The year 2020 has taught us a lot. What have we learned that we want to take with us, and what did we experience that we’d rather leave behind? Below are four reflections that consider how COVID-19 and the rest of 2020 will affect the future of disability insurance.
HOW WE DO DI: Using psychology still works.
Drop the “salesperson” role and put on your “advisor” hat. A salesperson sells; an advisor advises. Which would you more likely trust? By educating instead of convincing a client, an advisor becomes an impartial authority. One example of this is using transparency to explain the two philosophies of DI: 1) as coverage for base expenses to limit the potentially high-limit exposure of illness/injury, or 2) to truly replace income and maintain a lifestyle.
Clients are not a monolith, so we suggest checking any preconceived recommendations at the door. Taking the time to explore the pros and cons of each line item in a quote and understand the client’s perspective will usually prove to be more valuable than any time you believe you might be saving by not doing so.
THE COVID REVERBERATION: Lower averages could mean reduced payouts (for Group LTD).
The effects of the pandemic are not equal across the board. While the rest of society has tightened its belt, most white-collar professional service employees and medical professionals are not experiencing a significant loss of income—yet. But we’re still in the thick of it, and we won’t understand the full aftershock for a while. What we can surmise is that this overall momentum towards reduced hours and income can eventually affect disability insurance payouts. Group LTD plans, association plans, and even some old disability insurance policies have a clause in the contract that calculates payments based on a two or three-year average.
So, that awesome LTD plan from Employee Benefits Unlimited that touts 60% income replacement could end up being a significantly reduced benefit if your income has been affected. Plus, the benefits are likely taxable. Conversely, the IDI contracts we work with aren’t subjected to that same scrutiny and/or reduction. The Total Disability benefit maximum is the benefit maximum. You get what you pay for, literally.
THE COVID SILVER LINING: Simplified underwriting helps.
One positive outcome of the COVID economy is carriers’ willingness to write Simplified Issue coverage up to $10,000/month in individual DI benefits, $25,000/month for business overhead policies, and $1M for DI buy-sell. It’s never been easier to expedite a case through underwriting. We encourage more people to take advantage of this. BOE and Buy-Sell are especially helpful products for small offices reliant on a rainmaker to feed the staff and their families.
LOOKING FORWARD: Automation is the end-all-be-all.
Ultimately, automation will transform the industry more than anything. We’ve finally made it to the era of e-apps, drop-tickets, accelerated underwriting, and electronic health records (barely—this should be more prevalent). But there’s an even bigger need for automation on the backend that will separate carriers in the future—and that’s on the claim side. The term “Claims Culture” should be eliminated. Yes, a compassionate claims department is wonderful for the claimant—and if it were that way each time we’d opt to keep the culture. However, claims culture can also work against policyholder interests.
Take Diana’s situation for example (our mom). She had a lung transplant in May of 2020 and is on claim with two carriers. You’d think she could be left alone with that kind of diagnosis and procedure, but it’s night and day between the two carriers. Carrier 1 is hands-off with an automated approach to check-ins, something we like to classify as “parametric” (like life insurance: you’re either dead or you’re not). Diana is disabled as verified by her medical procedure codes. Meanwhile, Carrier 2 routinely checks in and asks for bank statements and nonexistent paychecks, as well as denial letters from Social Security, and so on. That second carrier’s “claims culture” is suffocating. Automation gets the job done without wasting anyone’s time.
Education. Transparency. Simplification. Automation. We’ve advocated for these concepts before and we will continue to do so until they are no longer “food for thought,” and instead, how things are.