No Such Thing as a Bad Risk – Part 1
The world of disability insurance written at Lloyd’s of London is often considered mysterious. This is a perception. That which is not typical is often misunderstood in the insurance industry.
As a Lloyd’s underwriter, I am frequently presented with risks that fall well outside those written by traditional American disability carriers. Standard DI markets have excellent carriers that serve the vast majority of consumer situations, and they are crucial for the economy. However, there are pockets of risks for which U.S. carriers are not a good fit and for which they have little to no appetite. Since Lloyd’s is a marketplace and not a singular carrier, the capacity and availability of unique plans exist in far more abundance.
Let’s take a look at some of these risks:
1. “My client wants to get her hands insured.”
Specific “body part” coverage is why the Lloyd’s DI market gained fame in the United States decades ago. A model’s legs, the derriere of a famous actress, the hair of a football player, the nose of a renowned sommelier, the hands of a surgeon. These are all risks insured at Lloyd’s.
2. “My client makes $2 million a year. He doesn’t need disability insurance…does he?”
Industry experts and statisticians have long ago concluded that two-thirds of one’s earnings is an appropriate amount of income replacement in case of disablement and total loss of income. For someone earning $2 million a year, a monthly benefit of $108,000 is appropriate. That is well beyond the benefit participation limits considered by traditional insurance companies and would require specialty market underwriting consideration. While some believe that higher income earners should have sufficient savings and investments as to not have a “need” for disability insurance, the real answer is that insurance is designed to protect what you have, not decide which investments to liquidate should someone need additional income during disablement.
3. “I have read through the occupation guide, and no carrier will accept my client’s occupation.”
Traditional insurers often restrict issuing cover on persons employed in certain industries or lines of work. Why? The reasoning is that the occupation may not provide employment longevity historically or income structure, persistency and fluctuations could pose a problem to financial underwriting. Common examples are writers, athletes and entertainers.
Next week we will delve further into the unique abilities of Lloyd’s of London in the disability space.
To be continued…