Albert Einstein once remarked, "Everything should be made as simple as possible, but no simpler."
As an industry, we've become skilled at creating a variety of titles to describe who we are and what we do. No longer are we "insurance agents," we are "financial advisors." Some of us prefer "broker" to "agent" and others prefer the more expansive "consultant" title. Here is some simplicity to consider: Regardless of how we identify ourselves, at the end of the day, our job is to facilitate the transfer of risk.
Last month, we discussed the necessity of earning trust when selling to Gen Y-ers. Earning trust with all prospects is challenging, but it gets easier when the client is comfortable that you are engaging in a complete analysis of their needs. Savvy professionals have always understood that successfully working with a client is more about process than product. Today's consumers -- regardless of generation -- understand that, too. No one ever wants to buy a product -- they want to solve a problem, and risk is their problem.
To transfer risk, we need to help the client understand and quantify it. We do this best by asking the key question: "What is your greatest asset?" If you aren't asking that question, you should, because most clients will think for a moment before they answer that their greatest asset is their business, their home, or their investment portfolio. Regardless of title, benefits professionals know that this question -- perhaps above all others -- is the key to having a compelling client conversation that engenders trust and leads to a long-term relationship.
Of course, the client's greatest asset is his ability to earn an income and to avoid "economic risk." If you aren't helping a client to understand that his income is the foundation on which all of his hopes and dreams are built, May is a great time to reassess your technique. For the past four years, the non-profit LIFE Foundation has designated May as Disability Insurance Awareness Month (www.lifehappens.org/protectyourpaycheck) and this year's theme is "Protect Your Paycheck" (Einstein would be proud).
"Disability insurance is the most overlooked and misunderstood of the major forms of insurance," said the campaign's industry spokesperson, John F. Nichols, CLU, DIA, president of Disability Resource Group. "That's what makes Disability Insurance Awareness Month such an important annual event. It brings the industry together in support of a simple goal: Getting people to think about their need for disability insurance coverage. And the need is certainly there: 72% of American workers do not have long-term disability insurance coverage, according to the U.S. Bureau of Labor Statistics. That leaves a lot of people vulnerable financially."
In the past hour, while you've been enjoying this issue of Life Insurance Selling, the National Safety Council estimates that nearly 3,000 Americans have become disabled. The average disability lasts 2.5 years, though many are unable to earn a living for the remainder of their lifetimes. According to a 2005 Harvard University study, 62% of all bankruptcies and mortgage foreclosures are due to disability. Accident or illness will force one in five Americans to miss work for a year or more before age 65 (LIFE Foundation). The American Payroll Association reports that 71% of Americans live paycheck-to-paycheck, without enough savings to cushion the blow of even a relatively short disability.
The current economic climate is not likely to improve these statistics anytime soon. Baby boomers with their spend-today lifestyles, children in college or other obligations were right in the middle of their prime earning years when the recession struck. Today, they are deferring their dreams of early retirement, and their ability to earn an income is the key to replacing some of the value they've lost in their homes and investment portfolios.
These individuals are often business owners and/or highly compensated employees (HCEs) who have just had an up close and personal example of how quickly circumstances can change, and how close they are to financial disaster. During periods like this, people tend to be more security conscious.
Some clients believe that Social Security Disability benefits will suffice, but the average claim payout is $1,004 a month and fewer than half of those making a claim are approved. Just 10% of disabling injuries are work-related. The other 90% is not, meaning that these individuals will get no relief from Workers Compensation coverage.
This is not a gender-neutral problem. A 2007 study by the Council for Disability Awareness indicates that while working women are more aware of this risk than their male counterparts, they are less likely to prepare for an income-ending disability. According the study, nearly half of female workers surveyed are concerned about suffering a disability, but only 38% said that they had had a conversation about being able to survive financially.
So, why is this vast amount of risk not being shifted to insurance that can shield consumers from financial disaster? According to Ron Neyer, LIMRA Senior Analyst, the biggest barrier is poor education. "When there's confusion, an employee doesn't want to allocate money toward a benefit that they don't fully understand," he told Employee Benefit Adviser. "If the employer is going to give it to them, great. But if they have to pay for it out of their pocket, they need to understand it a little bit better."
For some of us, the client base is comprised of those boomers and HCEs. For others, it is the 25-year-old junior executive making $50,000 a year who could lose $3.8 million in future earnings. So, why don't more advisors address this need with their prospects and clients? The bad news is that many perceive the contract terminology and features to be complicated and difficult to explain. That widely held perception is erroneous, but that misses the point.
If you are "stuck on product," you are inevitably shortchanging your client when it comes to process, and in this arena, process rules. If you aren't comfortable going it alone, there are a small number of expert firms throughout the country that are waiting to help you. Carriers also can provide information and some training. Anyone can give you product, but the key is finding an experienced partner who can provide both the tools and the training to help you with the process. A physician friend once told me that, "prescription without diagnosis is malpractice." This is especially true when working in the disability income area.
According to LIMRA International, only 18% of Americans say they've been approached about the need for purchasing disability insurance. There is plenty of market for those who want to have that critical conversation about the risk of getting sick or hurt (two more four-letter words) and losing their income. If you don't help your clients with transferring the greatest financial risk they have, your risk is that the client will refer to you by another four-letter word: gone.
David A. Saltzman, RHU, DIA, is national marketing director of Chicago-based Disability Resource Group Inc. The South Carolina resident is a past president of NAHU and has been a health, disability, life and employee benefits broker for more than 25 years. Readers may contact him at dsaltzman@drgdi.com.
