Advisor Today - March/April 2016 - (Page 25)

PRODUCT SPOTLIGHT INDIVIDUAL DISABILITY INSURANCE By Steve Brady Smooth Sailing Here is how to make an IDI sale after receiving a modified offer. S elling individual disability insurance (IDI) can be a lengthy process. From first broaching the subject with your client and submitting an offer, to underwriting and receiving an approved policy, the process can take weeks or even months. In addition, there is often a backand-forth between the carrier and the client, especially during the underwriting process. What's more, this back-and-forth can often end in an unexpected result: a modified offer. But a modified offer doesn't mean that a client isn't eligible for coverage; it is just an IDI policy that is different from what was originally applied for. The client is still approved for coverage, but it may not cover his back if he was in a car accident years ago and has continually sought care for the condition. I've talked to many advisors whose clients have received a modified offer, but aren't sure what to do. Generally speaking, IDI applications often come back approved different than what they were originally applied for, while some are declined due to income, medical or career history. Modified offers often come as a surprise to clients. That surprise can quickly turn into disappointment and result in a lost sale if not managed properly by the advisor. To that end, I recommend learning about the underwriting process, the information needed to ensure a successful approval, and what to do if your clients receive a modified offer. This information can help you manage your clients' expectations during the process. Charting unknown waters The origins of underwriting-or at least the process of assessing the risk of a potential customer-can be traced back to Lloyd's Coffee House in London in the late 1600s. At that time, underwriting was done to insure sailing vessels, and the process included analyzing the ship, cargo, destination, potential weather A modified offer is just an IDI policy that is different from what was originally applied for. conditions, crew and, most importantly, the captain. Understanding the captain's previous experiences at sea provided a clear vision for how he would handle unforeseen problems on a future journey, such as storms or other difficulties. The risk assessment was considered complete when the individuals accepting the risk wrote their names under the described risk. That is how they became known as underwriters. Today, underwriting for IDI assesses risk in a similar way. The "captain" in this case is your client, but underwriters are still looking at his life experiences. These include his career path to-date, his income history and, most importantly, his medical history. These three components can be considered "storms" that each captain has experienced, which help underwriters make their decision. Determining your client's readiness for the high seas A client's medical history is one of the main factors for an IDI policy to come back with a modified offer. As an advisor, it's often impossible to know your client's medical history. Clients often don't disclose medical conditions at the beginning of the process (even when prompted to do so), making it hard to predict what conditions an underwriter may exclude from a policy. Before you submit a policy, recognize some of the conditions that are harder to cover. These include musculoskeletal conditions (such as back problems), chronic conditions (such as high blood pressure) and previous injuries (such as a shoulder injury). In addition, there are a number of recreational activities that often aren't covered, including riskier endeavors like flying, rock climbing and auto racing. During the underwriting process, a carrier's underwriters will look at a client's physician statements and medical records. These go beyond understanding a client's height, weight and blood pressure; they will be looking for other indications that your client may be more likely to become disabled in the future. Navigating the waters of a modified offer It is important to make your clients aware that modified offers don't mean that a policy is declined. It may mean, for example, that there are exclusions that wouldn't be covered should your March/April 2016 | ADVISOR TODAY 25

Table of Contents for the Digital Edition of Advisor Today - March/April 2016

From the Editor
New Products
A Question of Ethics The Details Often Make the Difference
What's Ahead for Financial Advising?
Whos's Saving the Most and Why?
Making the Case for Critical Illness Insurance
Are You a Retirement Expert?
Selling the "Best Plan"
Smooth Sailing
Taking Incremental Steps Toward Success
Investment Strategies for Today’s Consumers
How Tax Efficient is Your Investment and Retirement Portfolio?
Naifa News
Ideas for a Profitable Practice
Crossing the Two Client Relationship Bridges
Working with Muslim-American Clients
Attracting and Serving Today's High-Net-Worth Clients
Becoming a Networking Success
Advertiser Index
Back Page

Advisor Today - March/April 2016