Insuring the uninsurable

(July 2006) Mike Taylor sees himself as the default guy. Others say he is the alternative solution provider. Call him what you will, but the next time you have a client in a strange insurance predicament you might want to remember his number.

Taylor, brokerage manager at Hunter McCorquodale Inc., specializes in “uninsurable” clients or the 4% of applicants who can’t get life insurance on the regular market.

Speaking at the IFB Spring Summit in Toronto, he says while the regular insurance market is doing a good job covering Canadians’ life insurance needs, there are still about 35,000 applications that are not finding coverage. Four out of every five of these applications are turned down for medical reasons, mostly because of heart ailments.

“There is a void in the Canadian marketplace,” he says which adds up to a face amount of about $7 billion. So late last year Taylor sat down and developed SecureLife to fill that space. SecureLife issues to ages 20 to 65 for $50,000 and $300,000. (While the maximum amount of SecureLife coverage is $300,000, Taylor says he can offer supplemental AD&D coverage through Lloyd’s of London as an approved Lloyd’s cover-holder). His target clients: baby boomers.

But why should an advisor work so hard to find insurance for so-called uninsurable clients? In one instance Taylor recalls an advisor was verbally abusive after hearing the quote only to return a few weeks later to asking for exclusive rights to the product when the quote resulted in repeat sales and referrals for regular long-term life insurance products. The main incentive, Taylor says, is that it turns a declined client into potential sale.

“Advisors don’t go prospecting for this type of business,” he says but it’s good to have options when a difficult case comes along.

When those cases crop up, Taylor turns to accidental death and disability partial solution. “It’s not a great solution; it’s really not as good as life insurance,” he admits although because of this approach he says he’s able insure about 70% of the declined applicants who are referred to him.

Of course, there are exceptions, like a diabetic who is not controlling their diet or following doctor’s orders. He estimates they make up 15% to 20% of his clients.

“Most of the time I will not compete with regular market insurers,” he says, which generally means if a person has received a quote from another insurer Hunter Taylor will likely not be able to beat it.

His firm can offer alternative solutions though. In one case an insurer was asking for $21,000 to cover an executive who had a private pilot’s license. If the policyholder agreed to exclude his time in the air then they were prepared to knock it down to $14,000.

By offering an AD&D plan, Taylor was able to cover the executive’s flying hours for $3,000.

A FOOT IN THE DOOR

If you’re looking for a new sales option, try recommending RESPs to grandparents, says Paul Grimes, senior vice-president sales for Industrial Alliance. Why? Because grandparents are worried about saving for education, even more than the children’s own parents are.

RESPs are the best way to market to families and to help insurance brokers get their foot in the door, says Grimes, but it’s not being used enough. Even though Canadians are clearly concerned about their child’s education, only 17% of Ontario households that have children have bought an RESP.

Grandparents have the time to listen to a broker and often have the money to put into an RESP, he says. “RESPs are the easy sell to the middle market,” he says, because they are easy to understand.

The middle market is “vastly underinsured,” he told the audience. Grimes painted a grim picture for the delegates. The number of premiums has been declining 10% a year, he adds, noting that only 8% of Canadians have over $500,000 of insurance coverage and large swaths of the population has no coverage at all.

“Stop selling and start advocating,” he says. In his view this means building relationships with clients, educating them and most importantly, simplifying the message.

This article originally appeared in Advisor’s Edge Report.

Filed by Mark Brown, Advisor.ca, mark.brown@advisor.rogers.com

(07/01/06)