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Bill Buchholz: Sage Series Episode 1



In episode one of our first season, what we’re calling the “Sage Series,” industry legend Bill Buchholz joins us for a discussion on some of his greatest lessons learned as a pioneer in the healthcare professional disability insurance market. 

Some Highlights From the Transcript:

  • Healthcare professionals have the means to purchase quality disability insurance: ~8:28
  • As time has moved on, budgetary concerns play a larger role in the disability insurance decision: ~10:24
  • Studying the contracts you sell is critical: ~12:15
  • It’s important to become part of either a bigger formal or informal organization for marketing purposes: ~18:30
  • Take a consultative approach: ~20:00
  • Disability Insurance is an “option on time:” ~22:50
  • Bill never prospected directly to doctors: ~27:00
  • Healthcare professionals want their brokers to be advocates: ~32:00
  • Mandatory rehab is a provision that acts as big turnoff for healthcare professionals considering DI policies: ~37:43
  • To save money, many insurance companies put provisions in the contract that give them permission to terminate the contract or reduce the size of the benefit: ~39:00
  • Why wouldn’t you consider insuring the asset that creates the money that allows you to buy all of your other assets? ~44:00
  • Unexpected Bobby Knight connection: ~50:00



Bill answers many of our questions including:

  • How did you get into this market?
  • Why target healthcare professionals?
  • Can you give us a specific example of a time where providing the right coverage to physicians paid off?
  • How would you respond to the statement, “All Disability Insurance policies/contracts are basically the same”?

James Crook:

Okay, Joe and Bill, we should all be on the line now.

Bill Buchholz:

Hi Joe, this is Bill.

Joe Sevcik:

Hello. Hi Bill, how are you?

Bill Buchholz:

Good. Nice to visit with you.

Joe Sevcik:

Good. Yeah, same here. How are things in beautiful Wisconsin these days?

Bill Buchholz:

Well it’s not all bad right now. According to the weather report which is not terribly reliable as you know, we’re supposed to have 12 consecutive days of about 80 degrees with sunshine and or slight clouds.

Joe Sevcik:

Wow. Nice.

Bill Buchholz:

Which means about half the days will probably rain.

Joe Sevcik:

Yeah. I’m originally from Chicago, I’m a Chicago kid. And we used to have a place up near Baraboo so I have fond memories of going up into Wisconsin.

Bill Buchholz:

Yeah. Well you wouldn’t recognize Baraboo unless you’ve been there recently because there’s four lane highways around it and everything. It’s really become quite the place.

Joe Sevcik:

Oh wow. No, I won’t recognize that. It was a pretty sleepy little town when I was a kid. Neat place, but yeah, yeah.

James Crook:

Yeah. Well Bill, we’re really grateful to have you today. I’ll go ahead and introduce Joe then we’ll introduce you, Bill. Joe Sevcik is a marketing and brand strategy professional with over 30 years of experience working for companies that include Hallmark, H&R Block and Assurant Employee Benefits. He spent over 10 years with Assurant serving as a senior vice president of marketing and strategy. When Sun Life acquired Assurant, Joe stayed on through a transitional period before moving on to his own consulting business. Joe is going to be cohosting our conversation here.

James Crook:

Then Bill, Bill Buchholz graduated from the University of Wisconsin school of business in 1968 with a degree in business administration and risk management. He also earned a masters in financial services and the certified employee benefit specialist or CEBS designation. He also taught employee benefits at the Wisconsin Graduate School of Business. After a 53 year very successful sales career, Bill retired in June of this year.

James Crook:

Those are the introductions. Bill, again, we’re excited to have you here.

Bill Buchholz:

It’s my pleasure.

Joe Sevcik:

Thank you James. And again, my thanks as well, Bill, for you joining us today. And I guess first off, congratulations on an impressive and successful career. I’m sure you’ll enjoy your well-earned retirement. But before we let you ride off into that proverbial sunset, we’d love for you to share with our listeners some of the lessons you’ve learned in your career, and especially how brokers and advisors can apply this today. If that sounds all right, we’ll just go ahead and jump right in.

Bill Buchholz:

Sounds like a plan to me.

Joe Sevcik:

All right. I think it’s safe to say that you’re an expert when it comes to disability insurance for healthcare professionals. Let’s just start off by why don’t you talk a little bit about how you really got into this market. What led you here?

Bill Buchholz:

Well if I were to have a bottle of truth serum I would say luck had a lot to do with it. When I graduated from the university, I decided that I was going to go into the sales and administration end of it. I thought that what I would do is to call on the medical clinic that my mother worked at. And I thought, “Gosh, for sure they’ll do business with me because my mother is there.” Well when I got there, they were very courteous but they were not ready to entrust their employee benefits, especially disability insurance to a 21 year old. So they politely declined me, but they said, “We just came back from a convention.” It was called MGMA, Medical Group Management Association. And they have endorsed an organization known as MGIS, Medical Group Insurance Services, to find a high quality disability program. They also had life insurance and some other things later on. But the impetus was caused by the disability coverage.

Bill Buchholz:

I called on the MGIS and they said, “Yes, we’re looking for people to represent us in various parts of the country.” And to make a long story short, we finally put an agreement together which turned out to be the best agreement investment that I’ve ever made. And that’s how I really got involved in it. And proceeded. My professor told me, he goes, “Make sure you understand the contracts thoroughly.” So we can talk more about that later, but that’s how I got started.

Joe Sevcik:

Okay great. You know, I know you’re from Wisconsin. When you said it was some luck that got you into it, I’m reminded of a quote. I don’t know if it’s true or not, but it’s been attributed to Vince Lombardi when he was with the Packers. He said, “Yep, we were lucky. And the harder we work, the luckier we get.” I’m sure there was plenty of hard work involved in that.

Bill Buchholz:

I was just at the right place at the right time.

Joe Sevcik:

Sure, sure. Other than the fact that your mom worked there, clearly once you made the call on the clinic and they told you about the MGMA group, what really led you to … or what really attracted you to this market? What made you think, “Wow, there really is something here”? Was it the conversation with the people at MGMA or conversations with people at MGIS? What was really the thing that said, “Boy, this is where I want to focus”?

Bill Buchholz:

When I started the business, I actually did learn some things in college. One of them was if you’re going to be involved in sales, you should probably try to work with people that have an ability to purchase things and significant things. The old Willy Sutton theory of why do you rob banks, because that’s where the money is. On my list I had doctors as people who had money who could buy things. So I started with the doctors and it turned out to be a good thing.

Joe Sevcik:

Great, great, okay.

James Crook:

Well my question … Oh sorry, go ahead Joe.

Joe Sevcik:

No, no, no I’m sorry, go ahead James.

James Crook:

No, I was just going to say kind of thinking about just from bringing the millennial faction in to this discussion, how do you feel that the market has … how true is everything that you’re saying? How has the market changed from where it was when you started to where it is today?

Bill Buchholz:

Well it’s changed significantly. When I started working with physician groups, quality was absolutely the most important thing. All the decisions were being made by physicians, not administration. And cost really wasn’t so much a factor, so long as it can be deductible to the entity. As you know we could also make it not taxable to the individuals, and we can talk about that later if you’d like. But it has changed quite a but.

Bill Buchholz:

Now it is more of a commodity. It’s being driven by budget decisions. They still want all the great quality, but if the management has to reduce the quality of the contracts just to trim the budgets, that’s kind of what happens. The approach I’ve used over the years is to make sure you present a combination of contracts, some that are high quality and good cost, and some that are maybe not quite the same quality but have a much lower cost. And let them make the decision as to which way they want to go. And of course make sure you document their decision process so that you don’t get caught with egg on your face later on.

James Crook:

Interesting.

Joe Sevcik:

That’s a really interesting concept, a really interesting statement there. Without putting you too much on the spot, when you present kind of this full array of contracts from okay to really good, how often would you say … and I know it’s driven by budget from what you said, but how often would you say once they really understand the contract do they tend to go for the higher quality versus the cost?

Bill Buchholz:

I think most of the time, and I’m just basing it on our book of business that we had. Almost all of the contracts were high quality contracts. For example, Sun Life’s contract is a high quality contract. And of course that would be one that we would be interested in presenting to them. But I’m going to digress for just a moment.

Bill Buchholz:

It is really, really, really critical that brokers and consultants truly understand the language of all of these contracts. I spent a lot of effort in my early years reading these contracts, knowing what all the provisions were, talking to the claims departments of the various insurance companies to find out how they handled situations. I was involved with my partner and some other people in actually assisting in writing the provisions of various contracts. And 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’s the situations that can cause the problem.

Bill Buchholz:

But to go back to your question, that original question is what percentage of them opt for the quality. I still think most of them do. I don’t know that holds for the rest of the brokerage and consulting community because sometimes the consultants, especially the big firms come in and do a whole bunch of things and they’re trying to cut costs to justify their fees. And in those situations they’ll probably opt for the lower cost. But boy is it ever important that you document all of this stuff. Because the rubber meets the road when it comes time for claims.

James Crook:

Interesting. Go ahead Joe.

Joe Sevcik:

I want to do a follow-up question on that, and this is kind of a two part question I think. I’ll kind of have you riff on the answer here. You talked about how important it is to understand and read the contract. So I guess the first part of my question is did you find that to be a competitive advantage? In other words, do you feel like you understood contracts perhaps better than others? And my second part of that question is do you think the selection process on behalf of the healthcare professional at the organization is influenced by how well the broker has explained the contract? In other words, and this is a little bit of a leading question, but in other words if the broker doesn’t really fully understand the contract differences then how would you expect the client to understand the difference?

Bill Buchholz:

Well let’s start with your first one.

Joe Sevcik:

Yep.

Bill Buchholz:

It’s really important that you do understand it. We would … when I say we, it’s the folks in my office and myself and particularly my partner Patti Garrity and Joanne Powers would go through these things. And we would have a little study group and we would read every single line of these contracts. Then we would check with the claims department to say, “How do you handle these things?” And where there was some ambiguity we’d ask them to clarify it with an email. Although when I started it was pen and pencil, there wasn’t any email.

Bill Buchholz:

Anyway, we would look at them all. Because part of your second question is the client will begin to understand that you may understand the policies a little bit better than somebody else might or another firm. And that includes even the big consulting firms. They still have individuals who were doing stuff, and they’re so driven by short term sales results that sometimes they can’t afford to take the time or have a contract that is good in the long run.

Bill Buchholz:

I don’t know if that answers your question. If you want to expand on it more I’d be happy to answer it.

Joe Sevcik:

No, I think that does. I think that highlights it perfectly. You’ve talked … you’ve given us great context on kind of how you approached it, how you started out. I love the idea of a study group. I think that really can provide a competitive differential for advisors and brokers. But with as much as the market has changed and know that you’ve seen, if you were starting out fresh today, so if you were going to come into this market today, how would you approach it? Would you approach it any different? What things would you focus on?

Bill Buchholz:

I would approach it a little bit differently. When I started, I just really had one horse in the race. And that was the MGIS program, and it still continues to be a great horse. But quality was so predominately desired by the clients that that’s all I really needed to have. Now I don’t think you can afford to do that. 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. I know that’s very difficult for some brokers to do or captive agents to do, but I think that’s the best way to do it these days. Because doctors are smart people, and I have not found them difficult to work with, so long as you are objective in the data and information that you give them. That’s what I would probably do a little bit differently now.

James Crook:

Okay. As a quick-

Bill Buchholz:

I’m going to add one other thing. I also think it’s probably important that you become a part of either a formal bigger organization or an informal organization. There was a group of brokers around the country and we formed an informal company or partnership, if you will, called National Benefit Partners. And we used that as a marketing arm to go to bigger organizations. Because that’s the big difference now in the marketplace is now you’re dealing with bigger organizations as opposed to the physician-owned smaller medical clinics.

James Crook:

Okay, let me ask a quick follow-up question to that. I’d love to know a little bit more about what does taking a consultative approach look like versus a more sales-oriented approach like you were talking about?

Bill Buchholz:

Well I think there’s a couple of things there that I mean by it. One of them is that you don’t come in with just the one horse. We use a line, if you will, or a presentation approach by saying our objective, if we can accomplish it, is to maintain or improve the quality of your benefits and if possible also reduce your budget. And we’ve been able to do that at a pretty high percentage of times. But if we’re able to accomplish that, is that something that would be of interest to you? Because you’re going to have to overcome the natural tendency to stay with your local broker, and I’m going to try to deliver information to you and leverage that you can get by working with a bigger organization.

Bill Buchholz:

The other part of it is that from a consultant standpoint, sometimes we’ll just do a consultant fee and say this is what we’re going to do for your service and we’ll work with whichever company or companies works best for you, which we do on a commission basis too but I think we just need to be more of an advisor rather than a sales person.

James Crook:

Interesting, yeah thanks.

Joe Sevcik:

You mentioned about how you would approach a physician group and kind of talk about you may have to move away from your current broker. Talk more about effective ways you found to prospect in this market. How would you prospect? How would you even get the door open for these groups?

Bill Buchholz:

It’s harder now than it used to be, to be quite honest about it. Because there’s fewer organizations. They’re bigger organizations where they may have a thousand physicians on staff and the physicians are employees, they’re not owners. But nevertheless, I think the fundamental approach would be that we can provide something for you I think you’ll find helpful and will not cause you any problems in the future, and that is if you will allow us to examine your current contract and give you an estimate of what we think it’s going to cost. And you are willing to provide us with some census material, based on our history here’s what we’ve been able to accomplish. Now that’s difficult for somebody starting out new, which is why I think you align yourself with other people or you’re a part of a study group or an informal brokerage firm.

Bill Buchholz:

I don’t know if I totally answered your question, but hopefully that helps.

Joe Sevcik:

Yes that does, that does help. You had referenced earlier, and this has kind of come up a couple different times. But you referenced earlier about your first decision in how to get into this market had to do with who’s got the money to be able to afford something. In your experience, talk a little bit about how healthcare professionals might differ from other high income professionals. I’m thinking attorneys, architects, something along those lines. Kind of both in their needs and their attitudes towards disability insurance. And are their needs truly different?

Bill Buchholz:

Well I don’t know that they’re that much different. But I’ll kind of start with the beginning. 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. They understand that.

Bill Buchholz:

I have tried to explain to physicians from day one that purchasing insurance, especially disability insurance is an option on time. If you are healthy, don’t pass away early or some disaster happens, if you have enough time you will accomplish all of your goals. And they will readily agree with that.

Bill Buchholz:

So rather than using some of the approaches that insurance companies have used by saying the probabilities of this, you become disabled and if you do this is what’s going to happen to you and look at all the money we can give you, I just tell them, “Think of insurance as an option on time. If you don’t have all the time you need, the insurance will fill in the blanks of what you could have accomplished.” And I have found that’s a concept that they buy into because we’re not in an argument immediately with different provisions of policies and the cost. I try to get them to buy in the concept that purchasing insurance is a smart thing to do, it’s not just a necessary evil, it’s an intelligent thing to do.

Joe Sevcik:

That is a great line. An option on time. I think that sums it up perfectly. We talked about the fact that physicians really understand how important disability insurance is, and they certainly understand their most valuable asset, their ability to earn the income. But they’re also among the busiest people there are. Lots and lots of demands on their time. Did you find a consistent way to kind of capture their interest and maybe help lead them to the decision? I know you talked about that a little bit, you touched on that, but maybe if you could expand a little bit.

Bill Buchholz:

Yeah I think that’s a really good question, because I never really went after the doctors themselves. Even back in the good old days, some may refer to it as the Paleozoic age. But even in the good old days, the three to 10 to 25 to 50, 100 physician clinics all had a business manager. And it was the business manager’s charge to take care of things like this. Our prospecting method was to go to the business managers or the people nowadays even in the big organizations within an HR department there will be somebody who addresses these issues. And we would go to them and make our pitch to them, because they will have more time. And they are charged with having a quality program at a reasonable price.

Bill Buchholz:

Previously you had asked the question how would I go after them. I have never gone after the doctors directly. Now occasionally they will actually call us and want to visit about some stuff and that’s where we get involved with individual contracts. But primarily what we’ve done is we’ve moved programs, and I quite frankly think they make the most sense.

Bill Buchholz:

Again, being repetitive and I apologize, but I did not go after the doctors directly. I went after the business managers who then would have the time to analyze, then they would take it to the doctors or the senior administrative people and say, “This is something I think we need to look at.” Then you have their attention, then ultimately we’d probably make a presentation to a committee within the physician group or the big organizations now to try to prove our point and compare what they had with what they can have and with the various kinds of contracts.

Bill Buchholz:

Then once again, and you’ll hear me say this over and over, document everything. Because everything goes fine. Everybody loves the lower cost or the higher quality benefits until claim time. Then you have to have things documented. That’s especially true if the plan is being purchased based on budget costs. They have to know that this is what they gave up and you agreed to do this. That’s kind of the way I would do it. You’re right, doctors are terribly busy.

Joe Sevcik:

Oh yeah, yeah.

James Crook:

That’s some really interesting information. I think that kind of leads us into a question here where do you have any claims disaster stories that you can share where something … without providing sensitive information, where someone was not happy at claim time with the trade-off they made?

Bill Buchholz:

Oh sure, there have been some uncomfortable times. I will tell you I don’t know for sure how many physician claims we have, but it’s several hundred. And we were sued one time and it turned out the judge just shooed the case out as being inappropriate. But we did an awfully good job of documenting things.

Bill Buchholz:

Where the problem usually starts is at the time of claim there’s a misunderstanding of how income is reported to the insurance company for the purpose of establishing what the benefit is. That income is not updated from time to time, from year to year. So there’s a gap between what is and what the contract or the insurance company says you’ve reported. Because insurance companies will always pay the benefit based on the lesser of your current income or the income you reported and are paying premiums on it. A lot of people don’t remember that. But we’ve had very few serious problems, and I thank our staff for that because they did such a great job of documenting things and talking with the clients and that sort of thing. Have we had some uncomfortable situations? Yes. But we’ve always been able to work them out with the client and the insurance company.

Bill Buchholz:

And part of the reason the insurance company has been willing to work in solving the problems is that we have not tried to pull anything over on them. I think a huge mistake that brokers make is when somebody within the organization is right on the verge of filing a claim then they change carriers and hopefully the broker has notified the new insurance company of it, but if they don’t it’s going to be a disaster. Fortunately we’ve never had one of those.

Joe Sevcik:

I’d love to hear the flip side of that question also. Talk about a time when providing the right coverage, the right contract really paid off for a group or a particular physician.

Bill Buchholz:

Out of all the claims that we’ve had physicians, it is very rewarding to go through the process with the client. The client is pleased that we consulted with them and that we’re going to be an advocate, and that is a term that we used all of the time is that we will be your advocate. Now that’s used by lots of people I think, but we really use, we really in fact do that. And we would help in the conversations with the insurance company with the proper authorization. But it is very, very rewarding to have a claim result in the manner in which you think it should be and what the client is hoping it will be.

Bill Buchholz:

Now of course we go back to the documentation of stuff to help support all of that. I told you there was one time we got sued and we had 700 pages of documents that we provided for the judge. He not only threw it out, but he did it with with prejudice because you can’t re-file the claim.

Bill Buchholz:

This is why … I should have said this a lot earlier, but it was really important to me to be doing something that I could be proud of. That I wasn’t just selling something just because somebody wanted me to sell it and I could make some money for doing it. I needed to be able to look in the mirror and say selling disability insurance or life insurance or long-term care, primarily we’re disability, is that I can be proud of what I’m doing and that shows up especially at the time of claim.

Joe Sevcik:

That’s great. You’ve touched on this a little bit, so my apologies if this seems like a repetitive question. How would you respond to this statement? All disability policies or contracts are basically the same.

Bill Buchholz:

I would say probably not the case. They aren’t. Because if you think about it, common sense wise, for a group of let’s say 100 physicians or 1000 physicians or whatever it happens to be, the disabilities are going to be the disabilities are going to be the disabilities. Whatever it is, it’s going to be the same with all of these situations. They’re going to break a leg, get MS, whatever. The claims and experience should be the same. Now that doesn’t mean that the payouts will be the same.

Bill Buchholz:

If one company is charging 50% of what another company is charging and we have the same batch of disabilities, something’s got to give. And what gives is the amount that’s paid out in claims. And that’s where the provisions are so important that you understand. We talked about reporting of income earlier. One of the things that surprises a lot of people is that at the time of claim there are some offsets. And they don’t know what those offsets are. Some might not know that deferred compensation is exempt as an offset. Another company may say it is used as an offset. That’s why we would spend time … when we were analyzing contracts, the first thing we would look at is the termination contracts, under what provisions can the insurance company terminate the contracts. And the one that we looked for the most is whether there’s mandatory rehab and that if you don’t agree to be rehabbed in whatever the insurance company thinks you’re qualified for, you run the risk of losing your benefit. That’s a huge thing.

Bill Buchholz:

The next set of provisions that we always go look at are what are the offsets in the event of a claim. Income from some other place or consulting income or rental income from the building that you own. Those are all extremely important things in addition to obviously the definition of disability. It goes without saying that there’s a huge difference between your own specialty definition and your own occupation definition. Or in some cases it’s an own occupation for a short period of time, then it’s any occupation. Those are huge things you have to know.

James Crook:

Interesting. You were just talking about one of those aspects were the mandatory rehab is such a big deal. Why is that such a big deal to healthcare professionals?

Bill Buchholz:

Early on we talked about doctors being proud of their profession. They’re also quite sure that they don’t want to be forced to do something that they didn’t train to do. Even to the point of teaching medicine as opposed to practicing a certain sub-specialty. It’s really important.

Bill Buchholz:

The other thing is that if they didn’t really believe that their ability to work and earn income wasn’t the most important financial asset they owned, they would be inclined to say, “Oh that’s okay, mandatory rehab is not a big issue. I’ll just go do something else.” And I don’t know that I’ve ever heard a physician say that.

Bill Buchholz:

The other thing escaped my mind here for just a minute. Oh, we talked about the claims essentially being the same with whatever quality of contract you have. Well how is the lower cost company going to not pay out less? One is if they can terminate the claim. The other one is that if they have sufficient offsets. And there are insurance companies, I’m not going to name any of them, but there are a significant number of insurance companies that will put provisions in the contract that’ll give them permission to terminate the contract and reduce the size of the benefit. Because ultimately at the time of claim, the reserves they have to set up at the time of claim is a function of the present value of the future stream of benefit payments. And if they can present that out to be less because they’re going to come back to work or they have to come back to work or there’s going to be certain offsets that the client wasn’t aware of, that reduces the reserves, that reduces the drain on profitability, that helps their stock price. There is a strong effort for insurance companies to be very careful of that. And I think you have to know that as a broker and you have to explain that to the client.

Bill Buchholz:

Because I can remember one particular situation with a group of about 500 physicians where they accepted a renewal with an increase of a million dollars. That’s compared to other companies that were willing to come in and offer it at a lower cost. And it was based on the fact that they did not want to change the quality of the benefits.

Joe Sevcik:

Wow.

Bill Buchholz:

Now I must confess that was probably about 20 years ago and things are a little different now. Again, I go back to you need to know that as a broker or consultant. You need to explain it to the client and you need to go through the thought process with the carrier.

Bill Buchholz:

For example … excuse me for rambling on here.

James Crook:

No, it’s great.

Bill Buchholz:

If you go to an insurance company and they provide a bid that they think is a really good one and it is and they don’t get the business, I think it’s incumbent upon the broker to go to that carrier and say, “This is why you didn’t get it.” And the reason was based on cost and the provisions that were not as good as yours were not a factor, were not that important to the client. Budget was. I hope that answers your question.

James Crook:

Yeah, no, that’s really great detail I think will be valuable for people to hear.

Joe Sevcik:

Bill, you had mentioned that you primarily focused on LTD, although if I have my notes right you said you also did some long-term care and some life.

Bill Buchholz:

Yes.

Joe Sevcik:

That would mean that you were probably in there with other brokers or advisors who might have carried some of the other lines. So talk a little bit about how disability insurance kind of fits with the other benefits and kind of how you approached the whole suite of benefits with a client.

Bill Buchholz:

Well again that’s changed somewhat over time too, and I’ll try to remember to come back to that. I think most physicians are comfortable with the notion that buying an option on time for disability insurance to cover their income makes some sense. Very few doctors are willing to accept that some of them are going to pass away during their working years. So an option on time for life, life insurance is a little bit different. But I think they do come together pretty good.

Bill Buchholz:

I would also ask them, and before I go into something else, long-term care I explain to them is a form of disability insurance after retirement. And I explain what has to happen to them to qualify for benefits. And that has become a more difficult product to sell because the actuarial estimates used in pricing it were way too aggressive. So the prices have gone up tremendously. But most people accept that life insurance is an acceptable benefit.

Bill Buchholz:

The thing I’ve always found interesting is to say to somebody, “Are you aware that the probability of your house burning down is far less than becoming disabled during your working years? But you don’t seem to have any difficulty, it’s almost an automatic to buy fire insurance or liability insurance of a different kind. Why wouldn’t you consider insuring the asset that creates the money that allows you to buy all these other things?” And I’ve found that to be acceptable to a lot of them.

Bill Buchholz:

The key is everybody does things for their reasons, not necessarily for mine. My job is to figure out what reasons would be acceptable to them, and I’ve found this option on time is a good thing for them to consider. Comparing the disability insurance cost to other costs of other types of insurance was acceptable. And some of it was that over time we developed a reputation for being accurate with our contract interpretations and that we would service things for a long period of time. We did that for 53 years while I was around, and it’ll probably go better now that I’m gone. But you never know for sure.

Joe Sevcik:

That’s great. I’m actually writing, I’m jotting down that line about everybody does things for their reasons, not mine. You need to figure out their reasons. That’s a great approach.

Bill Buchholz:

I actually learned that in a seminar. It’s amazing how you learn things along your career path and certain things you just remember. I heard the phrase an option on time probably 50 years ago and I’ve never forgotten it. People do things for their reasons not mine is another thing I learned from a seminar. I would actually go to these seminars and learn stuff.

James Crook:

That’s awesome.

Joe Sevcik:

These seminars, are they part of an industry association that you belong to? Or were they … talk a little bit about those. How did you view the role of continuing education and what were the best opportunities for that?

Bill Buchholz:

I started out being an individual life insurance salesman and disability salesman. That’s how I started with the Connecticut Mutual Life Insurance Company which is now a part of Mass Mutual. And I would go to the million dollar round table. And there was a gentleman by the name of Ben Feltman who worked with New York Life out of I think it was the Cleveland area but I’m not positive of that. And he was the epitome of life insurance sales in the world. He was unbelievable. And I had enough audacity. I saw him sitting at breakfast by himself and I said, “Ben, would you mind if I have breakfast with you and ask you a few questions?” And two hours later we stopped. During that time he said, “Bill, it’s really important that you think about what you’re going to say before you say it.” Then he told me about this option on time. People can visualize that and feel what an option is on time. You’re not saying they don’t have the ability to meet their goals, it’s just in case you don’t have the time this is what you would do.

Bill Buchholz:

The other thing he told me, he said, “Bill, try to think of all the questions that people can ask you. And you sit down in your office and based on a situation write down what the potential answers for that could be. Put them on a recipe card. When you’re going into a meeting, if you’re going into a clinic to talk about disability insurance, have those cards and just review them.” I would use that to remember some of the key points I was trying to get across and what I could bring of value.

Bill Buchholz:

We had a … I’m really rambling now. But we had a logo for our company, if you don’t add value you are of no value. So you have to come and present to the client, potential client or business manager, CFO, you have to bring to them something that is of value to them that makes their life easier. And that’s what we would try to do and I’d have a list of those things. And it worked so good I set it in a cupboard and now I can’t find them. But I can remember most of them.

James Crook:

Well that’s all really valuable stuff. And Bill, we really appreciate the time you’ve taken to talk to us today. Do you have any … we’re getting close to our hour here. Do you have any other critical lessons you’ve learned as you were building your career in this market?

Bill Buchholz:

Well one of the things that I was fortunate of, I talked about being lucky. I was lucky to get to know Bobby Knight when I was younger, the basketball coach. And some people think highly of him, some people don’t so much. I happened to be one that does think highly of him. But he once told me, he said, “Bill, remember this in whatever you’re doing. It’s not really that difficult to know what the right thing to do is. It just takes courage to do it.” And I’ve found when I was early in the business with the pressure to perform that I might be tempted to not explain something or not do the due diligence I should on a contract so that I could make the sale, because that particular contract had the lowest cost or something like that. And as time passed, it was a mantra within our office that do the right thing and in the end you will be paid handsomely for it. And we think that that has happened to us. We made a fair amount of money doing it our way and to coin a phrase from Frank Sinatra, we did it our way and we don’t have any regrets for doing it.

Bill Buchholz:

Boy, if you can stick to that, of doing the right thing, if you were really sitting in the client’s chair, doing what you would want to have done if you were sitting there making the decision that you sell them a disability program, what they don’t want to have is at time of claim that it’s denied for reasons that you never explained. Or they don’t want the doctor coming in and saying, “Hey, I heard from my buddy on the golf course that there’s this type of contract and you never explained that.” Do all that stuff up front. And stick to doing the right thing. It’s hard sometimes, but boy if you do it it’ll pay you handsomely.

Joe Sevcik:

Well that is great advice. And James, unless you have a final question that might be a good one to end on.

James Crook:

No, I think, yeah, I think that we’ve gotten a lot of value out of this conversation. Yeah, on behalf of MGIS, we’re very very grateful for your time today. Anyway, Joe were you going to say something?

Joe Sevcik:

I was just going to say, yeah, really echoing the same thing. This was very enlightening, very enjoyable. The hour really just flew by. I’m sure our listeners will really enjoy this as well. I will say that we wish you the best in retirement, but don’t be surprised if we ask you maybe back for a future blog and some future conversation. We won’t let you go quite that easy.

Bill Buchholz:

It’ll be my pleasure to do that if you’d like to. I apologize, sometimes I tend to ramble. But I think of things as I go along and I respond to questions pretty well because they trigger things in my mind. If there’s another topic you want to visit about or be more specific about certain things, I’d be happy to do that. And thank you for the opportunity to visit with you.

James Crook:

Yeah, thank you Bill. We will definitely take you up on that. Yeah, thank you so much. We’ll let you go and once we’ve kind of put this together into a podcast we’ll send it to you so you can take a listen before anyone else hears it.

Bill Buchholz:

Okay, that’d be wonderful.

James Crook:

Okay, Joe and Bill, we should all be on the line now.

Bill Buchholz:

Hi Joe, this is Bill.

Joe Sevcik:

Hello. Hi Bill, how are you?

Bill Buchholz:

Good. Nice to visit with you.

Joe Sevcik:

Good. Yeah, same here. How are things in beautiful Wisconsin these days?

Bill Buchholz:

Well it’s not all bad right now. According to the weather report which is not terribly reliable as you know, we’re supposed to have 12 consecutive days of about 80 degrees with sunshine and or slight clouds.

Joe Sevcik:

Wow. Nice.

Bill Buchholz:

Which means about half the days will probably rain.

Joe Sevcik:

Yeah. I’m originally from Chicago, I’m a Chicago kid. And we used to have a place up near Baraboo so I have fond memories of going up into Wisconsin.

Bill Buchholz:

Yeah. Well you wouldn’t recognize Baraboo unless you’ve been there recently because there’s four lane highways around it and everything. It’s really become quite the place.

Joe Sevcik:

Oh wow. No, I won’t recognize that. It was a pretty sleepy little town when I was a kid. Neat place, but yeah, yeah.

James Crook:

Yeah. Well Bill, we’re really grateful to have you today. I’ll go ahead and introduce Joe then we’ll introduce you, Bill. Joe Sevcik is a marketing and brand strategy professional with over 30 years of experience working for companies that include Hallmark, H&R Block and Assurant Employee Benefits. He spent over 10 years with Assurant serving as a senior vice president of marketing and strategy. When Sun Life acquired Assurant, Joe stayed on through a transitional period before moving on to his own consulting business. Joe is going to be cohosting our conversation here.

James Crook:

Then Bill, Bill Buchholz graduated from the University of Wisconsin school of business in 1968 with a degree in business administration and risk management. He also earned a masters in financial services and the certified employee benefit specialist or CEBS designation. He also taught employee benefits at the Wisconsin Graduate School of Business. After a 53 year very successful sales career, Bill retired in June of this year.

James Crook:

Those are the introductions. Bill, again, we’re excited to have you here.

Bill Buchholz:

It’s my pleasure.

Joe Sevcik:

Thank you James. And again, my thanks as well, Bill, for you joining us today. And I guess first off, congratulations on an impressive and successful career. I’m sure you’ll enjoy your well-earned retirement. But before we let you ride off into that proverbial sunset, we’d love for you to share with our listeners some of the lessons you’ve learned in your career, and especially how brokers and advisors can apply this today. If that sounds all right, we’ll just go ahead and jump right in.

Bill Buchholz:

Sounds like a plan to me.

Joe Sevcik:

All right. I think it’s safe to say that you’re an expert when it comes to disability insurance for healthcare professionals. Let’s just start off by why don’t you talk a little bit about how you really got into this market. What led you here?

Bill Buchholz:

Well if I were to have a bottle of truth serum I would say luck had a lot to do with it. When I graduated from the university, I decided that I was going to go into the sales and administration end of it. I thought that what I would do is to call on the medical clinic that my mother worked at. And I thought, “Gosh, for sure they’ll do business with me because my mother is there.” Well when I got there, they were very courteous but they were not ready to entrust their employee benefits, especially disability insurance to a 21 year old. So they politely declined me, but they said, “We just came back from a convention.” It was called MGMA, Medical Group Management Association. And they have endorsed an organization known as MGIS, Medical Group Insurance Services, to find a high quality disability program. They also had life insurance and some other things later on. But the impetus was caused by the disability coverage.

Bill Buchholz:

I called on the MGIS and they said, “Yes, we’re looking for people to represent us in various parts of the country.” And to make a long story short, we finally put an agreement together which turned out to be the best agreement investment that I’ve ever made. And that’s how I really got involved in it. And proceeded. My professor told me, he goes, “Make sure you understand the contracts thoroughly.” So we can talk more about that later, but that’s how I got started.

Joe Sevcik:

Okay great. You know, I know you’re from Wisconsin. When you said it was some luck that got you into it, I’m reminded of a quote. I don’t know if it’s true or not, but it’s been attributed to Vince Lombardi when he was with the Packers. He said, “Yep, we were lucky. And the harder we work, the luckier we get.” I’m sure there was plenty of hard work involved in that.

Bill Buchholz:

I was just at the right place at the right time.

Joe Sevcik:

Sure, sure. Other than the fact that your mom worked there, clearly once you made the call on the clinic and they told you about the MGMA group, what really led you to … or what really attracted you to this market? What made you think, “Wow, there really is something here”? Was it the conversation with the people at MGMA or conversations with people at MGIS? What was really the thing that said, “Boy, this is where I want to focus”?

Bill Buchholz:

When I started the business, I actually did learn some things in college. One of them was if you’re going to be involved in sales, you should probably try to work with people that have an ability to purchase things and significant things. The old Willy Sutton theory of why do you rob banks, because that’s where the money is. On my list I had doctors as people who had money who could buy things. So I started with the doctors and it turned out to be a good thing.

Joe Sevcik:

Great, great, okay.

James Crook:

Well my question … Oh sorry, go ahead Joe.

Joe Sevcik:

No, no, no I’m sorry, go ahead James.

James Crook:

No, I was just going to say kind of thinking about just from bringing the millennial faction in to this discussion, how do you feel that the market has … how true is everything that you’re saying? How has the market changed from where it was when you started to where it is today?

Bill Buchholz:

Well it’s changed significantly. When I started working with physician groups, quality was absolutely the most important thing. All the decisions were being made by physicians, not administration. And cost really wasn’t so much a factor, so long as it can be deductible to the entity. As you know we could also make it not taxable to the individuals, and we can talk about that later if you’d like. But it has changed quite a but.

Bill Buchholz:

Now it is more of a commodity. It’s being driven by budget decisions. They still want all the great quality, but if the management has to reduce the quality of the contracts just to trim the budgets, that’s kind of what happens. The approach I’ve used over the years is to make sure you present a combination of contracts, some that are high quality and good cost, and some that are maybe not quite the same quality but have a much lower cost. And let them make the decision as to which way they want to go. And of course make sure you document their decision process so that you don’t get caught with egg on your face later on.

James Crook:

Interesting.

Joe Sevcik:

That’s a really interesting concept, a really interesting statement there. Without putting you too much on the spot, when you present kind of this full array of contracts from okay to really good, how often would you say … and I know it’s driven by budget from what you said, but how often would you say once they really understand the contract do they tend to go for the higher quality versus the cost?

Bill Buchholz:

I think most of the time, and I’m just basing it on our book of business that we had. Almost all of the contracts were high quality contracts. For example, Sun Life’s contract is a high quality contract. And of course that would be one that we would be interested in presenting to them. But I’m going to digress for just a moment.

Bill Buchholz:

It is really, really, really critical that brokers and consultants truly understand the language of all of these contracts. I spent a lot of effort in my early years reading these contracts, knowing what all the provisions were, talking to the claims departments of the various insurance companies to find out how they handled situations. I was involved with my partner and some other people in actually assisting in writing the provisions of various contracts. And 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’s the situations that can cause the problem.

Bill Buchholz:

But to go back to your question, that original question is what percentage of them opt for the quality. I still think most of them do. I don’t know that holds for the rest of the brokerage and consulting community because sometimes the consultants, especially the big firms come in and do a whole bunch of things and they’re trying to cut costs to justify their fees. And in those situations they’ll probably opt for the lower cost. But boy is it ever important that you document all of this stuff. Because the rubber meets the road when it comes time for claims.

James Crook:

Interesting. Go ahead Joe.

Joe Sevcik:

I want to do a follow-up question on that, and this is kind of a two part question I think. I’ll kind of have you riff on the answer here. You talked about how important it is to understand and read the contract. So I guess the first part of my question is did you find that to be a competitive advantage? In other words, do you feel like you understood contracts perhaps better than others? And my second part of that question is do you think the selection process on behalf of the healthcare professional at the organization is influenced by how well the broker has explained the contract? In other words, and this is a little bit of a leading question, but in other words if the broker doesn’t really fully understand the contract differences then how would you expect the client to understand the difference?

Bill Buchholz:

Well let’s start with your first one.

Joe Sevcik:

Yep.

Bill Buchholz:

It’s really important that you do understand it. We would … when I say we, it’s the folks in my office and myself and particularly my partner Patti Garrity and Joanne Powers would go through these things. And we would have a little study group and we would read every single line of these contracts. Then we would check with the claims department to say, “How do you handle these things?” And where there was some ambiguity we’d ask them to clarify it with an email. Although when I started it was pen and pencil, there wasn’t any email.

Bill Buchholz:

Anyway, we would look at them all. Because part of your second question is the client will begin to understand that you may understand the policies a little bit better than somebody else might or another firm. And that includes even the big consulting firms. They still have individuals who were doing stuff, and they’re so driven by short term sales results that sometimes they can’t afford to take the time or have a contract that is good in the long run.

Bill Buchholz:

I don’t know if that answers your question. If you want to expand on it more I’d be happy to answer it.

Joe Sevcik:

No, I think that does. I think that highlights it perfectly. You’ve talked … you’ve given us great context on kind of how you approached it, how you started out. I love the idea of a study group. I think that really can provide a competitive differential for advisors and brokers. But with as much as the market has changed and know that you’ve seen, if you were starting out fresh today, so if you were going to come into this market today, how would you approach it? Would you approach it any different? What things would you focus on?

Bill Buchholz:

I would approach it a little bit differently. When I started, I just really had one horse in the race. And that was the MGIS program, and it still continues to be a great horse. But quality was so predominately desired by the clients that that’s all I really needed to have. Now I don’t think you can afford to do that. 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. I know that’s very difficult for some brokers to do or captive agents to do, but I think that’s the best way to do it these days. Because doctors are smart people, and I have not found them difficult to work with, so long as you are objective in the data and information that you give them. That’s what I would probably do a little bit differently now.

James Crook:

Okay. As a quick-

Bill Buchholz:

I’m going to add one other thing. I also think it’s probably important that you become a part of either a formal bigger organization or an informal organization. There was a group of brokers around the country and we formed an informal company or partnership, if you will, called National Benefit Partners. And we used that as a marketing arm to go to bigger organizations. Because that’s the big difference now in the marketplace is now you’re dealing with bigger organizations as opposed to the physician-owned smaller medical clinics.

James Crook:

Okay, let me ask a quick follow-up question to that. I’d love to know a little bit more about what does taking a consultative approach look like versus a more sales-oriented approach like you were talking about?

Bill Buchholz:

Well I think there’s a couple of things there that I mean by it. One of them is that you don’t come in with just the one horse. We use a line, if you will, or a presentation approach by saying our objective, if we can accomplish it, is to maintain or improve the quality of your benefits and if possible also reduce your budget. And we’ve been able to do that at a pretty high percentage of times. But if we’re able to accomplish that, is that something that would be of interest to you? Because you’re going to have to overcome the natural tendency to stay with your local broker, and I’m going to try to deliver information to you and leverage that you can get by working with a bigger organization.

Bill Buchholz:

The other part of it is that from a consultant standpoint, sometimes we’ll just do a consultant fee and say this is what we’re going to do for your service and we’ll work with whichever company or companies works best for you, which we do on a commission basis too but I think we just need to be more of an advisor rather than a sales person.

James Crook:

Interesting, yeah thanks.

Joe Sevcik:

You mentioned about how you would approach a physician group and kind of talk about you may have to move away from your current broker. Talk more about effective ways you found to prospect in this market. How would you prospect? How would you even get the door open for these groups?

Bill Buchholz:

It’s harder now than it used to be, to be quite honest about it. Because there’s fewer organizations. They’re bigger organizations where they may have a thousand physicians on staff and the physicians are employees, they’re not owners. But nevertheless, I think the fundamental approach would be that we can provide something for you I think you’ll find helpful and will not cause you any problems in the future, and that is if you will allow us to examine your current contract and give you an estimate of what we think it’s going to cost. And you are willing to provide us with some census material, based on our history here’s what we’ve been able to accomplish. Now that’s difficult for somebody starting out new, which is why I think you align yourself with other people or you’re a part of a study group or an informal brokerage firm.

Bill Buchholz:

I don’t know if I totally answered your question, but hopefully that helps.

Joe Sevcik:

Yes that does, that does help. You had referenced earlier, and this has kind of come up a couple different times. But you referenced earlier about your first decision in how to get into this market had to do with who’s got the money to be able to afford something. In your experience, talk a little bit about how healthcare professionals might differ from other high income professionals. I’m thinking attorneys, architects, something along those lines. Kind of both in their needs and their attitudes towards disability insurance. And are their needs truly different?

Bill Buchholz:

Well I don’t know that they’re that much different. But I’ll kind of start with the beginning. 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. They understand that.

Bill Buchholz:

I have tried to explain to physicians from day one that purchasing insurance, especially disability insurance is an option on time. If you are healthy, don’t pass away early or some disaster happens, if you have enough time you will accomplish all of your goals. And they will readily agree with that.

Bill Buchholz:

So rather than using some of the approaches that insurance companies have used by saying the probabilities of this, you become disabled and if you do this is what’s going to happen to you and look at all the money we can give you, I just tell them, “Think of insurance as an option on time. If you don’t have all the time you need, the insurance will fill in the blanks of what you could have accomplished.” And I have found that’s a concept that they buy into because we’re not in an argument immediately with different provisions of policies and the cost. I try to get them to buy in the concept that purchasing insurance is a smart thing to do, it’s not just a necessary evil, it’s an intelligent thing to do.

Joe Sevcik:

That is a great line. An option on time. I think that sums it up perfectly. We talked about the fact that physicians really understand how important disability insurance is, and they certainly understand their most valuable asset, their ability to earn the income. But they’re also among the busiest people there are. Lots and lots of demands on their time. Did you find a consistent way to kind of capture their interest and maybe help lead them to the decision? I know you talked about that a little bit, you touched on that, but maybe if you could expand a little bit.

Bill Buchholz:

Yeah I think that’s a really good question, because I never really went after the doctors themselves. Even back in the good old days, some may refer to it as the Paleozoic age. But even in the good old days, the three to 10 to 25 to 50, 100 physician clinics all had a business manager. And it was the business manager’s charge to take care of things like this. Our prospecting method was to go to the business managers or the people nowadays even in the big organizations within an HR department there will be somebody who addresses these issues. And we would go to them and make our pitch to them, because they will have more time. And they are charged with having a quality program at a reasonable price.

Bill Buchholz:

Previously you had asked the question how would I go after them. I have never gone after the doctors directly. Now occasionally they will actually call us and want to visit about some stuff and that’s where we get involved with individual contracts. But primarily what we’ve done is we’ve moved programs, and I quite frankly think they make the most sense.

Bill Buchholz:

Again, being repetitive and I apologize, but I did not go after the doctors directly. I went after the business managers who then would have the time to analyze, then they would take it to the doctors or the senior administrative people and say, “This is something I think we need to look at.” Then you have their attention, then ultimately we’d probably make a presentation to a committee within the physician group or the big organizations now to try to prove our point and compare what they had with what they can have and with the various kinds of contracts.

Bill Buchholz:

Then once again, and you’ll hear me say this over and over, document everything. Because everything goes fine. Everybody loves the lower cost or the higher quality benefits until claim time. Then you have to have things documented. That’s especially true if the plan is being purchased based on budget costs. They have to know that this is what they gave up and you agreed to do this. That’s kind of the way I would do it. You’re right, doctors are terribly busy.

Joe Sevcik:

Oh yeah, yeah.

James Crook:

That’s some really interesting information. I think that kind of leads us into a question here where do you have any claims disaster stories that you can share where something … without providing sensitive information, where someone was not happy at claim time with the trade-off they made?

Bill Buchholz:

Oh sure, there have been some uncomfortable times. I will tell you I don’t know for sure how many physician claims we have, but it’s several hundred. And we were sued one time and it turned out the judge just shooed the case out as being inappropriate. But we did an awfully good job of documenting things.

Bill Buchholz:

Where the problem usually starts is at the time of claim there’s a misunderstanding of how income is reported to the insurance company for the purpose of establishing what the benefit is. That income is not updated from time to time, from year to year. So there’s a gap between what is and what the contract or the insurance company says you’ve reported. Because insurance companies will always pay the benefit based on the lesser of your current income or the income you reported and are paying premiums on it. A lot of people don’t remember that. But we’ve had very few serious problems, and I thank our staff for that because they did such a great job of documenting things and talking with the clients and that sort of thing. Have we had some uncomfortable situations? Yes. But we’ve always been able to work them out with the client and the insurance company.

Bill Buchholz:

And part of the reason the insurance company has been willing to work in solving the problems is that we have not tried to pull anything over on them. I think a huge mistake that brokers make is when somebody within the organization is right on the verge of filing a claim then they change carriers and hopefully the broker has notified the new insurance company of it, but if they don’t it’s going to be a disaster. Fortunately we’ve never had one of those.

Joe Sevcik:

I’d love to hear the flip side of that question also. Talk about a time when providing the right coverage, the right contract really paid off for a group or a particular physician.

Bill Buchholz:

Out of all the claims that we’ve had physicians, it is very rewarding to go through the process with the client. The client is pleased that we consulted with them and that we’re going to be an advocate, and that is a term that we used all of the time is that we will be your advocate. Now that’s used by lots of people I think, but we really use, we really in fact do that. And we would help in the conversations with the insurance company with the proper authorization. But it is very, very rewarding to have a claim result in the manner in which you think it should be and what the client is hoping it will be.

Bill Buchholz:

Now of course we go back to the documentation of stuff to help support all of that. I told you there was one time we got sued and we had 700 pages of documents that we provided for the judge. He not only threw it out, but he did it with with prejudice because you can’t re-file the claim.

Bill Buchholz:

This is why … I should have said this a lot earlier, but it was really important to me to be doing something that I could be proud of. That I wasn’t just selling something just because somebody wanted me to sell it and I could make some money for doing it. I needed to be able to look in the mirror and say selling disability insurance or life insurance or long-term care, primarily we’re disability, is that I can be proud of what I’m doing and that shows up especially at the time of claim.

Joe Sevcik:

That’s great. You’ve touched on this a little bit, so my apologies if this seems like a repetitive question. How would you respond to this statement? All disability policies or contracts are basically the same.

Bill Buchholz:

I would say probably not the case. They aren’t. Because if you think about it, common sense wise, for a group of let’s say 100 physicians or 1000 physicians or whatever it happens to be, the disabilities are going to be the disabilities are going to be the disabilities. Whatever it is, it’s going to be the same with all of these situations. They’re going to break a leg, get MS, whatever. The claims and experience should be the same. Now that doesn’t mean that the payouts will be the same.

Bill Buchholz:

If one company is charging 50% of what another company is charging and we have the same batch of disabilities, something’s got to give. And what gives is the amount that’s paid out in claims. And that’s where the provisions are so important that you understand. We talked about reporting of income earlier. One of the things that surprises a lot of people is that at the time of claim there are some offsets. And they don’t know what those offsets are. Some might not know that deferred compensation is exempt as an offset. Another company may say it is used as an offset. That’s why we would spend time … when we were analyzing contracts, the first thing we would look at is the termination contracts, under what provisions can the insurance company terminate the contracts. And the one that we looked for the most is whether there’s mandatory rehab and that if you don’t agree to be rehabbed in whatever the insurance company thinks you’re qualified for, you run the risk of losing your benefit. That’s a huge thing.

Bill Buchholz:

The next set of provisions that we always go look at are what are the offsets in the event of a claim. Income from some other place or consulting income or rental income from the building that you own. Those are all extremely important things in addition to obviously the definition of disability. It goes without saying that there’s a huge difference between your own specialty definition and your own occupation definition. Or in some cases it’s an own occupation for a short period of time, then it’s any occupation. Those are huge things you have to know.

James Crook:

Interesting. You were just talking about one of those aspects were the mandatory rehab is such a big deal. Why is that such a big deal to healthcare professionals?

Bill Buchholz:

Early on we talked about doctors being proud of their profession. They’re also quite sure that they don’t want to be forced to do something that they didn’t train to do. Even to the point of teaching medicine as opposed to practicing a certain sub-specialty. It’s really important.

Bill Buchholz:

The other thing is that if they didn’t really believe that their ability to work and earn income wasn’t the most important financial asset they owned, they would be inclined to say, “Oh that’s okay, mandatory rehab is not a big issue. I’ll just go do something else.” And I don’t know that I’ve ever heard a physician say that.

Bill Buchholz:

The other thing escaped my mind here for just a minute. Oh, we talked about the claims essentially being the same with whatever quality of contract you have. Well how is the lower cost company going to not pay out less? One is if they can terminate the claim. The other one is that if they have sufficient offsets. And there are insurance companies, I’m not going to name any of them, but there are a significant number of insurance companies that will put provisions in the contract that’ll give them permission to terminate the contract and reduce the size of the benefit. Because ultimately at the time of claim, the reserves they have to set up at the time of claim is a function of the present value of the future stream of benefit payments. And if they can present that out to be less because they’re going to come back to work or they have to come back to work or there’s going to be certain offsets that the client wasn’t aware of, that reduces the reserves, that reduces the drain on profitability, that helps their stock price. There is a strong effort for insurance companies to be very careful of that. And I think you have to know that as a broker and you have to explain that to the client.

Bill Buchholz:

Because I can remember one particular situation with a group of about 500 physicians where they accepted a renewal with an increase of a million dollars. That’s compared to other companies that were willing to come in and offer it at a lower cost. And it was based on the fact that they did not want to change the quality of the benefits.

Joe Sevcik:

Wow.

Bill Buchholz:

Now I must confess that was probably about 20 years ago and things are a little different now. Again, I go back to you need to know that as a broker or consultant. You need to explain it to the client and you need to go through the thought process with the carrier.

Bill Buchholz:

For example … excuse me for rambling on here.

James Crook:

No, it’s great.

Bill Buchholz:

If you go to an insurance company and they provide a bid that they think is a really good one and it is and they don’t get the business, I think it’s incumbent upon the broker to go to that carrier and say, “This is why you didn’t get it.” And the reason was based on cost and the provisions that were not as good as yours were not a factor, were not that important to the client. Budget was. I hope that answers your question.

James Crook:

Yeah, no, that’s really great detail I think will be valuable for people to hear.

Joe Sevcik:

Bill, you had mentioned that you primarily focused on LTD, although if I have my notes right you said you also did some long-term care and some life.

Bill Buchholz:

Yes.

Joe Sevcik:

That would mean that you were probably in there with other brokers or advisors who might have carried some of the other lines. So talk a little bit about how disability insurance kind of fits with the other benefits and kind of how you approached the whole suite of benefits with a client.

Bill Buchholz:

Well again that’s changed somewhat over time too, and I’ll try to remember to come back to that. I think most physicians are comfortable with the notion that buying an option on time for disability insurance to cover their income makes some sense. Very few doctors are willing to accept that some of them are going to pass away during their working years. So an option on time for life, life insurance is a little bit different. But I think they do come together pretty good.

Bill Buchholz:

I would also ask them, and before I go into something else, long-term care I explain to them is a form of disability insurance after retirement. And I explain what has to happen to them to qualify for benefits. And that has become a more difficult product to sell because the actuarial estimates used in pricing it were way too aggressive. So the prices have gone up tremendously. But most people accept that life insurance is an acceptable benefit.

Bill Buchholz:

The thing I’ve always found interesting is to say to somebody, “Are you aware that the probability of your house burning down is far less than becoming disabled during your working years? But you don’t seem to have any difficulty, it’s almost an automatic to buy fire insurance or liability insurance of a different kind. Why wouldn’t you consider insuring the asset that creates the money that allows you to buy all these other things?” And I’ve found that to be acceptable to a lot of them.

Bill Buchholz:

The key is everybody does things for their reasons, not necessarily for mine. My job is to figure out what reasons would be acceptable to them, and I’ve found this option on time is a good thing for them to consider. Comparing the disability insurance cost to other costs of other types of insurance was acceptable. And some of it was that over time we developed a reputation for being accurate with our contract interpretations and that we would service things for a long period of time. We did that for 53 years while I was around, and it’ll probably go better now that I’m gone. But you never know for sure.

Joe Sevcik:

That’s great. I’m actually writing, I’m jotting down that line about everybody does things for their reasons, not mine. You need to figure out their reasons. That’s a great approach.

Bill Buchholz:

I actually learned that in a seminar. It’s amazing how you learn things along your career path and certain things you just remember. I heard the phrase an option on time probably 50 years ago and I’ve never forgotten it. People do things for their reasons not mine is another thing I learned from a seminar. I would actually go to these seminars and learn stuff.

James Crook:

That’s awesome.

Joe Sevcik:

These seminars, are they part of an industry association that you belong to? Or were they … talk a little bit about those. How did you view the role of continuing education and what were the best opportunities for that?

Bill Buchholz:

I started out being an individual life insurance salesman and disability salesman. That’s how I started with the Connecticut Mutual Life Insurance Company which is now a part of Mass Mutual. And I would go to the million dollar round table. And there was a gentleman by the name of Ben Feltman who worked with New York Life out of I think it was the Cleveland area but I’m not positive of that. And he was the epitome of life insurance sales in the world. He was unbelievable. And I had enough audacity. I saw him sitting at breakfast by himself and I said, “Ben, would you mind if I have breakfast with you and ask you a few questions?” And two hours later we stopped. During that time he said, “Bill, it’s really important that you think about what you’re going to say before you say it.” Then he told me about this option on time. People can visualize that and feel what an option is on time. You’re not saying they don’t have the ability to meet their goals, it’s just in case you don’t have the time this is what you would do.

Bill Buchholz:

The other thing he told me, he said, “Bill, try to think of all the questions that people can ask you. And you sit down in your office and based on a situation write down what the potential answers for that could be. Put them on a recipe card. When you’re going into a meeting, if you’re going into a clinic to talk about disability insurance, have those cards and just review them.” I would use that to remember some of the key points I was trying to get across and what I could bring of value.

Bill Buchholz:

We had a … I’m really rambling now. But we had a logo for our company, if you don’t add value you are of no value. So you have to come and present to the client, potential client or business manager, CFO, you have to bring to them something that is of value to them that makes their life easier. And that’s what we would try to do and I’d have a list of those things. And it worked so good I set it in a cupboard and now I can’t find them. But I can remember most of them.

James Crook:

Well that’s all really valuable stuff. And Bill, we really appreciate the time you’ve taken to talk to us today. Do you have any … we’re getting close to our hour here. Do you have any other critical lessons you’ve learned as you were building your career in this market?

Bill Buchholz:

Well one of the things that I was fortunate of, I talked about being lucky. I was lucky to get to know Bobby Knight when I was younger, the basketball coach. And some people think highly of him, some people don’t so much. I happened to be one that does think highly of him. But he once told me, he said, “Bill, remember this in whatever you’re doing. It’s not really that difficult to know what the right thing to do is. It just takes courage to do it.” And I’ve found when I was early in the business with the pressure to perform that I might be tempted to not explain something or not do the due diligence I should on a contract so that I could make the sale, because that particular contract had the lowest cost or something like that. And as time passed, it was a mantra within our office that do the right thing and in the end you will be paid handsomely for it. And we think that that has happened to us. We made a fair amount of money doing it our way and to coin a phrase from Frank Sinatra, we did it our way and we don’t have any regrets for doing it.

Bill Buchholz:

Boy, if you can stick to that, of doing the right thing, if you were really sitting in the client’s chair, doing what you would want to have done if you were sitting there making the decision that you sell them a disability program, what they don’t want to have is at time of claim that it’s denied for reasons that you never explained. Or they don’t want the doctor coming in and saying, “Hey, I heard from my buddy on the golf course that there’s this type of contract and you never explained that.” Do all that stuff up front. And stick to doing the right thing. It’s hard sometimes, but boy if you do it it’ll pay you handsomely.

Joe Sevcik:

Well that is great advice. And James, unless you have a final question that might be a good one to end on.

James Crook:

No, I think, yeah, I think that we’ve gotten a lot of value out of this conversation. Yeah, on behalf of MGIS, we’re very very grateful for your time today. Anyway, Joe were you going to say something?

Joe Sevcik:

I was just going to say, yeah, really echoing the same thing. This was very enlightening, very enjoyable. The hour really just flew by. I’m sure our listeners will really enjoy this as well. I will say that we wish you the best in retirement, but don’t be surprised if we ask you maybe back for a future blog and some future conversation. We won’t let you go quite that easy.

Bill Buchholz:

It’ll be my pleasure to do that if you’d like to. I apologize, sometimes I tend to ramble. But I think of things as I go along and I respond to questions pretty well because they trigger things in my mind. If there’s another topic you want to visit about or be more specific about certain things, I’d be happy to do that. And thank you for the opportunity to visit with you.

James Crook:

Yeah, thank you Bill. We will definitely take you up on that. Yeah, thank you so much. We’ll let you go and once we’ve kind of put this together into a podcast we’ll send it to you so you can take a listen before anyone else hears it.

Bill Buchholz:

Okay, that’d be wonderful.

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