Speaker 1: 0:00

Is disability insurance the forgotten but essential piece of your client's health insurance strategy? We'll find out on this episode of Shift Shapers.

Speaker 2: 0:11

Change either energizes or paralyzes. The choice is yours. This is the Shift Shapers podcast, bringing the employee benefits industry interviews with individuals and companies who are shaping the industry's shifts. And now here's your host, david Saltzman.

Speaker 1: 0:32

And to help us answer that question, we've invited my old friend Don Chimay, who is Regional Director of Executive Benefits at the Principal. So now that we've talked a little bit about some of the fundamental aspects of disability, income group and individual, et cetera, and where the market stands, let's talk a little bit about you know what three areas. Where's the need? And I think you and I talked off air. There are three different areas that I'd like to explore. The first is young professionals, and then we can talk about business solutions and then executive benefit solutions. So let's talk a little bit about young professionals. What's that need look like?

Speaker 3: 1:08

Right. So we do a lot of work in the individual side for what we describe as young professionals. These are folks that are either in their medical residency, their dental residency, their veterinary medicine residency, their dental residency, their veterinary medicine residency, folks that are doing some of the you know support around that, like the CRNAs, the you know. Those are folks that frankly don't get a lot of group disability insurance from their perspective, maybe hospital or medical practice or dental practice, a lot of dental practices don't give any group disability insurance. I always think it's weird because it's available and it's really not that expensive, but they really just don't offer a lot to the staff but also those professions. As they get more and more embedded, you know, more and more embedded in the skill, obviously those incomes really start to go up. So they always outrun the group insurance as well. So there are a lot of advisors that will work with them when they're young in their careers by, let's say, a very modest disability policy on them. But then they maintain the relationship over time with those young professionals and as their income will grow and their families grow and their expenses grow, they're just adding to those policies A great way for somebody you know, in the individual financial professional realm to get some high network clients very early in their careers and establish relationships with them.

Speaker 3: 2:38

By the way, you don't see it quite as much. But I would say the same thing about young entrepreneurs right, they're young professionals, but there's really not a lot of people you know going after that young entrepreneur set early in their careers. But you know, I ensure people's incomes, I look at people's incomes all day long and I'm going to tell you that there are some small business owners, a lot of small business owners, frankly, that are in weird occupations you would never think about and they make way more than any doctor or any surgeon or any. It's kind of you know, don't sleep on that. My point is.

Speaker 1: 3:15

Well, and it also covers the sticky. I mean, it does create a longer lasting employee employer advisor connection. It sure does lasting employee-employer advisor connection.

Speaker 3: 3:23

It sure does, and you can watch companies grow, you know, over time and you never know.

Speaker 3: 3:29

You know when I was at Paul Revere and it was not in my office but it was in the DC office you know there was an advisor who started working with a small company called AOL when it was only 10 employees, right, and you can imagine what happened with that right.

Speaker 3: 3:47

It's not technically around much in its same form today, but just think about if you can get with a young professional person who you know is working, you know, in a space that's kind of have the ability to really explode over time, what a great client to have. And a lot of times you know they need individual disability insurance protection, they need group insurance with those small businesses. For sure it's a great way to get your foot in the door and maybe from a competitive standpoint right, because everybody's selling health insurance Maybe you can offer something that's a little bit different that gets your foot in the door and can, like you say, start a very long-term relationship. The persistency on these individual policies is excellent. I've had a chance to look at some folks' blocks of business, some of my GAs, over time. They built great businesses over time with the disability products, because they just are stinking, as you said.

Speaker 1: 4:48

And we'll. You know we'll talk a little bit about kind of comp when we get further into our conversation, but the area where I spent a lot of my time was in business solutions. Talk a little bit about that and what else. You know how that's another thing that an advisor can bring to the table and create a longer term relationship with a client. Great, because you know how that's another thing that an advisor can bring to the table and create a longer term relationship with a client.

Speaker 3: 5:06

Great, because, you know, think about the business owner. The business owner really has two assets, right? They have the ability to work. That's probably their most important asset, right? So that's one asset we need to ensure. But the reality is, as a business owner, they have this other asset the business itself. As a business owner, they have this other asset the business itself.

Speaker 3: 5:29

What happens if they get sick or hurt, can't work for an extended period of time? That business wants to survive their absence as well, right? So the individual market has also allowed for buy-sell planning. Right? We've got owners that have partners or additional shareholders. They all have obligations to one another. They usually have a buy-sell agreement almost always and buy-sell agreements are legal documents. Everybody signed them. They obligate you to something you might want to know what it obligates you to. It often obligates you to buy your partners out if you get sick or hurt.

Speaker 3: 6:03

We have overhead expense insurance, which replaces the expenses that are needed to maintain or continue that business's day-to-day operation Things like rent, the utilities, employee salaries. There's overhead expense insurance that pays those. We have loan protection insurance in the marketplace now, where you have the ability to pay off a business loan if somebody gets sick or hurt. There's nothing in those loan documents that say if you get sick or you can't work, the bank's not coming for their money. They are right. So we have that. And then we have key person disability insurance as well, proportion disability insurance as well Same right. You've got key people within that business. They're valuable. They're no longer able to contribute to the success of the business. The business needs to be compensated for their absence, to survive their absence. So good solutions that are out there. I still will tell advisors look at the individual first, look at the group insurance, look at the individual first, but don't neglect those business solutions because they're very much a needed conversation for Moza for that business.

Speaker 1: 7:17

Well, you know, we oftentimes advisors will ask you know how do I start that conversation, how do I get into that? I cannot tell you although you and I have talked about it, how many clients I picked up and how much money I made when I was selling by asking when was the last time your buy-sell agreement was reviewed? Because I knew, going in what the business owners had not really paid any attention to. And that is, you said, correctly. So it creates an obligation, but it creates an obligation. Almost all of the agreements are stock agreements. They create an obligation in the event of death, but also in the event of disability, and since largely they're sold by life insurance folks, they don't often fund them for disability or they frequently leave that open. And when you can show a client that exposure, you're their new best friend, You're their agent for life. So there's a lot of opportunity there and it doesn't take a heavy lift to do it years old.

Speaker 3: 8:08

Just a reality. So you know those obligations underneath those buy-sell agreements it's real, it happens. You know, I was in a lawyer's office a few years ago out in Athens and we were talking about this and you know it was actually we were talking about it for his firm and he, in the course of the conversation, he goes. You know, I know what you're talking about. He goes yeah, we just had this with one of our clients and you know we got that guy some money. He said it that way to me. He said it to me. I said, oh, you got that guy some money because he didn't have a buy-sell agreement that was funded and you guys had to go into negotiation. When you say it that way, I figure not all the parties were happy with the money that you got the guy.

Speaker 3: 9:04

Right, and yet you could have funded it for pennies on the dollar. The same as with the life insurance, the same thing that you get where there's really no difference.

Speaker 1: 9:08

Now the third area is an area that's, you know, somewhat newer, at least in terms of the parlance, and that's executive benefit solutions. How do those, what are they and how do those differ from the business solutions?

Speaker 3: 9:18

Yeah.

Speaker 3: 9:18

So think of the executive benefits as really an extension of the group.

Speaker 3: 9:22

Disabilities we talked about earlier that the group disability insurance for maybe 5% or 10% of an employee population just can't cover the income adequately.

Speaker 3: 9:33

So what we have now in the marketplace generally, starting at five or more lives, almost all the carers now will offer you some type of guaranteed issue protection if the employer pays for those individual disability policies on a group of individuals, right. So again, starts at usually five or more lives, it's typically employer paid, although there's some opportunity to do this even on a voluntary basis on a guaranteed issue platform. But that's the key is we're just enhancing the group for the most highly compensated individuals where again earlier I talked about, where maybe the bonuses aren't covered, maybe the K-1 distributions have not been covered, maybe the K-1 distributions have not been covered. We're coming in and layering in these individual policies. Kind of think of it as sold as a group, that they're really still individual policies, but you're gaining the guaranteed issue and typically most carriers are discounting the product either 15, somewhere between 15 and 30 percent, depending on the size of the group and how the carrier goes about their discount structure.

Speaker 1: 10:42

So you're getting savings, you're getting guaranteed issue benefits again, starting at about five or more lives, and those discounts are significant because it's not an inexpensive product to purchase.

Speaker 3: 10:55

It's not, and you know where I talked about the group being about four tenths of one percent on average. The individual tends to be about one and a half percent somewhere in there. But again, a little bit different. The individual product portable, the individual product premium is guaranteed at least age 65 and age 67. You know, we can't come back and re-rate anything if we've had, if we made a mistake. So there's a reason that that premium is a little bit higher and sometimes the individual product is even a little bit more liberal in its language. So yes, a little bit more expensive, but there's value in that difference in premium.

Speaker 1: 11:34

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Speaker 3: 13:39

Thanks for asking that because it's gotten a lot better. You know, when the industry sort of crashed and burned back in the 90s and like we were still struggling in the early 2000s, there were some health issues, especially the mental, nervous or anxiety and depression related claims that were weighing on the industry. I will tell you that over time that has sort of been put in the rearview mirror a little bit and I think this is my own feeling about this. I think people are dealing with mental health much better than they ever have been and therefore we don't have quite as many claims from that. It's hard to put your finger on that, but you know that was something that if you had you know, been on any kind of antidepressant medicine for a while.

Speaker 3: 14:25

There you were getting a decline. Today, no care really declines you unless you're on a heavy antidepressant medicine. And there's all kinds of other medical things, issues that have improved as well high blood pressure, cholesterol, things that created waivers and modifications on policies and ratings. We don't do that anymore. You know we basically. You know big pharma. Say what you will at times about big pharma, but big pharma has helped a lot of people as well. We've seen it in some of the that risk history. So we're not quite as concerned as about some of those issues that we may have been in the past. Obviously, it makes it a little bit easier for us to issue these policies at our best rates, with very modest, if any, modifications.

Speaker 1: 15:14

Let's talk about what is decidedly an upside of these products, and that is the revenue stream for the advisor. It can be an extremely lucrative product line to add to what you're offering your clients, can't it?

Speaker 3: 15:25

And you know whether it's group disability or individual disability. You know, I think most of your folks know that group disability you're probably somewhere between 10 and 15 percent revenue on the group, depending on kind of, you know, bonus structures and those kinds of things with different carriers. With individual, you're anywhere from 40, to excuse me well, 50 to 75% on medically underwritten business and then when you get into that guaranteed issue you're sometimes in that 40 to maybe as much as 70% first year come and maybe 5 to 10% renewals percent first year come and maybe five to ten percent renewals. Um, and and we talked about earlier that the businesses stink right these, these products. You know once the people have them they tend not to get rid of them.

Speaker 3: 16:10

I've had my disability policy for almost 40 years, actually two of them for almost 40 years. You know, once they're in there, because those premiums aren't changing, people keep them. So it's a great way to build recurring revenue right because of that renewal infrastructure that both the group and the individual have. But on the individual side, a little bit more heavy commission on the front end, the time really to convince them, convince people to buy it. I think that's the biggest issue that you know people you know advisors have is hey, I've got to. Maybe you know I'm super busy with my group solutions and my employee benefit platforms that I'm putting in place. Well, you know I've got to stop and now have maybe a little bit more of an intentional conversation, but the industry is going to reward you for that monetarily.

Speaker 1: 17:01

There's enough reward so that if you have a small office, you could have somebody who specializes in DI and you open the case and then you turn them over to somebody, or you bring them with you and you do it together.

Speaker 3: 17:11

You know I think that's a great point. You know I work with a lot of firms that have one individual, like you say, is just become an expert in that area and you know we're going to share the revenue between the advisors on that. I'll tell you, the other thing that's happened is to hear the term maybe broker's broker, but you have folks that are now working with employee benefit firms. They're not employed by the firm but they have a relationship with the firm so that when the employee benefit advisor has identified a need for a business owner or a set of executives that need this conversation, they partner with that another broker who maybe again specializes in this individual market. They just split the business. So again, really, you know there's good opportunities for somebody to have the conversation. Whether you want to build your own expertise or whether you want to I use your term lay off the risk a little bit to another advisor and ask them to help you out.

Speaker 1: 18:13

There's a lot to learn and there's a lot involved in these contracts. Involved in these contracts. If you're a baby advisor or if you're just thinking, hey, I'm a seasoned advisor, I'm looking for new conversations to want to have with my clients, etc. How do you learn about this stuff? I mean, I remember how we used to do it in the old days and you know we had the tablets that Moses brought down the mountain with the chiseling in them. But today, how do you do that?

Speaker 3: 18:39

Well, there's a variety of ways. You know there's a couple of resources that you know I throw out there just as good resources. You know the Council for Disability Insurance Advisors is a independent third party resource that has a lot of good marketing material associated. I think that's one of the best. Um. Um, you know resources out there on our independent platform. Um, I know NAFA does Life Happens. Now, you know there's stuff on Life Happens that you can work through. I think that's a good resource as well. Um, you know NAVIP has you know in in our um. You know quarterly meetings and things that you know your local NAVIP chapters have you know quarterly meetings and things that you know your local maybep chapters have.

Speaker 3: 19:22

You know, I would go and and um just pay attention to those times when you have disability insurance as a topic um. The other thing you can do is just align yourself with a good bga, good broker general agency who specializes in this, and there's um several of these across the country the plus group um, and then a lot, of, a lot of the big bgas now national bgas um have their own folks that are specializing in disability insurance. So just ask, you know, hey, you know, do I?

Speaker 2: 19:53

you know how do I what?

Speaker 3: 19:54

resources do you have that I can kind of lean on um. And then obviously there's always, you know, guys like me, the carrier reps that are always there, that want to, you know, partner with you as well. So you know, any of those resources are great places to start the one individual side there. The one thing that I'll also say is you know, read a specimen contract and it's an old school thing but ask your wholesaler to provide you with a specimen contract. It takes about, I would say, maybe 25 minutes to read through a contract. You'll be amazed, just by reading through the contract, how much more confident you'll be at what this product is, what this solution is going to do for your client. You know how does it really work. And I say the same thing on the group side as well. You know, take a group contract, you know, same exact thing, a little bit old school, just kind of reading through that sometimes, I think, just gives advisors a lot of confidence as well.

Speaker 1: 20:57

I think that's certainly a great place to start and it's a great place to end our conversation for today. Don Chimay, regional Director of Executive Benefits at Principal Financial Group. Don, thank you so much for sharing your expertise with our audience. Thanks, dave, it's been my pleasure. I want to give a quick shout out to our sponsor and our producer, hatcher Media. Hey, if you need podcast production or professional graphic design, josh Hatcher is the expert to contact. For more information, visit him at HatcherMedianet. That's H-A-T-C-H-E-R Media dot net.

Speaker 2: 21:35

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