You successfully secured an appointment, made the case for disability income insurance, overcame the price objections and submitted the application. Now all that's left to do is sit back and wait for the commission, right? Hopefully. Unfortunately, many agents find that submitting the application is the first in a series of grueling underwriting steps that end with long and confusing client conversations about disability income insurance exclusions, class changes and premium hikes. What's a hard-working agent to do? In five words: Give underwriters what they want.
So, what DO disability underwriters want? It is really quite simple. They want accurate information in three critical areas: 1. Current income 2. Occupational class 3. Medical history
Secret #1: Ask the right income questions and then carefully manage disability income expectations. A good rule of thumb for determining a disability income benefit amount is to calculate 60 percent of a client's gross income. However, the gross income level may not be what it seems. The key is to ask your client to come to the appointment with answers to these crucial questions:
1. Are you self-employed or do you work for someone else? 2. If you work for someone else: What percentage of your income is from base pay? What percentage is from commissions or bonuses? a. If 100 percent base pay: What are your documented gross earnings for the past six months? Get one pay stub that shows six months of history or the multiple paychecks needed to document six months. Last year's 1040 form and supporting W-2s may also be used. b. If mixture of base pay, commissions and bonuses: At the end of last year, what did your 1040 tax form show for your annual earnings? This is normally reported on page one as W-2 earnings. 3. If self-employed: At the end of last year, what did your 1040 tax form show for your NET annual earnings as reported on Schedules C or E plus W-2, if applicable? How about the year before?
Use the last year's W-2 figure as the gross pay to estimate the disability income benefit amount. So, if the client earns $75,000 per year, the monthly gross income is $6,250 and the 60 percent ballpark would be $3,750. From there, explain that each carrier applies maximum disability income benefit levels, based upon the client's occupational class and medical history. In this example, most disability income insurance carriers would provide a maximum base benefit amount of $2,780 and a SSI rider of $1,170 resulting in a total disability income benefit amount of $3,950 - pretty close to the 60 percent ballpark. However, that's assuming a typical occupational class and medical history. When meeting with your client, it's best to stay general until you have been informed of his/her actual earned income.
Secret #2: Obtain a clear understanding of the client's occupational duties. Many disability producers write down the client's job title without asking questions about the duties performed. The duties performed (not the job title) determine the occupational class and the premium charged. For example, one agent submitted an application for an Oil Company Owner. Initially, that would suggest a 5A class with the most favorable rates. However, after learning the job duties, the underwriters determined that the applicant was really an Owner-Operator of a gas station, with an A classification. This occupational class change more than doubled the price of the disability income insurance plan!
Lesson learned: Always look at the duties - not the title!
Secret #3: Be thorough with medical information. This is no time to be shy. Tell your client that it's important to be forthcoming about any and all medical conditions. The client can either give you the information directly, or, use the telephone application option to provide his/her medical information to the carrier. It's best to know about medical impairments up front so we can shop for coverage from carriers that accept medically impaired risks.
Not Recommended: • Copying medical information off old medical exams from prior files. • Assuming no change in medical history without specifically asking the questions. • Providing only the last name of doctors consulted without phone and address. • Providing only sketchy info about treatment, dates, prescriptions, recovery/resolution.
Strongly Recommended: • Tell your client that taking five minutes to carefully record up-to-date medical information today will save weeks in the underwriting process. • Ask every question on the medical section of the application, even if the client is being examined. • Allow us to cut down on the time it takes to get an APS by providing the info needed up front without waiting for the exam. • When a question is answered "yes," get the dates treatment was provided, medicines prescribed and the issue resolution. Also include the name and contact information for the practitioner consulted.
Three Secrets Add up to Disability Income Insurance Underwriting Success When it comes to making friends with underwriting, there truly are no shortcuts. Each of the three secrets has one common ingredient: Thorough and accurate information. Increased preparation leads to increased disability income insurance approval rates every time. Don't be afraid to ask your clients for the necessary documentation. Yes, it can be uncomfortable. But remember, they provide a lot more information than that every time they apply for a home loan. Considering the potential risks and the potential benefits, it's well worth the time.
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