Changing the IDI Conversation from Price to Value

Understanding your client’s income-protection needs and helping to picture the moment of not being able to work will move the discussion to finding the right solution for his problem.

In my conversations with brokers and advisors about selling individual disability insurance (IDI), I often get the question: “Where does your product hunt?”

What they typically mean is, “Where does your product have the lowest rates?” As an industry, it’s our duty to ensure the products and services we sell are in our clients’ best interests. Now, one could argue that asking where a product falls in regard to price is thinking of our clients’ best interests, but cost is just one factor. When it comes to IDI, I believe we need to recommend the coverage that provides clients with the best value — that is, a policy that best suits their income-protection needs in the long run, as well as their budgets.

Think beyond the initial sale

It’s no surprise that when salespeople go on sales calls, they’re thinking about making a sale! And it’s no surprise that the path of least resistance to a sale is through the lowest-priced product on the spreadsheet. When it comes to selling IDI, however, I want to suggest that advisors can have more success in the long run, and be more helpful to their clients, by focusing the client’s attention on the real value of an IDI contract: what will happen in the event of a claim.

Let’s not be naïve. Cost matters. And let’s acknowledge that an IDI contract doesn’t do a client or the advisor any good if it isn’t purchased. Clearly, an advisor’s goal is to get prospects and clients to make buying decisions, and this takes an intense and skilled sales effort. But, as the advisor, if your focus is on long-term value, your clients are more likely to focus there, too. And that sets you and them up for the best possible outcome: an IDI contract that has the best chance of performing well for them at claim time, and yet, is one they have kept in force because they could afford it.

So what’s the answer? How do we balance the discussion between meeting income-protection needs as well as clients’ budgets and spending tolerance? Here are some suggestions:

Rethink how products hunt. When you ask where a product hunts, have in mind finding out which products are the best fit for each client based first on protection: how well each contract will perform for each type of buyer should a claim happen. Based on a person’s occupation, demographics, financial resources, etc., where is the best possible intersection of protection and affordability? Advisors have an opportunity to match contract provisions to each person’s unique needs, so that should a disabling illness or injury occur, a client will have coverage in place tailored to him or her.

The safest solution for any client is to buy the richest possible contract in terms of broad, inclusive provisions. That would be providing the broadest protection, but it would also be making the contract expensive — and possibly unaffordable in the client’s eyes. Let’s remember that the point of insurance is for people to transfer risk from themselves to the insurance company. The question always is how much risk do we transfer, and how much do we retain?

With auto insurance, people with cash-flow problems usually want low deductibles; in other words, they want to transfer as much risk as possible to the carrier. Others are willing to keep more of the risk through higher deductibles in exchange for lower premiums. That principle applies to any insurance sale, including IDI. But as we know, the variables with IDI are not as simple as deductibles in an auto policy. Your clients need you to help them find that balance between spending more to transfer risk versus spending less to keep more risk, based on their situation.

Match provisions to people. As an advisor, when you ask yourself where different products hunt, if you’re thinking about people as well as price, you’ll think about the specific needs of different kinds of buyers. Let’s look at some examples:

Highly specialized professionals. When working with surgeons, trial attorneys, or other highly compensated professionals with specialized skills, several things tend to be true. One, they tend to buy value over price, once they understand what is at stake. Two, they have invested heavily in education and training to build their careers, which means they will agree that they have a lot to lose should they no longer be able to work. People with the most to protect usually want the most protection available. Three, they can be declared disabled by conditions that might not disable people with less specialized skills.

What happens when a neurosurgeon gets a hand tremor and can no longer perform surgery? Or a litigator loses her voice and can no longer appear in court? If I’m advising this client, I know going into the appointment that the IDI policy needs to be as broad-based as possible, given the earnings potential. I’m going to look for a policy that has fewer limitations rather than more, such as the provision that covers mental disorders. Some policies limit coverage for mental disorders to 24 or 60 months, while others allow payouts for the entire benefit period. And I know that the definition of disability needs to provide Own Occupation protection with specialty language. With Own Occupation, a surgeon who is disabled from performing surgery may well be willing and able to do other meaningful work, but the benefit will not be reduced by earnings from another occupation. Compare a surgeon with a corporate executive with much more generalized skills. A less comprehensive definition of disability may be the most appropriate fit, given the far less specialized duties.

Young professionals just getting started. These clients are likely to have significant career growth and thus, growth in earnings over time. Also, they may be carrying heavy student loan debt. Priorities for them would be making sure the policy allows for future purchases of more coverage with no further medical underwriting, at the most efficient price point available, and seeing to it that their student loan obligations are accounted for.

The sandwich generation. Different carriers have developed hard-to-find or even unique provisions aimed at buyers with very specific needs. For example, The Standard has a provision called the Family Care Benefit. It is useful for all ages, but designed especially for IDI buyers with young families as well as aging parents. People who fall in the sandwich generation often have concerns about one day having to take care of a family member at the cost of missing work. The Family Care Benefit is able to pay a benefit if the insured is away from work and loses income while taking care of a seriously ill family member (parent, spouse, child or domestic partner).

Find the right protection, then the right price

If you start your IDI sales meeting by understanding the client’s particular income-protection needs based on demographics, occupation, family structure, etc., and then help that person picture the traumatic moment of not being able to work, the discussion will move naturally to finding the right solution for the problem. Which contract best suits this individual? How will specific provisions impact the client at claim time? The starting point is not necessarily the richest contract, but instead, the most appropriate contract based on that person’s situation.

If you and your client agree on the contract that is most suitable, but the cost is an insurmountable stumbling block, then you’re in a position to prioritize which provisions should remain as is, which might be modified to a less expensive version, and which pieces of the basic plan design might be altered, such as the waiting period or benefit period, so that the person can go ahead and get this important coverage in place. Once that is accomplished, you will have succeeded in helping your client make an informed decision about getting the best possible intersection of quality and cost in an IDI policy.

Doug Waters, CLU, RHU, REBC, is the second vice president of individual disability income insurance sales at Standard Insurance Company. He leads the IDI sales organization for The Standard and represents the needs of the field to the home office. He can be reached at doug.waters@standard.com.

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Advisors can have more success and be more helpful by focusing the client’s attention on the real value of an IDI contract: what will happen if there is a claim.