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Insurance Cost Too Much? Industry Offers Solutions to Cash-Conscious Clients

Cost objection has long been one of the major challenges agents face when selling insurance. Today, as the economy tightens and consumers become more selective in what they spend money on, that challenge will continue to become larger.

Research by Agent Media, publisher of the Agent’s Sales Journal, shows that cost objection is consistently ranked among the top five insurance sales challenges, and when different lines of insurance are measured, is cited by as many as 75 percent of agents as the biggest obstacle they face.

Carriers in different segments of the industry are responding to the tightening environment, attempting to offer products and incentives that will help agents overcome the cost issue when working with clients.

Following are some solutions offered by a number of companies in the health insurance, benefits, life insurance, long term care insurance, and disability insurance markets.

Health insurance: High deductibles, rate guarantees

One method carriers are using is offering more products that allow for higher deductibles, which lead to lower premiums. In the health insurance field, for example, “carriers are trying to offer a diverse choice of health insurance designs, and by doing that, you go to higher deductibles and get extremely lower premiums,” said Ron Buffman, president of the Texas Association of Health Underwriters (TAHU). Cost objection was cited by 45 percent of health insurance agents in the 2008 Agent Media Health Insurance study.

Some of the newer products offer coverage for catastrophic illnesses while providing a deductible as high as $7,500, Buffman said. These appeal to consumers who have enough money to handle routine medical costs but want to be protected in the event of an extended hospital stay.

In addition to higher deductibles, some carriers are offering guaranteed rates for multiple years.

Assurant Health, for example, offers a two or three-year rate guarantee for most of its products, said Mike Norderhaug, vice president of sales strategy for the company. Consumers trade paying a slightly higher premium for the knowledge that the premium will not increase during the policy term, Norderhaug said.

Assurant also offers a variation on the higher deductible/lower premium approach adopted by many carriers. For certain high-deductible products, for example, if the consumer does not reach the deductible through claims, the deductible is lowered every six months while the premium remains the same. This helps meet consumers’ concerns that they are paying for coverage that they don’t use, he said.

Providing a wide range of deductibles is part of an overall trend in the health insurance industry to provide more “consumer-directed” products, said Carolyn Goodwin, former president of TAHU.

“We want to get the consumer more involved in their health care decisions. People are being given multiple options about the kind of coverage that they want, and how they want to spend their money.”

That involvement can also include participation in wellness programs. With some carriers, said Buffman, “if you are participating in a wellness program, you will see a decrease in your premium.

From the carrier standpoint, if we become healthier people, health insurance costs will decrease and will therefore decrease premiums.”

Benefits market: Wellness plans take the lead

Wellness programs are visible in other segments of the industry, as well. Health benefit administrators are among industry groups featuring the programs on their Web sites, and using them to help reduce insurance costs. Thirty-five percent of survey respondents in the benefits area cited cost objection as a challenge in the 2008 Agent Media Benefits Market Study.

Wellness programs focus on preventive measures to help reduce the instance of claims. For example, Meritain Health offers a program to new clients that provides them with a comprehensive blood test screening for such components as cholesterol and cancer. The test is used to “help identify tomorrow’s claims,” said Dave Parker, Meritain senior vice president of sales. Meritain pays the costs for the tests for the first year, with subsequent years covered by the employer as a claim.

While there is a cost to the employer, Parker said that detecting diseases before they’ve had a chance to worsen saves lives and helps maintain health care costs.

Life: Premium refunds, combo packages

In the life insurance arena, where 35 percent of agents in the 2008 Agent Media Life Insurance Study said cost was a sales challenge, carriers are trying a combination of customized policies and other approaches to help make it easier for agents to sell to their clients.

Premium refunds have become one regular part of the mix. Some carriers have begun offering refunds on term insurance policies where the client has not used the policy before the term ends. In other cases, carriers are trying to ease the “sticker shock” of whole life policies.

For example, Massachusetts Mutual Life Insurance Co. (MassMutual) offers a whole life product that allows customers to recoup 90 percent of their premium if they cancel within one year of taking out the policy. At the end of five years, they can take back the full amount of their premiums, said Craig Waddington, vice president and actuary for U.S. insurance group product management at MassMutual.

Sticking with the overall industry theme of customizing products to try to reduce premium costs, MassMutual also offers a policy that mixes whole life with term insurance. The policy starts as term, with the customer paying whatever part of the whole life premium is affordable. As the whole life portion begins to pay dividends, it covers an increasing amount of the term premium, Waddington said. Eventually, the policy can be converted to whole life.

Prudential Financial is another carrier working on keeping premium costs down so agents can more easily sell policies, said Hank Ramsey, vice president of product management in individual life.

While Prudential has a return-of-premium term product, and is working on a reduced-premium whole life product, through the use of technology and other efficiencies, the company strives to keep premium costs as low as possible.

In addition, AIG American General has, among other measures, launched a universal life product with lower premiums and new underwriting classes between standard and premium and added a term life policy with customizable dates that in some cases has resulted in a 16 percent reduction in premium costs, said Leslie Hiltabrand, communications manager for the company.

Education key in LTCI segment

Cost has always been a challenge for agents selling long term care insurance, said Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI).

Seventy-five percent of long term care agents in the 2008 LTCI Study reported that cost was the biggest objection they faced from clients.

While there are some initiatives carriers are taking to help provide agents with flexibility, Slome said one of the biggest ways to overcome cost objections is to educate consumers about the actual costs of long term care insurance. “Consumers have the mistaken impression that long term care insurance is expensive,” said Slome. In response, AALTCI has developed promotional materials designed to help consumers understand what the costs are.

AALTCI’s efforts are also aimed at the increasingly younger market for long term care insurance — the average age of a policyholder in 2000 was 67, while in 2007 it was 58, Slome said. A key point the association tries to make is that there are good reasons to take out a long term care policy when you are young and in relatively good health, Slome said.

“You need to health-qualify for long term care insurance,” he said. “If you wait until you’re in your mid-60s, two things are likely to happen. The first is you’re much more likely to lose good-health discounts, and second, the worst-case scenario is that your health condition has gotten worse and you can no longer qualify at all.”

AALTCI also works to educate consumers and producers alike that a full-fledged long term care package isn’t always needed and that choosing a lower level of benefits may provide adequate protection for the insured and significantly reduce the premium, he said. Calculating inflation protection in different ways is one example of how costs can be reduced. Some carriers also offer the ability to purchase a base level of coverage, with the ability to add to it as life circumstances change. That allows the consumer to “lock in” the health qualification, Slome said.

More targeted coverage for DI clients

In the disability insurance segment, where 61 percent of agents in the disability portion of the 2008 Health Insurance study said their clients perceived coverage as too expensive, carriers are starting to offer a greater breadth of coverage types to make coverage less expensive for those put off by the price.

According to Bob Taylor, executive director of the Council for Disability Awareness, the industry has been making several creative moves toward more accessible and more affordable products, including a push toward increased awareness of the true cost and value of disability insurance.

“Clearly one of the challenges of the industry is this is a difficult, somewhat complex product to sell, probably more than any other genre of products,” Taylor said. “I think we’re starting to make inroads in getting [the message of value] out and that, combined with efforts on the part of insurance companies to make it easier to buy and sell their products, those forces are coming together and are showing bright signs on the horizon.”

Among the disability companies working to make their products more accessible is Berkshire Life Insurance Company of America, which is offering policies that allow consumers flexibility in what coverage they have. As their life circumstances change, their coverage can change with it, said Larry Hazzard, senior vice president for product and marketing.

And Unum Provident recently placed their traditional employer-funded product and their employee-funded voluntary product on one platform, allowing for a lower spread of risk and lower administrative costs that can then result in lower rates.

Mike Simonds, chief marketing officer for Unum U.S., urges agents to discuss with clients any group disability offerings their employers may offer, as group policies typically carry a lower premium than individual disability products. Tweaking coverage options such as elimination and benefit periods can also help further tailor the coverage to meet both budget and needs, he said.

Ultimately, cost should be no concern for those looking to shield themselves from mounting bills and potential loss of income. In reality, however, it can be difficult to motivate clients to think beyond the now and see the true return on investment of a major insurance purchase. Combining education with new solutions, however, can help ease your clients’ cost concerns.

Dan Kittay is a freelance writer. He can be reached at dan@kittaynewmedia.com.