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Competing in the Healthcare Disability Market is About Strength of Coverage

By James Crook 10:32 am MDT 9/16/2020

Brokers work hard to differentiate themselves from the competition and earn the business of healthcare professionals looking for group disability insurance (DI). But using a sales strategy that focuses primarily on price leads down on a slippery slope toward zero profitability. Why? Because there will always be other brokers offering a lower price in an effort to take your business. Also, as with all businesses, using price as your primary differentiator is a difficult way to make a living.

Working with physicians provides an ideal opportunity for brokers to sell on value; they, more than some other policy shoppers, have more to lose financially with the wrong type or amount of insurance coverage. Here are a few strategies to use when focusing on the strength of the group DI coverage as your main selling point.

Lead With Coverage

When you offer the right plan options from the start, and then explain why you’ve chosen them from a coverage perspective rather than from a cost perspective, you’ll position yourself as an expert on the income-protection needs of healthcare professionals. Proposing a group DI plan that acts like a gold-standard individual disability insurance (IDI) plan is a great place to begin discussions. It’s a product that healthcare professionals already trust, so they’ll automatically be more receptive to what you have to say.

Once your client understands why the contract you’re offering is more valuable than a (potentially) less expensive contract, they may be more willing to accept a higher premium in exchange for comprehensive protection of their income. You’ll also have earned their trust by offering value, because you’ve demonstrated a commitment to providing the right coverage for their needs rather than quickly seeking out the cheapest option.

Be a Consultant, Not a Salesperson

The Broker Advisor recently conducted an interview with Bill Buchholz, a group benefits broker with 53 years of sales experience specializing in the healthcare professional DI market. In it, he warned that many brokers are too driven by short-term sales results. He offers this advice to gain an edge:

“I think you need to be able to present an array of contracts with an array of different provisions and explain the differences to them, so you take more of a consultative approach than you do a sales approach,” says Bill. “It is really important that you can explain to them that if you want to go for a contract that’s maybe 50% of the cost of the other one, and I’m just picking 50%, here’s what you’re giving up. Here are the situations that can cause the problem.”

Bill reiterates that doctors are smart people who opt for quality most of the time, and says he hasn’t found them difficult to work with as long as the information is presented objectively.

“I really, truly believe that doctors understand that the most valuable financial asset they own is their ability to work and earn an income commensurate with what their expectations are, and hopefully even more.”

Explore a Supplemental Group IDI Policy

Most healthcare professionals come out of medical school with an IDI policy that’s rich in features and tailored to their specific needs. But what they often need is more coverage and increased benefits as they move through their careers. This process typically involves individual underwriting and higher premiums, and the resulting plans are sometimes a poor match for what the beneficiary is looking for.

Offering a group long-term disability (LTD) supplement that acts like IDI (but still preserves the many advantages of group benefits) gives healthcare providers access to the extra coverage they need without the cost and underwriting limitations of securing it on their own. In your discussions, be sure to focus in on some of the key contract provisions that are especially important to physicians:

How pre-disability earnings are defined

Healthcare professionals typically earn additional income beyond their base salary, such as bonuses and ownership profits—which may not fall into the guidelines of what many traditional group LTD policies narrowly define as income. For a policy to meet the financial expectations of the beneficiary when benefits are required, it needs to consider each income source.

How “disability” is defined

The definition of “disability” for healthcare professionals should mirror their IDI policy language: narrow and specific, rather than broad and subjective. Typical group LTD plans define disability according to broad specialties so that the benefits are based on what other healthcare professionals in the national economy belonging to the same specialty do. They are not based on the individual healthcare professional applying for the benefits.

How partial benefits are calculated

Most LTD policies calculate partial benefits using one of two formulas: Proportionate Loss or 50% Offset. We won’t define these formulas here except to say that the resulting calculations can result in drastically different partial benefits. Each formula will benefit each healthcare professional’s situation differently. A good LTD policy will calculate both formulas and use the result that is higher of the two to pay partial benefits.

How other offsets impact payments

Many group contracts reduce their disability payments through offsets, which are provisions in the contract that allow the insurer to make deductions when other sources of income are introduced. Income sources could include Social Security Disability Insurance (SSDI), worker’s compensation, state disability programs, employer-provided disability retirement benefits, or even income from a business partnership. Sometimes these offsets can be negotiated, but it’s a tough fight because there are no federal laws prohibiting them. Showing your knowledge of these disability scenarios and explaining them to healthcare professionals is, at the least, advantageous for earning their trust.

Selling disability benefits based on value means focusing on presenting benefits that allow healthcare professionals to more closely replicate their original salaries – which may not be as easy with their current group benefits plans (and they may not even know it). Because group benefits are often price-driven, this type of sales strategy allows you to not only provide the most appropriate coverage for your clients – which is what most of them are looking for anyway – but to also ensure the ongoing solvency of your own business.

Want to differentiate yourself even more in the disability insurance marketplace? Consider earning the Disability Income Fellow (DIF) designation from AHIP to increase your credibility and build trust with your healthcare professional clients and prospects.

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