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

Upcoming event

Oct 22


San Francisco 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

Most watched


Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

Target-date fund design may be wrong for retirees

Researchers suggest the funds don't adequately hedge against sequence-of-returns risk in retirement.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime


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