Central to an insurance agent’s service offering is helping clients plan for the long term and for downside events.
And a key element to such planning is providing insurance that covers a client if income is disrupted — specifically, through long-term disability (LTD) and disability insurance. The insurance agent must educate clients about why LTD insurance is a necessary part of an income earner’s financial plan and should also explain how disability can drastically alter household finances and long-term financial plans. He or she must also select an appropriate type of LTD coverage for each client and explain why it’s right for that client’s needs. After all, when clients have a claim, they look to the agent for assistance and direction.
There are two types of LTD policies for the client to consider: group policies and individual policies.
Organizations frequently offer group LTD policies as employment incentives. And it can be an important perk — particularly when potential plan members are offered the benefit on a non-medical-evidence basis or when potential members would otherwise be refused coverage or have to pay more for similar benefits due to rating concerns.
Employers, meanwhile, usually offer this benefit as a loyalty incentive and business efficiency tool. If the cost of the benefit is directly or indirectly passed on to plan members, the insurance agent should explain how the cost of group LTD insurance is lower than that of an individual policy. This cost savings is easily explained when connected with reduced underwriting, marketing, administrative and claims costs.
Employers who offer LTD benefits also receive important, albeit hidden, value in managing their workforces. An ill or injured employee who comes to work drains his or her colleagues and reduces overall productivity. It’s also possible he or she will require additional (and often unscheduled) time off work, produce substandard work and reduce morale.
Most employees without individual or group LTD policies must attend work for as long as possible despite health issues because they’re utterly dependent on their income. By contrast, an employee who has income replacement provided by LTD insurance can focus on recuperation, rehabilitation and, when necessary, retraining.
Adequate coverage also sends a message that the employer will take care of its people. It’s an effective contrast to the harsh alternative of termination and the potential human rights complaints against the employer that can follow.
Servicing plan members
Actively servicing a group policy and providing assistance to the employer or organization offers the insurance agent particular sales opportunities:
- The agent reinforces his or her role and value. This can protect the agent from the ever-present threat of loss of commissions to a competitor who tries to appeal to the client based on price.
- During sale and servicing of the group policy, the agent will form relationships with senior employees and managers at the organization and, as a result, will have the opportunity to offer other insurance and investment services.
- The agent will meet the applicants and can offer further insurance and investment services to them if they fit into the agent’s marketing demographics.
When a claim occurs, an employer has little interest in the process beyond avoiding any strife that may arise. This puts an agent in a unique position to assist and reinforce his or her value to the organization. The agent can provide the necessary claims forms and give plain-English explanations of the process.
This claims assistance process has two parts:
A simple benefit claim is best served by timely application and attention to detail. The three standard forms (employer’s statement, attending physician’s statement and claimant’s statement) must be completed with all available details and in keeping with the policy’s terms. In particular, all persons completing a form should directly address the issue of the claimant’s ability to meet the initial definition of “total disability.” Reference to the key words/terms used in the definition and how the plain meaning of these words/terms apply to the health and work of the claimant is necessary.
If a claim is denied, the claimant should consider the response, and if wishing to pursue the matter, he or she should be referred to a professional who can assist in the matter. Lawyers who deal with these claims can routinely assess the merits of a claim or denial and provide practical advice. Sometimes the claimant just needs to be told to “Get on with getting on.” Other times, he or she needs help in providing better information to the insurer — such as a more detailed attending physician’s statement, decoded OHIP summaries, clinical notes and records of other treating health professionals, and substantive details with respect to how the illness or injury affects activities of employment or daily living — in order to support the claim.
An agent who offers real and continuing value will build client loyalty at a time when competition is increasing. The trick is to manage the upside events and then efficiently deal with the downside events (in particular claims) by providing prompt information and passing the problems on to a third-party advocate: That way, the upsides fall to the agent, and the downsides are passed on with a meaningful and helpful referral.
Added value of keeping careful records
Any employer offering LTD coverage should be warned about potential liability for any negligent misrepresentations (errors) in informing a plan member about the LTD insurance. This liability can arise in the application for insurance coverage, the maintenance of up-to-date information during the coverage period, the claim for a benefit and any right to obtain replacement coverage on the termination of the plan. (Plan termination can be due to either the ending of the relationship between the employer and the insurer or the insured employee’s quitting or being fired.)
An agent should always keep in his or her files a copy of the master policy and each revision, as well as each certificate and version of benefit booklet for future reference. Easy access to this information for responding to the employer’s, organization’s or plan member’s enquiries shows a sense of professionalism and efficiency. Furthermore, direct reference to these documents in conversation and written communications avoids potential confusion or allegations of misleading advice.
By taking simple steps, an agent can limit the potential for errors:
- Explain to applicants the pitfalls of incomplete or misrepresentative information in an application.
- Prior to forwarding the applications to the insurer, check them for completeness.
- If required, confirm the employed person is actively at work or meets other policy requirements.
- Check for updates of the application information on a regular basis (perhaps yearly). An example of a foreseeable change in a key piece of information is an insured’s increase in income.
- Explain any right to replacement insurance.
- Assist the insured if he or she needs to make a claim.
Full-service group policies providing LTD benefits are a valuable and profitable business line for professional insurance agents. Benefits include the direct commission for the sale and ongoing service of the policy, the continuation of this relationship and the opportunity to market services to plan members.
In these times of financial turbulence, the security offered by LTD insurance against a downside risk is more evident to potential clients than it is in easy financial times. Now more than ever, there is an opportunity to educate and help this market.
Harold Geller is an expert on legal issues affecting financial intermediaries and their clients. As part of this service, he helps long-term disability claimants assess their claims and, if appropriate, present their claims to insurers. Harold is also a well-known industry commentator, a CE provider and principal of Geller & Associates, the long-term disability division of Doucet McBride LLP.
(07/02/09)
