Employer-owned coverage: A long-ignored market with great potential

“Yeah, I tried that when I was a young producer,” said the life agent. “But it didn’t go anywhere. Too complicated. After awhile, I gave up.”

He was talking about breaking into selling employer-owned life insurance for executives and key personnel. Many agents tried, but often with less than satisfactory results.

In light of such past experiences — and there were plenty of them — why should producers now view that same market as an opportunity for sales? In addition to many more prospects today than there were some years ago, there’s one overriding difference that is a game changer: today the process is incredibly selling-friendly.

Here’s why:

  • Fast underwriting. With the help of technology, underwriting process is nearly instantaneous.
  • Group personalization. The underwriting level is based on the number of people in a group and the desired amount of coverage.
  • Two types of programs

o   Simplified Issue. With only six-to-eight basic medical questions, no paramedic physical exam, Attending Physician Statements, or telephone questions, the application process is smooth and swift.

o   Guaranteed Issue. All participants qualify as long as actively working. This can have significant value when there are privacy or health concerns, or someone is uninsurable through conventional underwriting.

  • High face amounts. Up to $1 million with Guaranteed Issue and $1.5 million with simplified issue programs.

Taken together, the process is incredibly selling-friendly. No waiting for weeks, no client misgivings, second thoughts, or fading motivations. On top of that, it gets the deal done before competitors get wind of what’s happening and try to move in.

Effective sales strategies

Since Guaranteed Issue and Simplified Issue products are ideal for smaller firms, here are some effective sales strategies:

  • When the loss of key personnel can have an adverse impact on a business, this coverage has significant value, particularly when it’s an employer-paid benefit.
  • It’s also a way to reward and retain top-level employees as part of executive bonus or deferred compensation plans.
  • For companies with multiple owners, these programs work well as part of buy-sell agreements and in succession plans.

Prospecting is focused and straightforward:

  • Target groups: law firms, physicians, biotech firms, technology companies, and consulting firms, among others.
  • Qualified participants: those classified as executives, owners, or who hold white collar or management positions.
  • Work requirements: participants must work at least 30 hours a week, earn more than $75,000, and be no older than age 70.
  • Group size: the number of lives ranges from five to thousands. Groups up to 30 work well.

In marketing these products, here are a few important guidelines for producers:

  • While the application process moves quickly, closing these sales can take longer than the average individual case, and that can be discouraging for some agents. Yet, other producers recognize that patience and persistence are more than worth the investment of time and effort. For example, a commission for a 10-member group can be about $50,000, utilizing a minimally funded UL plan. A group of 20 members would generate commissions of about $150,000 using an accumulation-focused product.
  • Astute producers realize that talking with prospect firms is, in itself, a marketing opportunity that builds relationships and opens the door for other types of life insurance sales.

Quick case study

To better understand the entire process, here is a case history that helps to bring it all together:

This case involved a law firm that wanted key person coverage on a select group of 30 lawyers, based on a combination of billable hours and annual revenue. The producer recommended an Indexed UL policy because the cash accumulation potential was attractive to the law firm.

The plan was funded at a target premium level for 1 Mill per participant. With this strategy the policies provided cash accumulation and a guaranteed coverage duration past potential retirement age.

Upon retirement of each participant, the law firm can recoup premiums paid, plus additional monies.

The total annual premium was $220,000.

For her efforts, the producer earned a $200,000 commission on the group case.

At a time when there are many available qualified business prospects for life insurance products that offer convenience and simplicity, both Guaranteed Issue and Simplified issue programs offer significant sales potential.

• Thoughts or comments? Please chime in on this new thread: Employer-owned life a market ripe for producers?

Andrew Gordon is a Senior Case Design Specialist at First American Insurance Underwriters, Inc., Needham, Mass. He specializes in advanced and complicated life insurance case design, helping top producers find the best solutions for their clients. He can be contacted at[email protected], 800-444-8715.