Why You Need an Impaired Risk Life Insurance Broker on Your Financial Services Team

Why You Need an Impaired Risk Life Insurance Broker on Your Financial Services Team

This paper explains why the life insurance sales process needs an impaired risk specialist, and how I have built my brokerage to master that craft.

3 types of life insurance sales.

I have been selling life insurance for over 25 years. In that time, I have seen life insurance sales fall into one of three basic categories:

1. Jumbo estate and business sales;

2. Low-cost term sales (includes permanent products with small face amounts, for people who qualify for preferred or standard underwriting;)

3. and Impaired Risk (candidates who present a higher risk due to current health; medical history; lifestyle; avocation; travel; citizenship; or financial/legal/motor vehicle record.)

A family tradition of impaired risk expertise.

From day one in my career I have specialized in the impaired risk sales. This is an area of expertise I inherited from my father, who was one of the first general agents to focus on substandard business, back in the 1950s and 60s.  He helped local captive agents place their outside business.

I have built upon this model, and expanded it to form a national life insurance brokerage helping financial advisers of all professions service their higher-risk clients. These advisers include group benefit brokers; financial planners; P&C brokers; investment advisors; and life insurance brokers who focus on jumbo cases or low-cost term.

Why consumers want to work with an impaired risk specialist.

When I first launched my brokerage, we published a website advertising our services as a specialist in high-risk cases. Almost immediately we were flooded with email requests for help from people all over the country! It was remarkable. Clearly, there is a demand among consumers for such a specialist. I soon deduced several reasons why:

First of all, many, many people are having a bad experience applying for life insurance. They are getting declined or rated unexpectedly, and realize that their regular insurance guy or gal doesn’t have the skills for handling higher-risk cases.

Secondly, they are not comfortable disclosing personal information to someone who is not an expert in their problem. They may trust their financial planner, investment advisor, or general insurance broker implicitly in that person’s area of specialization. That does not mean they want to discuss their prior drug use, Crohn’s disease, or bankruptcy history with them.

Third of all, the use of a specialist has become standard operating procedure for dealing with many professionals. When people have a special medical problem, they go to a doctor who specializes in that area. They may go to a general practitioner for an annual check up, but will go to a nephrologist for a kidney problem. Likewise with legal issues:  attorneys with specific expertise are sought for estate planning, litigation, or real estate matters.

Prequalification is the key to client satisfaction.

Potential applicants who pose a higher underwriting risk realize they need special underwriting attention; at the same time, however, they expect the same level of service as people who present a standard or preferred risk. They assume their application will be approved at the rate quoted.

My firm accomplishes this with a state-of-the-art prequalification process. We invest significant resources in each client to obtain thorough and accurate quote information. All underwriting issues are identified before an app is taken. Very importantly, we confirm that the potential applicant is a “ready buyer,” and will indeed accept the policy if the application is approved at the rate quoted it. Our placement ratio of applications to quotes is very high with our wholesalers, and this encourages them to work with us on both underwriting and service.

The quotes we provide are therefore both competitive and reliable, and our clients can submit a formal application confident of the outcome. We remain their advocate throughout the underwriting process to insure an approval at the rate quoted.

Why conventional life insurance sales operations do not prequalify candidates.

The vast majority of life insurance sales people do not prequalify their clients for coverage. Those that do prequalify, typically do not do so effectively. This includes both full-time brokers and agents, as well as other financial consultants who sell life insurance as a side product. There are several reasons for this.

First of all, field underwriting is not typically part of their sales training. They are not knowledgeable in all the various risk areas that affect mortality. They don’t develop the people-skills needed to guide potential applicants in the full disclosure of private health and lifestyle information. Nor have they developed an efficient system for conducting client interviews, obtaining medical records, and acquiring all the other necessary quote data.

Secondly, they have not created the complex network of connections that are needed to consistently obtain good rates for large numbers of people posing diverse underwriting risks. Affiliations with different general agencies are required to have access to a wide variety of underwriters. Research into new vendors offering new companies and products needs to be conducted on an ongoing basis.

Most importantly, the standard of “an approval at the rate quoted” is not integral to the business model of many sales people. All too often, they submit an application speculating that their client will be approved at all, let alone at the rate quoted. When inevitable problems arise, they have not positioned themselves as client advocates to hold both the general agent and the underwriter’s feet to the fire.

How to significantly increase sales revenue in your firm.

The impaired risk life insurance specialist has a unique set of strengths. They can be utilized to complement the proficiencies of different types of financial services teams.

His expertise in substandard risks equips him to handle standard and preferred risks quite easily. A firm with core proficiencies outside of life insurance, such as in financial planning, investment management, or employee benefits, can utilize his talents to handle all life cases professionally. Life insurance can become a major source of revenue.

A firm that is well-established in closing jumbo and/or low-cost term cases may not have the prequalification system in place to effectively handle substandard cases. The specialist can then be brought in to close those sales. The firm now has the capability of handling all levels of risk.