influence such as accountants, wealth advisors and legal counsel. You can build center of influence relationships by offering "Lunch and Learns" with CE credits made available by your DI distributor. You can also break into this market by cold calling on HR professionals.
- Employees – Another approach is to offer employee-paid, voluntary DI benefits as a supplement to employer-paid group benefits. Approach employers directly, asking to participate in the benefit enrollment process or create an alliance with an employee benefits producer. Even if the employer offers group long-term disability, the benefits are taxable and can leave employees with significant income loss during periods of disability. Voluntary plans fill the gap, plus they're portable and can be purchased at more affordable group rates in the employment setting.
If you choose to focus on this niche, make sure to explore Multi-Life Voluntary Guaranteed Simplified Issue (GSI) plans. With three or more lives, you can offer significant discounts and with five or more lives you can offer guaranteed simplified issue underwriting so no one is declined.
What are the four worst markets? (aka: The BAD)
When you venture into the disability insurance arena, there are several groups you want to avoid at all costs:
- Low income earners (they can't afford it).
- People over age 60 (it usually doesn't make sense).
- Those who are independently wealthy (they can self-insure the risk).
- Those with a high level of unearned income (no need).
High income is a DI prospect prerequisite, but high net worth is not. In fact, those with a net worth in excess of $6 million usually have the means to pay for their expenses outright if they become disabled. Why would they waste their money purchasing a disability insurance policy? They won't. There is NO NEED. Furthermore, many insurance carriers won't even underwrite this type of prospect.
Also, watch for those with a high level of unearned income – e.g., income earned from rental properties or other investments. If unearned income is greater than earned income, the NEED for DI is minimal. Unlike earned income that stops with disability, unearned income continues regardless of the person's physical ability. Carefully assess this prospect's needs before recommending a policy. In many cases, these prospects are better suited for a critical illness or long-term care product.
What are the most misunderstood markets? (aka: The UGLY)
The two markets that many producers steer clear of when they shouldn't are medically impaired and high-risk occupations. In the past, medically impaired and high-risk classes were difficult to underwrite, but today there are many new products available including guaranteed issue plans and critical illness policies. If you're interesting in targeting these markets, your disability insurance distributor has the tools to help you succeed. The best part about the "ugly" markets is that competition is scarce.
One last follow-up note:
The National Sales Executive Association conducted a survey on how many sales you can get depending on how many times you contact your prospects. Here's what they found:
- 2 percent of sales are made on the first contact.
- 3 percent of sales are made on the second contact.
- 5 percent of sales are made on the third contact.
- 10 percent of sales are made on the fourth contact.
- 80 percent of sales are made on the fifth to 12th contact.
When selling disability insurance, sales persistence makes a huge difference. If you want to be successful, you have to pick a good niche, but you also have to be prepared to follow up – maybe even 12 times! When you master this skill, you'll position yourself for disability insurance sales success today and for many years to come.
The original version of this article was published in the May 2010 issue of Life Insurance Selling.