DI Can Protect Your Client’s Paycheck — and Increase Yours Selling DI to the Corporate Client

Branden Pierson, UnumKeith Hoffman, NFP

Kat Freeman, NFP

Presented By:

INTERNAL USE ONLY. Not for public distribution.

Agenda

• Disability Insurance Awareness Month Campaign• Multi-Life Disability 101• DI Sales Ideas• NFP DI Resources

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE

Disability Insurance Awareness Month

http://go.nfp.com/diam

Top 5 Reasons to Sell Individual Disability Insurance

1 It’s a great door opener.

2Upon a disability, it helps your clients pay daily living expenses and bills, including premiums on other insurance products they have with you.

3 It helps you diversify your portfolio offering and provides attractive compensation.

4 It’s part of your due diligence. 

5 Solutions are available in sought-after markets – business owners and higher-income individuals.   

Multi-Life Disability 101

7

Industry Snapshot:Multi-Life Sales Trends – “Back in Black”

Unum Growth Drivers:

1.Large New Case Saleso Industry Diversificationo 1/3 ER Paid, 2/3 Voluntaryo Pent up demand from 09/10?

2.Inforce block yield improvement but not pre-recession level. “New Normal?”

o Up sell on inforce block GSI Tier 2 Expansions

o New hires, earnings increases

The Great Recession Impacts to Multi-Life: Unum’s Experience • Inforce Block Yield drop due to unemployment / earnings decreases• New large case sales: Executive comp scrutiny / “Cuts not benefit adds”• ER paid plan persistency drop / EE pay persistency fairly stable• Stayed the course: small/mid new case sales

UNUM = +33% GrowthW/O Unum = 7.5% Growth

8

Multi-life IDI leadership

26%

penetration3

Unum has 16,406 inforcemulti-life IDI customers2

18%

penetration4

1 LIMRA, “2010 U.S. Individual Disability Income Inforce Total Multi-life,” 2011. 2 Unum IDI Database as of December 31, 2010. 3,4 Unum IDI Database as of March 31, 2011.

CompanyTotal multi-life

IDI inforce premium1

Unum $565,505,130

Carrier 2 228,512,805

Carrier 3 146,181,326

Carrier 4 97,032,502

Carrier 5 83,216,756

Opportunity!

9

Multi-life IDI leadership – Full Year 2011

CompanyTotal multi-life IDI

sales premium* YOY Change Market Share

Unum $50,381,056 33% 32%

Carrier 2 26,149,811 9% 17%

Carrier 3 21,819,162 20% 14%

Carrier 4 13,164,422 -21% 8%

Carrier 5 11,979,675 15% 8%

Carrier 6 11,741,520 22% 8%

Carrier 7 10,533,608 -2% 7%

Carrier 8 8,576,080 20% 6%

Carrier 9 704,518 -10% 0%

Carrier 10 367,929 26% 0%

Carrier 11 70,536 390% 0%

Carrier 12 18,611 -37% 0%

Total $155,506,928 15%

*LIMRA, “2011 U.S. Total Multi-life IDI Income Issues,” 2011.

1010

The ER sponsored multi-life market• Penetration: 30% of Fortune 1000 has ER sponsored IDI

Unum’s Focus on the ER Sponsored Multi-life Market• 99.5% of Sales are in the ER Sponsored ML segment

• 85% of our sales are Guaranteed Standard Issue

New variables that are expanding the ER sponsored market

• Innovation: Communication, Education, Enrollment for Multi-life

• Distribution: Revenue growth and diversification for benefit producers

• Evolution: Products and Uwing that are more user-friendly than the past

10

The ER Sponsored Multi-Life Market

11

Unum Multi-Life IDI:New Case Industry Trends

Financial Services, 24%

Healthcare Services, 22%

Manufacturing, 13%

Business Services**, 10%

Other Services, 10%

Legal Services, 8%

Business Consulting*, 8%

Engineering & Management,

Environmental, 5%

2011

Notable Trends:• Health Care Services driven healthcare reform physician plans• Financial services increase• Law firms retooling/upgrading existing plans vs. new plans

12

Most employers and employees do not know their current exposure

Supplemental disability is one of the most popular voluntary products among employers

Diversification and growth(vested revenue)

Keeps other brokers out

• Solves problems• Strengthens the

relationship

Why Supplemental Multilife Disability for Brokers?

RevenueRevenue

On the minds of employersOn the minds of employers

Customer persistencyCustomer persistency

Insulation from competitorsInsulation from competitors

Need for educationNeed for education

13

Why invest your time ?

Revenue Growth from within………..

Assumptions*: Produce $65,000 of premium year 1, then 10% growth years 2-10

Multi-Life IDI compensation is 100% Vested

* Business Mix can increase or decrease the above

Total RevenueRecurring Revenue

YTD Revenue

Year 1 $37,000

Year 5 $98,000 $44,000 $332,000

Year 10 $194,000 $106,000 $1,085,000

14

Vested Compensation 10 Year View

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

200,000

An

nu

al C

om

pen

sati

on

1 2 3 4 5 6 7 8 9 10Year

Broker Name: Joe Revenue

Inforce Bonus

Add'l Renewal

Renewal Base

FY Bonus

First Year Base

Proposed Sales: $65,000

Annual Growth: 10.0%

Persistency: 90.0%

Total 10 Year Comp: $1,084,973

Renewal Stream: $106,504

Note: All projections and results are estimates for illustrative purposes only and are not to be construed as a contract between you and the subsidiaries of Unum Group. Actual payments due to you are governed by your broker contract and compensation schedules. The subsidiaries of Unum Group reserve the right to alter the compensation program at any time, subject to contract limitations

Building the Renewal Stream

15

Objective

Utilize group and individual product platforms to create a more effective integrated disability insurance program

Integrated Group and Individual DisabilityCoverage

Group Long Term Disability

• Economies of Scale, ER owned

• Designed for masses• Variable rate structure

Individual Disability Income (IDI)

• Individually owned, provided through ER

• Value added, customized• Pooled, level-rate structure

16

Supplemental Multi-life Income Protection Evaluation

SHORTFALLS & GAPS - (Exposing the employee need)

Benefit maximumsTaxability of benefits All size

Appeals

To

EE/ER

VALUE OF OFFERINGBenefit educationEnrollment and communicationBenefit features

- Portable/LTC/CAT

ER Sponsored Leverage (Discount / GSI Uwing)

Retain and attract Customization

RISK TRANSFER - (Employer risk diversification)

Reduce plan exposure and experience volatility

COST SHIFT / PLAN AND FUNDING REDESIGN

Large case: Medium to high

credibility

Uninsured earnings - Incentive (Bonus, Commission)- Deferred comp, RSU, Retirement

Information Needs: LTD Plan, Total Comp Census, Plan Experience

Appeals

To

EE/ER

Appeals

To

ER

All size

SizeSegment

17

Concern: Income replacement shortfall due to benefit maximum

Shortfall & gap illustratedAssume 60% to $15,000 LTD plan

Why Multi-Life IDI? Need

LTD Plan Max

Employee Population

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

25 30 35 40 45 50 55 60 65 70

Age

Earn

ing

s

Above LTD Plan Maximum Below LTD Plan Maximum

18

Shortfall & gap illustrated

Assume 60% to 15K LTD plan

*Tax assumption − 28%

Why Multi-Life IDI? Need

SalaryBonus/

CommissionTotal Income

Group LTD Benefit

Total Income Replacement

Total Income Replacement

after Tax*

$100,000 $25,000 $125,000 $ 6,250 60% 43%

150,000 37,500 187,500 9,375 60% 43%

200,000 50,000 250,000 12,500 60% 43%

250,000 62,500 312,500 15,000 58% 41%

300,000 75,000 375,000 15,000 48% 35%

350,000 87,500 437,500 15,000 41% 30%

This column represents the NET after-tax income

replacement.

19

Income replacement by taxability of benefits

If LTD and IDI are both non-taxable (generally employee-paid), the total replacement is limited to 60%

If LTD and IDI are both taxable (generally employer-paid), total replacement can be up to 75%

If LTD is taxable and IDI is non-taxable (generally employee-paid), 75% replacement applies for the majority of cases.• This may be lower if non-taxable benefit outweighs the taxable benefit on a

dollar basis.

LTD IDI Total replacement

Non-taxable Non-taxable 60%

Taxable Taxable 75%

Taxable Non-taxable 70%-75%

20

Guaranteed exchange for long term care policy (optional for 675 and 750 products)

•$3000 per month•Home care benefits•6-year benefit period•Between ages 60–70

Group LTD + IDI: Buy-up

Cost-effective disability coverage that supplements LTD income protection

180 Days Age 65

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Time line

Catastrophic disability

25% to a monthly maximum of $10,000

IDI 75%, less group LTD, to a monthly maximum of $XX,000

GroupLTD

60% to a monthly maximum of $XX,000

Wage c

on

tinu

ati

on o

r STD

21

Guaranteed exchange for long term care policy (optional for 675 and 750 products)

•$3000/month•Home care benefits•6-year benefit period•Between ages 60–70

Group LTD + IDI: Combination plan

Combines cost-effective group LTD with the non-cancellable feature of IDI to provide executives with comprehensive coverage

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Catastrophic disability

40% to $10,000 monthly maximum

IDI 10% to a monthly maximum of $XX,000

GroupLTD

50% to a maximum monthly benefit of $XX,000

180 Days Age 65Time line

Wage c

on

tinu

ati

on o

r STD

22

Ideal factors for GSI plans

Employer-paid & 100%

Higher Earnings

● Five or more employees earning $75,000 or more

Income Replacement shortfalls• 60% or lower replacement ratio

• A cap of $10,000 or less on incomes that call for higher amounts

Risk transfer● Greater than a 60% replacement ratio

● LTD maximums greater than $15,000

Defined group/carve out − white collar executives

Basic Monthly Earnings (BME) that excludes variable compensation

Employee-paid plans 50 or more employees earning $75,000 or more

20% participation or a minimum of 10 lives, whichever is greater

23

Cannot be cancelled and contract cannot be changed

Level premiums to age 65 (option to age 67 for Income Series 750)

Individual ownership of policies – portable

No offsets with workers’ compensation, social security or other government programs

Multi-life discounted rate structure

Highlight features of multi-life IDI

Return-to-work features: Recovery and work incentive benefit

Long term care exchange offers an asset protection feature (optional rider for Income Series 675/750)

Catastrophic disability benefit for more severe disabilities (optional)

24

Enrollment support at every step

A successful enrollment begins with:

Full support from the employer and the Human Resources department

An installation call before the enrollment – with the employer, implementation manager and enrollment manager

Successful strategy execution based on employee demographics and industry

Multiple contacts with employees and variedenrollment options to accommodate unique needs

25

Steps to a successful enrollment

• Informational website

• Live informational sessions via the web

• Q&A for web and paper enrollments

• Inbound and outbound calls

Educate

• Voice Signature Authorization (VSA) (paperless enrollment)

• Self-enrollment via the web

• Face-to-face enrollment

EnrollCommunicate

• Endorsement letter

• Announcement communications

• E-mail reminders

• Personalized paper kits

26

Enrollment methods and tools

PaperIndividualized kits provide personalized information and all forms necessary to enroll. Supports specialized programs and customer requests.•Assessment of need•Personalized rates•Endorsement letter from employer •Policy information•Toll-free number for assistance during enrollment staffed by licensed enrollment specialists

Web plane.biz link e-mailed from Unum or provided on employer site.•Toll-free number for assistance during enrollment staffed by licensed enrollment specialists •Secure site protects employee privacy•Real-time tracking throughout enrollment•Can also include modified paper kit delivered to employee

Phone Employees speak with enrollment specialists to choose a plan and enroll via Voice Signature Authorization (VSA) technology.

• Educational website or paper kits supply detailed plan information

• Implemented as part of paper or web-based enrollment strategy

• Instant enrollment with the assistance of licensed enrollment specialists

2727

Value Story - Unum’s Disability Claims Model

Our guiding principle is to provide a fair, thorough and objective review of all claims.

We do this by adhering to the highest standards built on:

Highly skilled people

A customer-focused process

Protection for customers when they need us most

INTERNAL USE ONLY. Not for public distribution.

Q & A

INTERNAL USE ONLY. Not for public distribution.

Tips on How to Sell DI

Say “Paycheck Protection.”  Don’t tell me what it is. Tell me what it does! Most people cannot envision being disabled but they can understand the importance of protecting the paycheck – their most important asset. Change your client’s perspective by using one key phrase - paycheck protection.

Sell the Need for Disability Insurance with a Personal Story.

Sell Disability Insurance to Business Owners. There are many good candidates for DI, but business owners need the most protection. Protect business owners’ paychecks with individual disability insurance along with a Business Overhead Expense (BOE) policy to protect the business. Only 5 percent of business owners have a Business Overhead Expense policy.

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE

INTERNAL USE ONLY. Not for public distribution.

NFP DI Capabilities & Resources

Multi Life DI Sales Center Customizable Marketing

Material Income Analysis Tools Request for Proposal

System Uconnect for DI Impaired Risk Outlet High Limit DI Outlet

Existing Coverage Reviews

Underwriting Advocacy Claims Expertise Point of Sale Assistance Carrier and Product

Information Training & Education NFP DI Partnerships

INTERNAL USE ONLY. Not for public distribution.

The secret to selling Disability Insurance…

You need to ask.

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE