Even if they don’t realize it, financial planners provide a ready-made channel to sell individual disability insurance coverage into the growing employer-sponsored multilife market. That was the word from a disability market expert.
Financial planners frequently serve a high-net-worth clientele. And because high-net-worth individuals often own companies or inhabit very senior ranks at a corporation, it’s easy for financial planners to ask for an introduction to corporate benefits managers, said Chuck Lanigan, an expert on disability insurance.
“The key challenge for agents is to get in front of the right person and so agents will join clubs to get in front of people. But a planner already has solved that,” said Lanigan, executive vice president with Ohio National.
The individual disability insurance market's "sweet spot" is selling an individual policy to a doctor. But selling into the employer-sponsored multilife, or ESML market, is a much more efficient avenue for individual disability sales.
Because financial planners generally are highly efficient people, mining the employer-sponsored market represents a much better fit than pivoting to an individual disability policy sale, Lanigan said.
The major “aha moment,” Lanigan said, occurs when financial advisors see themselves as life insurance producers. When advisors sell a disability insurance plan into the ESML market, people within the plan become automatic prospects for a life insurance sale.
An individual disability insurance policy typically replaces at least 60 percent of a wage earner’s income in the event that the employee can’t return to work.
Disability insurance, however,traditionally has been seen as a harder sell than many insurance products as it requires more selling and underwriting expertise.
Multilife Sales Notch Gains in Distribution Share
New individual disability insurance premium last year reached $392.2 million last year. This was a 5.8 percent increase over 2014 and the highest volume of new premium since the 1990s, according to Milliman’s disability market survey.
Not only is much of the new premium growth coming through the ESML market, but many insurers have incurred more favorable claim experience compared with individually sold disability policies. That's according to Milliman consulting actuary Robert W. Beal, author of the report.
At the end of last year, new premium distributed through the ESML market amounted to 41.2 percent of all new disability insurance premium. This was an increase from 38.4 percent in 2010, according to Milliman.
Individual disability insurance sold into the ESML market last year was still less than the 52.9 percent of new premium rung up through individual sales. However, the long-term growth trends show ESML disability sales climbing and individual disability sales falling.
“Demand in the ESML market is increasing slowly,” Beal said.
Between 2012 and 2015, new premium in the ESML market grew by 16.4 percent compared with new premium growth in individual disability insurance sales of only 5.9 percent over the period, Beal’s research also found.
“You have to find brokers who can sell the advantages of selling voluntary products and employer-pay products and promote it,” Beal said. “The market is increasing and it’s not going away.”
And that’s great news for financial planners.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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