Disability Insurance –
A Fix for the Sales Commission Cutback!
The goal of healthcare reform is to improve insurance affordability, insure more people and create better value for individuals and small businesses. Consequently, the new law requires insurers to use at least 80 percent of the premiums to pay for patient medical care rather than administrative costs and profit retention. To meet the requirement, insurers are trimming administrative costs and, as you can imagine, sales commissions are among the first round of expenses on the chopping block.
"As much as we'd like to suggest otherwise, we believe the impact on agents will be negative due to carriers cutting costs and the onset of exchanges," said Richard L. Lungen, president of National Health Options, in Agent's Sales Journal. "Agents must offer a variety of products and services that are creative and can be customized to fit group needs. There will still be a need for consultative services for groups and individuals to understand their benefit options, but margins and opportunities will likely be reduced post-healthcare reform. The agents that survive and thrive will be those that recognize the need for change and provide additional options for their client base."
Carriers are already modifying insurance agent compensation plans. According to the Wall Street Journal, Independence Blue Cross of Philadelphia, Penn., stopped paying a percentage commission on small-group policies effective May 1, changing to a monthly flat fee for each policy sold. Janet Trautwein, CEO of the National Association of Health Underwriters, predicts that "eventually there won't be any more percentage commissions."
As the future of health insurance commissions is uncertain, it's a good idea for brokers to spread out within the marketplace. It's smart to consider ancillary insurance sales to help make up the commission difference. And it just so happens that right now is an opportune time to start selling disability income insurance. It can become a steady and lucrative source of income for the savvy producer. And, DI industry developments are resulting in better support than ever before for earning these sales. Besides low competition and generous commissions, here are three smart reasons to start selling disability insurance.
- Disability is a serious and likely risk.
Here are several hard-hitting statistics that illustrate the incredibly high risk of disability:- In the past hour, almost 3,000 Americans became disabled. That's 49 disabilities every minute. (National Safety Council, "Injury Facts 2008 Ed.")
- More than 51 million Americans - 18 percent of the population - are classified as disabled. (U.S. Census Bureau, Nov 2008)
- Almost one third of Americans entering the workforce today (three in 10) will become disabled before they retire. (Social Security Administration, Fact Sheet, Jan 31, 2007)
Now that you've seen the data, it's easy to see why financial experts believe having adequate disability insurance is even more important than having adequate life insurance.
- When the economy is bad, the market for disability insurance is good.
Many Americans faced a significant reduction in income and/or assets in 2009. And it's no secret, a disability can lead to financial devastation. Sixty-two percent of all personal bankruptcies filed in the U.S. in 2007 were due to the inability to pay for medical expenses. (The American Journal of Medicine, June 4, 2009). As a result, there's been a greater focus on job income as the foundation of financial and emotional security. People are starting to see the importance of building their own safety nets to protect their family's future. And they're no longer able or inclined to self-insure the risk of disability. That is why individual disability insurance is an essential product to offer clients – the cornerstone of sound financial planning.
Critical illness insurance is another important income protection policy. As a result of employers and consumers choosing high deductibles or coinsurance to offset rising health insurance premiums and policies offering limited coverage on traditional treatments, individuals may incur large medical bills not covered by their traditional insurance policy. This medical insurance helps cover medical expenses that are typically not covered by other insurance policies. Paid in lump sums, critical illness insurance gives clients the freedom to use the money where it is needed most - from medical bills to the mortgage. - Relaxed underwriting creates opportunity for income protection.
Securing disability insurance coverage is easier than ever before. In fact, many carriers are writing up to $5,000/month of coverage without medical exams, blood or urine samples, medical records or income documentation!
If you're selling to groups, Guaranteed Standard Issue (GSI) allows you to use a short form application with no health questions. No exams, blood or urine is required. No personal history interview or employee-provided income verification is needed. Carriers literally throw away their underwriting manuals for GSI submissions. Why? Because they feel that with five or more lives, they can spread the risk and avoid adverse selection.
Ready to strike back on the looming commission cutback?
There's no better time to spread your wings and turn disability insurance into your healthcare reform sales commission solution.
