There has long been a prevailing theory in the disability income (DI) industry that during recessionary economic times, it is easier for consumers to see the real impact of a loss of income. Layoffs, demotions, retirement portfolio reductions, loss of housing equity, and business slowdowns all affect an individual's income. Therefore, conventional wisdom concludes, it should be easy to draw the parallels with a similar loss of income if one is disabled. This, in turn, should lead to more consumers understanding the value of DI coverage.
In a sense, that is true. However, it is equally true that for people going through job turbulence or fearful that negative income issues are just around the corner, a sort of decision paralysis takes over.
Sure, they can more clearly see the protection DI insurance offers, but the coverage costs money — money that people are afraid to spend because more difficult times might lay just ahead. The value of DI coverage gets lost amid the uncertainty and fear generated by a weak economy.
This is the same issue facing many retailers. Even consumers who have disposable income are skittish about spending it, fearful there may be a time in the near future when they will wish they had that money back. Retailers answer this with deep discounts that they hope the average consumer will see as too good to pass up.
That tactic does not always transfer well to the sale of DI insurance. Rates are filed with the state, so the ability to discount is not easy, unless there have been discounts filed that the insurer has not released yet (not likely). Instead, agents often make the mistake of selling whatever DI product is the lowest in price because they do not want to lose a sale to a consumer who now has taken an interest in income protection.
Since you typically get what you pay for in DI insurance, the lowest-priced product is often streamlined with benefits that are difficult to qualify for when needed. Additionally, rates may not be guaranteed, and the insurer may carry less than an A financial rating, meaning that the agent's E&O coverage may exclude that sale — and it is just this type of product that the E&O coverage may be most needed for, should the policyholder have a claim and not easily be able to access benefits.
This economic slowdown is perhaps the worst in decades, and a quick upturn back to the heydays of the 90s and 00s is not realistic. The term "jobless recovery" will likely take its place in the future alongside the great oxymorons of our time. However, there are things agents can do to deliver a quality DI package at an affordable price — a sales practice that will be here for some time to come.
Back to Basics
When coaches are faced with trying to reverse a losing streak, they often preach the same thing: Go back to the fundamentals. In this down economy, the tradition of reviewing with your clients the key household and business expenses that must be paid is the most basic of practices and will more likely lead to a sale.
There are necessary expenses and then there are luxuries. The purpose of a budget exercise with a client is to determine what items need to be paid no matter what — rent or mortgage, food, car payment — to find the minimum of coverage that can help the individual during a time of disability.
Agents have made the mistake over the last couple of years of quoting only the maximum coverage available based on the person's income. That is the best-case scenario plan but few, if any, clients buy that proposal today. You need to present a Plan B and C as well.
Plan B would give a moderate amount of coverage, while Plan C is the minimum coverage to pay for the absolute necessities you and the client have identified.
For example, someone earning $75,000 annually might normally qualify, if buying the coverage with after-tax dollars, for $4,000/month. So Plan A would illustrate that amount for the longest benefit period available. Then, in working with the client, you narrow the key expenses down to $2,500/month. Plan B would illustrate that amount for the longest benefit period available and include some optional riders. Plan C would be for the same amount, but for a base total disability plan only and with shorter benefit period choices.
Today, it is the Plan Cs that are most likely to be bought — still quality coverage, but less of it for now. It is important to add a Future Income Increase optional benefit so that the client can add more coverage later without having to qualify medically, only financially.
Cross-Selling Opportunities
You can also focus the sale more — concentrate on one aspect of a prospect or client's business situation and address that alone. For example, you could ask small business owners if they have personally guaranteed the lease payment on their business premises. The answer is almost always, "Yes." Your follow-up would be, "Would you like a tax-deductible way of protecting your ability to continue to make that payment during a disability?" You are instantly on your way to discussing Business Overhead Expense disability insurance, a product that moves well in a down economy because it is generally a low premium sale and a tax-deductible one for any type of business.
Finally, many add-on sales are made by including a term life quote with a DI proposal. Put in a $250,000 life insurance term quote with your DI recommendations. You will be surprised by the number of people who have lost their group life insurance at work because of benefit cutbacks or have simply started their own businesses after a job layoff and have not yet had the time to address that need. You are giving them an easy way to boost that coverage quickly and inexpensively.
These are simple ideas, but it is amazing how few agents practice them. Since we have no idea when the economy will return to easier times (and the more debt we mount up nationally, the less likely it is to turn around anytime soon), these should become a permanent part of your everyday practice.
While today's economy lets us frame the income protection more easily, unless you adapt to the changing times and see it through the client's eyes, you could be in for a "sales-less recovery," a practice that does no one any good.
Jeff Sadler is part of the Tri-State DI Center – Florida in Riverview. He may be reached at jeff@tristatedi.com.
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