Many advisors shy away from the topic of critical illness (CI) when talking to clients about their insurance needs. However, CI insurance can play an important role in a client’s financial plan, and by getting clients to think about the impact an illness could have on their lives, advisors may be surprised to see how much the product appeals to clients.
“The people who do sell it, sell a lot of it, because they’re not afraid to talk about it,” says Tim Landry, living benefits consultant with Montreal-based QTR Solutions.
Knowing how to talk about CI insurance, Landry says, is key to success in selling these policies. He suspects that advisors who have had trouble generating sales of CI policies might be taking the wrong approach.
For instance, using statistics to underscore the likelihood that a client will experience a severe illness often fails to have the intended impact, according to Landry. Although advisors might assume they’ll get clients’ attention by pointing out the odds that they’ll develop cancer, Landry says clients often see that as a scare tactic.
“We spend far too much time talking about statistics,” says Landry. “The moment you talk statistics, you’re inviting people to say ‘well, I’ll be one of the three people that don’t get it’.”
A more effective way of raising the topic of CI insurance, Landry says, is to ask clients whether they know anyone who has experienced cancer, a heart attack or a stroke, and inquire about the impact it had on that individual’s life. Since a vast majority of adults know someone who has experienced one of these illnesses, that gives them a real-life scenario to which they can relate.
Many advisors are deterred by the underwriting process associated with CI insurance. Most insurance companies carefully assess each applicant’s health and family medical history as part of the underwriting process, and declines, ratings and exclusions tend to be common in cases where the risk of an illness is higher.
“It is far more difficult to underwrite a critical illness or disability policy than it is to underwrite a life insurance policy,” says Micheline Varas, senior vice president, living benefits and managing partner at Vancouver-based Customplan Financial Advisors Inc. “It makes that process a little bit more tedious to explain to a client.”
However, the underwriting process needn’t be a barrier to sales. Advisors who educate themselves on how the underwriting process works will have an easier time identifying potential red flags when filling out an application with clients, so that they can prepare clients for the possibility that the application will come back with a rating, an exclusion or a decline.
“I think there has to be an understanding of the underwriting process, what’s required [and] how different illnesses impact underwriting decisions,” says Varas. She suggests going through the entire insurance application with clients, including the medical section, to identify any potential problems.
In cases in which advisors are concerned that an application will be declined, clients should consider applying first for a simplified or basic CI policy, which tends to be easier to qualify for than more comprehensive policies. “There are products out there specifically designed for people who are hard to insure for critical illness,” says Landry.
Although the price of CI insurance can be a concern for some clients – particularly because premiums have risen considerably in recent years – advisors can customize the product to the client’s budget. For instance, cost-conscious clients could opt for a 10- or 20-year term policy rather than a permanent policy, to keep premiums down.
In addition, choosing a lower level of coverage can make the policy more affordable. Although clients might like the idea of having enough coverage to pay off their entire mortgage, it might be more realistic to get a policy that would cover mortgage payments and other living expenses for six months or a year.
“Focus on what the immediate need is,” says Varas. “That’s going to alleviate a lot of the financial pressure on this individual when they’re going through such an emotionally and physically difficult time in their life.”
Advisors who don’t feel confident enough in their knowledge of CI to actively promote the product should consider a referral arrangement with advisors who specialize in living benefits, Landry suggests.
“A lot of people just talk about what they’re comfortable with, and I don’t blame them for that. What they need to do is build an association with other reps who understand it, and work together,” he says. “That way, you can offer your clients everything, and you’ve got a group of people around you who are dealing in a quality manner with all of these products.”
This is the second article in a three-part series on critical illness insurance.
Up next: The evolution of CI insurance.