Insurers' disability-outsourcing trend picks up steam

Jan 30, 2006 @ 12:01 am

By Gary S. Mogel

NEW YORK - Another large insurer has jettisoned its individual-disability products and services in favor of outsourced offerings.

Allstate Corp. of Northbrook, Ill., will stop offering its homegrown individual-disability policies tomorrow. Its 13,600 agents and representatives will instead have access to individual-disability policies through The BISYS Group Inc., a New York-based financial products outsourcing firm.

"Production was low, and the economies of scale needed to be successful were not achieved," said Mike Boot, an actuary with Allstate Financial Group. "The decision was part of our ongoing philosophy to focus on our core products."

Allstate joins Lincoln Financial Group in Philadelphia, New York Life Insurance Co. and Prudential Financial Inc. in Newark, N.J., as major national insurers that have outsourced all or part of their individual-disability businesses.

"I think this will be a good thing, because it provides me additional individual-disability markets that will be competing for my clients' business," said Herb Katzeff, an Allstate personal financial representative in White Plains, N.Y.

Allstate will continue to service in-force individual-disability policies and will continue to write group disability coverage through its Allstate Workplace Division in Jacksonville, Fla.

The insurer's sales force will receive education, access to wholesalers, product information, sales illustrations and required forms from BISYS. Last year, Allstate dropped its long-term-care offerings, and this month, BISYS started offering LTC products that the insurer's representatives can sell.

"Agents' reaction to the change varies, but we've generally gotten positive feedback. Compensation and sales awards will be relatively similar to what they had before," Mr. Boot said.

"Outsourcing disability has become a trend, as this is high-risk coverage for insurers, with claims that can be on the books for many years," said Sean Norton, a senior vice president in the Salt Lake City office of BISYS. "For instance, someone who becomes disabled at age 30 can have a claim lasting for 35 years or more."

Several broker-dealers are also using BISYS to place individual-disability coverage for clients, Mr. Norton added. Among those are LPL Financial Services in Boston and San Diego, and Mutual Service Corp. in West Palm Beach, Fla.

"Other contracts with broker-dealers are in the process of being negotiated and will probably be announced this month," Mr. Norton said.

"An extremely liberal definition of disability and dealing with stress-related claims caused many disability insurers to start hemorrhaging losses and prompted them to exit the business," said Philip Harriman, a partner with Lebel & Harriman LLP. The Portland, Me., firm manages about $700 million in client assets.

"Disability insurance has always been very difficult to underwrite, because everyone says they can't work," Mr. Katzeff added.

"Producers will receive compensation comparable to what they got from Allstate," Mr. Norton said. They will also have access to expanded product offerings, he added.

"Most producers like the idea that there is one point of contact for several insurers," Mr. Norton said.

BISYS offers individual-disability products from Assurity Life Insurance Co. of Lincoln, Neb., MetLife Inc. of New York and The Principal Financial Group Inc. of Des Moines, Iowa.

Coverages, premiums and services are the same as are available to producers that approach the insurance companies directly, Mr. Norton added, with BISYS compensated by policy overrides.

"Assurity is a good market for high-risk business, and MetLife can handle all levels," Mr. Katzeff said.

"Principal is a leading company for placing individual-disability coverage for my professional, white-collar clients," Mr. Harriman said.

BISYS' training webcasts are also useful, said Mr. Katzeff, who has worked with the firm on LTC insurance. There is also DI Boot Camp conference call training that includes a disability coverage quoting system, an explanation of policy terms and conditions, and sales ideas.


What do you think?

View comments

Recommended for you

Upcoming Event

Nov 19


New York Women Adviser Summit

The InvestmentNews Women Adviser Summit, a one-day workshop now held in six cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


How are broker-dealers helping 401(k) advisers adapt to a changing market?

Bryan Hodgens, co-head of LPL Financial's Retirement Partners group, says the industry is getting much better at connecting advisers to wealth management opportunities and helping scale their businesses.

Latest news & opinion

IBD report: Another impressive year

Despite a stock market decline, revenue is up. And the streak isn't expected to end anytime soon.

IBDs with the most CFPs

How many of the more than 83,000 certified financial planners are employed by the big independent broker-dealers?

Richard Thaler wants to use 401(k)s to boost Social Security payments

The Nobel laureate wants to simplify drawing down retirement assets, which he thinks is 'way harder' than saving the money.

InvestmentNews announces 2019 Innovation Awards winners

Sheryl Garrett is this year's InvestmentNews Icon.

Morgan Stanley rides wealth management train to solid first quarter

Chairman and CEO James Gorman expresses excitement about expanding into workplace plans with purchase of Solium.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print