From the June 01, 2006 issue of Agent’s Sales Journal • Subscribe!

New Graduates Good Market for Short-Term Medical Coverage

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June 1, 2006 • Reprints

Each year, high schools and colleges send hundreds of thousands of graduates into the world, each with a unique set of goals and ambitions. As they enter this time of transition, many find themselves with new insurance needs. While some agents focus on auto and renter's insurance, many overlook an additional opportunity that can create an attractive and consistent revenue stream: Short term medical insurance can give recent graduates and their parents valuable peace of mind by protecting them from the devastating financial impact a catastrophic illness or accident can cause.

New beginnings

Amid all the excitement of graduation, parents often learn -- sometimes after the fact -- that their group or individual insurance no longer covers their graduate. As a result, many young adults join the millions of Americans who are uninsured, making recent grads the fastest growing segment of the uninsured population. According to a recent report by Commonwealth Fund, almost 40 percent of college graduates and half of high school graduates who do not enroll in college have no health insurance coverage at some point during their first year after graduation.

Many graduates and their parents choose one of two options that leave agents out of the mix. Some parents take matters into their own hands and pay a premium for government regulated programs such as COBRA, hoping their child will have full-time employment with employer-sponsored insurance in place before the extension ends. At the other end of the spectrum, there are those who decide to forgo insurance and wait for a future employer to foot much of the bill.

Short term medical insurance gives agents a strong opportunity to enter the conversation and offer a valuable and sensible alternative. Often, a simple question about a young adult's post-graduation plans creates the opportunity to discuss the financial implications a catastrophic illness or accident can have.

Targeting new clients

Agents have many opportunities to discuss short term insurance with existing customers. Often, raising the issue helps build trust by educating customers about a new exposure they hadn't considered. According to a 2004 survey by Assurant Health, 40 percent of parents mistakenly believed that their recent graduates were still covered by their insurance plan. Conversations about financial planning and life insurance provide an opening, since these conversations typically touch on risk management.

Agents who have been successful in helping fill this insurance gap have used a variety of other techniques as well. Understanding your current book of business and proactively reaching out to your clients with college-age children is one opportunity to provide value. Many insurance companies provide marketing material for agents to use to increase awareness of short term medical, such as postcards and fliers that can easily be included in other correspondence you have with your clients.

Additionally, trigger messages can help spark the short term medical conversation. Many agents use brochure stands and posters in their offices. A reminder announcement on your voice mail or hold message can also help raise awareness of short term medical solutions.

Short term medical insurance offers an attractive value proposition to graduates and parents. Sales pitches based on protection, flexibility, and simplicity speak to their values while addressing their practical concerns.

David Andrews is vice president, product management for short term medical at Assurant Health. He holds the FLMI designation and is a member of the Society of Insurance Research. Mr. Andrews can be reached at 800-800-1212 or david.andrews@assurant.com.


Closing the deal
Once you have identified the coverage opportunity and the conversation begins, you can stress several points that position short term coverage as a practical and necessary way to manage medical catastrophe risk.
o Cost of catastrophe. Today's health care system still insulates most policyholders from the true costs of medical coverage. As a result, graduates and parents are often startled by the costs of treating recognizable ailments. According to recent claims data, a case of pneumonia cost $75,000, while a climbing accident resulted in $466,000 in medical fees.
While clients and prospects are still digesting this data, it's worth pointing out that these costs would come at a time when graduates can least afford them. Many college graduates are faced with student loan payments, and parents are shifting their focus from saving for college to preparing for retirement. Instead of being burdened with massive debt, one policyholder who paid only $266.40 for a six-month policy received benefits covering a spinal cord injury amounting to more than $623,000.
o Low-cost options. The individual medical market has created innovative policies that deliver practical coverage for a reasonable price. Though short term policies vary according to age, gender, and state, they're typically about one-third the cost of coverage through COBRA. Policyholders can save even more by choosing a high-deductible plan or a 50/50 co-insurance option.
o Flexibility. Many graduates don't know how long their job search will take and are reluctant to purchase coverage they feel they may not need. You can address this obstacle by helping them find a flexible policy that provides coverage for up to six or 12 months, and then allows them to pay for coverage one month at a time. If the client obtains permanent coverage through an employer, they can simply stop paying the month-to-month premium. In addition, graduates can carry these plans with them if they move out of state because there are no network requirements.
o Simplicity. Short term policies are easy to purchase. Applications typically consist of a series of three to five "yes/no" questions. Some companies offer convenient online applications and can make coverage available as early as the next day.

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