But this lobo solitario – given his New Mexico home base – wants the disability insurance business to be anything but solitary. He is an outspoken advocate who is serious about getting insurance producers actively involved in selling DI – a product category that could certainly use a boost in awareness and activity from carriers and agents alike.
We know from Disability Insurance Awareness Month (each May) statistics that the vast majority of working Americans – 70% – have no disability insurance coverage at all, and we know 82% of Americans have never even been contacted about DI. We also know that three in 10 Americans will become disabled at some point before they retire. And right around 60% of all personal bankruptcies filed in the U.S. every year are due to an inability to pay for medical expenses that would be covered if the person had DI.
People need disability insurance, but hardly anyone seems willing to sell it to them these days. Years ago, according to W. Harold Petersen of Petersen International Underwriters, there were 545 companies that offered disability insurance. Today Petersen says there are about 30.
Along with the drop in carriers came a drop in agents who actively offer the product to clients and prospects.
This drives DI advocates like Larry Schneider crazy.
“First of all I’ve seen a lot of claims pass through my office and know how important it is [for people] to have a guaranteed income, and so I’ve seen the tears, I’ve seen the ambulance, those kind of pictures, which reinforces my passion for selling DI and having others do it as well,” Schneider says.
Earlier this year, Schneider, an occasional contributing author to Life Insurance Selling and the magazine’s weekly QuickTips e-newsletter, asked Life Insurance Selling if he could write a very direct wake-up call to agents who are not actively promoting disability insurance to their clients and prospects. The following are some excerpts from that column:
“This is a call to action to those that don’t believe that disability income insurance is THE most important insurance your clients should have! Do you not realize that disability is the biggest reason for home foreclosure? Do you want the government to take this product away from your portfolio? Do you want someone else to sell this needed coverage to your client? Do you want to forsake a commission stream that is the most lucrative in the industry? Do you not want to sell the one product which, as financial planners say, is the cornerstone of all financial planning?
“If you have been turned off by having submitted an application in the past and seeing it declined, 10-to-1 it was your fault for not knowing the underwriting rules beforehand… For those who don’t take this challenge, make sure your E/O is current, because it is possible your disabled client can sue you for not advising them that the coverage is both available and a necessity…
“Wake up agents and also those who profess to be financial planners. And while I am at it, also you home office people, who I must say for the most part (and you know who you are) just idly sit by and not provide the necessary tools in order to properly equip your agents to become knowledgeable. Are you not interested in agent retention? Do you want the field force to shrink even further? Do you want the industry to become extinct like the dinosaurs? With a little more effort, disability insurance protection can once again be top gun!
“Here’s the challenge to all of the sheep out there: Stop your moaning and groaning and instead, merely just sell one policy each month for at least the next 10 years and I guarantee that your retirement will be secure. Heck, I used to sell five a week (all issued) and if I could do it, anyone can. Spread the word!”
Think he’s a little bit passionate about the product? Sure, his interest in getting more agents to actively market DI is a bit self-serving, as he would stand to benefit by working with more agents through his company, Disability Insurance Resource Center. But that’s hardly a disqualifier for an advocate. With such an untapped market, it’s hard to argue that disability insurance needs as many people touting its importance as possible to spread the word among agents and consumers alike.
Speaking of Schneider’s business, his home-based operation assists agents and financial planners with their disability insurance challenges, including hard-to-place prospects, and those claimants who need guidance with their disability claim both before and during a denial phase. He is also an expert witness for DI claims which have been inappropriately denied, as well as being a brokerage for standard cases.
In addition to running his company, Schneider works to promote the selling of DI through authoring various articles, speaking at industry events, and he has written a pair of books (The Anatomy of Disability Income Insurance, which aims to make an agent a DI expert, and The Anatomy of Denied Disability Income Insurance Claims, which covers what to expect from the carrier when there is a claim and how to avoid a denial). He has also developed a DI sales and marketing system composed of eight manuals.
DI specialist from the start
This is the type of work one might expect an expert in the field to take on at this advanced stage of his career. But let’s gain some perspective with a look back at how Schneider earned his wings in the industry.
His roots as a DI specialist date back to 1972, “when disability insurance was in its prime,” Schneider says. While working as a management consultant for one of the “Big Eight” accounting firms, an ad in the Washington Post happened to catch his eye and spark his interest.
“It said, ‘Own your own business, no investment needed.’ At that time I wanted to get into sales, even though I had a very lucrative job as a management consultant. And I found out this company sold nothing but disability insurance over a 26-state area with roughly 200 full-time agents,” Schneider says. He gave it a shot.
“It was a good market and our product was exceptional, which made it somewhat easier to sell,” he says. Among his first orders of business was memorizing a half-hour canned presentation word-for-word, which took a couple of weeks. The company – Shook Associates, with a home office in Pittsburgh – trained its agents well. “We knew all the rebuttals to all the objections,” Schneider says.
He remembers making a measly $68 in his first week, but says the tide turned quickly from there. “I sold about five applications a week,” he says, noting that at that time, his company paid by the number of submitted applications. “I became a partner a couple of years later.”
He says those first years with Shook Associates shaped his entire career. And he achieved success while relying on an effective cold-calling selling system. “Our sales philosophy was based on a one-call cold call basis, which the presentation made very professional rather than saying, ‘take it or leave it.'” He admits it may sound kind of cold, but if the prospect didn’t buy that day, the system directed him to say goodbye and move on. “With cold calling, you find out where you stand right away. If someone’s interested they’ll talk to you; if not, cross them off the list.”
Schneider’s cold calls focused on reaching small business owners rather than larger companies. “The reason for small businesses was I was able to get decisions on a more immediate basis rather than with corporations, where it had to go through committees,” Schneider says. Another benefit of dealing with business people was that Schneider eliminated having to work nights, which was the typical sales environment to get the family – the husband and wife – involved.
He personally sold over $500,000 in premium of individual disability insurance between 1972 and 1976, and was the carrier’s national sales leader for 16 consecutive months. As a partner, he was in charge of agency recruiting and field training, but was also required to maintain his production.
The recession of the late 1970s hit the company hard, as claims went up because people who lost their jobs realized they could get paid more by going on disability rather than unemployment. With more claims than income, the company decided to stop selling DI.
After a few years of dabbling in “buy term, invest the difference” life insurance sales, Schneider began to realize he was still getting a fair amount of DI business from other agents without really trying. By the early 1980s, he decided to market his services in that direction, and the early incarnation of Disability Insurance Resource Center was born.
“Once DI gained favor again in the marketplace, I capitalized on my experience whereby other agents came to me for guidance, and as a result I realized I should start a brokerage,” Schneider recalls.
Why DI isn’t sold more
Schneider says he think a primary reason DI isn’t sold more today is due to the breadth of insurance products, both on the life and health and property and casualty markets.
“Typically an agent will go to the path of least resistance,” Schneider says. “Disability insurance can be very profitable for the agent, but it takes a little more study. Basically the industry – and especially the carriers who don’t care what the agent sells – does very little to educate the agent in order to sell disability insurance.”
Schneider says he brought this up while speaking during a “town meeting” at the recent sixth annual International Disability Insurance Society conference in Boston. “This could be overcome to some extent if the first application an agent submits gets a little bit more attention and concession so that the agent doesn’t feel abandoned when the application runs into a problem as a result of not being experienced,” Schneider says.
Another idea Schneider says he would like to see are Web sites that show probable outcomes based on health or other issues that will impact or determine whether or not an application is going to be declined or issued. This would help agents “be smart” about submitting applications.
Identifying DI prospects
Schneider says anybody who needs to protect their income (do you know many people who don’t?) is an excellent candidate for disability insurance. While doctors and dentists are traditionally professions that tend to be strong purchasers of DI, Schneider says going after small business owners and other professionals can be a better road to take for agents looking to break into the DI market. While lots of experienced DI agents are focusing on medical professionals, there is much less competition in going after non-medical professionals and small business owners. “This is especially important for a new agent wanting to break into the field who may not have the experience to compete against some of the more experienced agents out there,” Schneider says.
Group vs. Individual
Schneider sees group insurance as a substitute for individual insurance. Basic group DI coverage is often provided at no cost to employees. “If it wasn’t for that form of coverage, probably the employee would have no coverage. However, if there were a choice between the two, without a doubt and hands down, individual coverage is far more superior in many ways,” Schneider says. “One of which is the definition of total disability and the various guarantees that individual coverage provides along with superior wording in all the definitions, terms and conditions. Not to mention it is easier to be paid when one is under claim.
The future of DI
Schneider, one of the founding members of the International DI Society, says he thinks the outlook for DI is getting brighter as a result of the efforts of the fledgling organization.
“This society only deals with disability insurance, and through panels and breakout sessions the conference trains agents on the subject,” Schneider says. Members of the society are hoping next year’s conference in Chicago will continue to show growth.
When asked for a final thought, Schneider simply says, “Wake up the sleeping tiger and help protect the unprotected!”
Larry Schneider’s 7 reasons why you should sell DI
1. It’s a great door-opener to sell other products as well.
2. It can be a daytime business.
3. There’s very little competition.
4. Commissions (first year) and renewals are outstanding.
5. It yields persistency – once it is on the books, it is very unlikely that somebody will replace it as they can do with life and health insurance.
6. It’s a great prospecting tool – gets the agent in front of more prospects.
7. You will avoid being sued by someone who becomes disabled without coverage who then says, “Why didn’t you sell me this stuff?”
The most common reasons for DI policy declinations:
Health, age, and/or build (height and weight)
Duties of the job (i.e., high-risk or uninsurable occupations)
Self-employed, working out of the home without having to leave to visit clients
Too much existing coverage
Not enough income
Being an alcoholic, or having depression, etc., issues
Answering reader questions
A few months back, Larry Schneider offered to answer reader questions about disability insurance. Here are a couple of the questions along with Larry’s responses:
Charles Dyson: Do you see an increase in individual DI claim rejections in the past couple of years? In group long-term disability claims? In denying already-approved claims after benefits have been paid a few years, even if there is no change in health? Do you see a difference in claims approvals between an insurance company’s individual DI claims departments and their group LTD department?
Larry Schneider: This is a tough one to answer, because the carriers don’t publish this kind of information freely. However, in my opinion, there is an increase in the number of claims being (at the very least) initially rejected, since the economy has created “opportunities to still be paid,” but the ratios between “rejection” and “paid” seem to be about the same.
One of the reasons might be that the carriers are somewhat concerned about “acts of bad faith” because there are many law firms now involved in pursuing denials.
So far as NC (IDI) vs. Group, group will always have more denials, since there are no punitive damages associated with acts of bad faith and these policies have so many more restrictions that the claimant falsely thinks they are covered forever and under all circumstances, e.g., own occupation for the full BP, etc., when in fact, they aren’t!
Michael Gorectke: In your article in the May 2010 issue of LIS, you mentioned employer-paid LTD that provides tax-free benefits. You’ve piqued my curiosity! Please tell me how you do this.
Larry Schneider: Give the employee(s) a bonus to match the premium and therefore the bonus will still be a deductible expense to the employer and then the employee pays the “bonused” premium with after-tax dollars.
If you have a question for Larry, send it via e-mail to firstname.lastname@example.org
Brian Anderson is Editor of Life Insurance Selling.
For more information about the International DI Society, please visit www.internationaldisociety.com. For more information about Schneider’s Disability Insurance Resource Center, visit www.di-resource-center.com.