Current economic challenges are forcing many companies to cut costs. Companies are adjusting their budgets to avoid layoffs and some employee benefit plans are being streamlined or completely eliminated. Because of these cuts, employers and individuals may wonder how they can afford disability insurance (DI). But the real question is: How can they afford not to buy DI?
Producers should see these troubled times not as a challenge, but as an opportunity to communicate the need for group disability insurance. While consumers are trying to cover expenses in a difficult economy, they still should be concerned with the expenses they would continue to incur if they are totally disabled and physically unable to work. It's never easy to prepare for a job loss, but economies turn around eventually. How can individuals survive the devastating loss of their ability to earn an income if they are totally disabled and physically unable to do so? By taking the steps to make sure they are covered by group disability insurance, consumers can feel in control when other financial aspects of their lives are volatile.
Stress the need
One of the most compelling ways to market group disability insurance is by educating customers. The value of a group disability insurance policy greatly outweighs its cost more than with any other type of group insurance. An employee's greatest asset is the ability to earn an income, and group disability insurance helps offset the loss of wages incurred when an individual loses that ability. Without an income, individuals may lose the ability to pay for basic expenses including other types of insurance, so it's vital that they have group disability insurance.
Many people believe "it won't happen to me," but that's simply not true. According to the 2004 report by the Actuarial Foundation, "Disability Insurance: A Missing Piece in the Financial Security Puzzle," workers at age 30 face almost a one-in-three chance of suffering a disability lasting three months or more during their working careers. In fact, the risk of disability is greater than the risk of premature death.
Customers without dependents may feel that they don't need coverage, when in reality, they could greatly benefit from having group disability insurance. Without financial support from a spouse, young, single people who become totally disabled may face severe financial struggles. Having group disability insurance can help provide peace of mind with their biggest earning years ahead of them. While disability is often associated with accidents, it's actually more commonly caused by illnesses such as digestive system diseases and musculoskeletal diseases, among others, according to the 2002 JHA Research Center report, "U.S. Group Disability Rate and Risk Management Survey."
Stress the affordability
Disability insurance can be well worth the premium cost for the average employee. Most group voluntary disability insurance is priced on a sliding scale based on income. This scale provides the opportunity for lower-paid employees to have access to affordable coverage that they may not be able to access otherwise. Individual plans can be more expensive and difficult to obtain than group insurance plans because they can involve medical underwriting.
Disability insurance plans may seem costly, but that's because nothing is more valuable than one's ability to earn an income. When insurers determine a person is totally disabled, the benefit period could last for years. Compared to the cost of other insurance and the benefits paid, group disability insurance is one of the least expensive options.
Going without disability insurance can be costly. The JHA Research Center's 2004 study, "Replacing a Disabled Employee," estimates that it costs a company between 75% and 150% of that employee's salary to replace him or her. If multiple employees become disabled, costs can be overwhelming. A 1987 Group Long-Term Disability (GLTD) Basic Table from the Society of Actuaries notes that after 90 days on disability, nearly half of workers are unable to return to work for several years. With the benefits offered under a group disability insurance contract, employees can better afford to maintain an acceptable lifestyle during recovery and return to work as valued, productive employees.
Building the case
As insurance producers, we must have our customers' most vital needs at heart. It's also our obligation to ensure that we communicate the risk of disabling injury or illness and the best way to insure against such risks. Here are just a few ways to build the case for group disability insurance:
Connect the dots. Every business starts with a detailed financial plan for success. Included in that plan should be steps to prepare for the unexpected. A good financial plan starts with offering group disability insurance as part of a comprehensive benefit plan package.
Education is key. Good decisions are made when customers have information. Research the industry, stay on top of trends affecting it, communicate openly about the need for group disability insurance and be prepared to answer the tough questions while also offering viable solutions. When your audience is educated, they're not only more informed, but they also can justify the investment, which helps you grow your sales.
Offer convenience. In today's fast-paced society, people are being tasked with more than ever. This often leaves participants with little time to do everything they wish outside of work. Options such as multiple open enrollment meetings and offering enrollment via phone or online may lead to higher sales and more satisfied employees.
Leave the door open. Effective customer service goes a long way in a downward economy and long after the sale. Empathize with your customers and let them know you are present. Becoming an advocate positions you well to be viewed as a true asset.
Expand your horizons. The brightest and best people never stop learning. Keeping current with the latest professional opportunities offered in the industry can help you be viewed as an extension of an employer's benefits team.
Recent economic news has been dismal and beyond the scope of consumer control, but without offering group disability insurance, employees may face further financial burdens and employers may find themselves in more financially unstable positions long after things get better. As responsible producers, we cannot ignore this.
Tim Staggs is Regional Vice President, Employee Benefits, for American United Life Insurance Company (AUL), a OneAmerica company based in Indianapolis.
