Brokers Should Know How To “Field Underwrite”

Making things simple can save a whole lot of time for everyone. Cost, as always, is a factor in any purchase.

Here a two examples:

Stop Loss Insurance

A 900 life case whose projected paid claims is $9,000,000 asks their broker, “How much will we save by increasing our specific deductible? Give me a ball park number.”

Rule of Thumb: Stop loss premium rates equal 2-6% of projected claims. Doubling the deductible is worth about 2-2.25% of claims.

So, when you are sitting in the prospects office and ask the right questions and get the right answers, you can mentally calculate a generally good idea of what their cost basis should be (claims + stop loss + admin + reserves).

“Mr. Prospect, based on what you’ve shared with me, your composite all in unit cost per employee per month should be around $550. Your reserve fund should be about $1.2 million. Your year end reserve balance would be projected to be $1.4 million.”

Group Long Term Disability 

I used to sell a lot of employer paid long term disability insurance simply by saying “Mr. Jones, I can insure your payroll for 1% or less providing your employees with continued income should they become disabled to age 65.”

In almost every instance the owner would pull out a calculator, punch in some numbers, and say “Yes, let’s do this.” Only then did¬†I shop for offers in the market knowing in advance the sale was assured.

Cost = .0075 – 1.25% of payroll